Democracy Manifest: Bitcoin, politics, and the US Election

As crypto enters the spotlight in a bewildering U.S election, I ask you, dear reader, if this is democracy manifest. 

Following Donald Trump’s appearance at Bitcoin Nashville, cryptocurrency finds itself in the spotlight during the most turbulent U.S election I can recall. And yes, I’m including the last two. I’ve considered blogging on this topic for a short while and bizarrely, the thing that’s spurred me into action is the news that Jack Karlson (probably not his real name), star of the spectacular Democracy Manifest / Succulent Chinese Meal video/arrest, sadly passed away earlier this month. 

The two incidents, of course, are unrelated, yet Karlson’s call for democracy to prevail as he’s bundled into the back of a squad car, presumably for dine-and-dashing at a Chinese restaurant, feels like something of a call to arms. And so I’m going to say a few words on Trump’s Nashville speech and its role in the U.S election, and I’ll make some broader points around cryptocurrency and politics while I’m doing it. I’ll leave it for you to decide if I know my judo well (just watch the arrest video, dammit). 

Crypto and the US Election

It seems strange that crypto might have an influence on the U.S election. I’m not going to overhype the impact of this, but the Federal Reserve has said that 7% of Americans held or used crypto last year and this could be an election that’s won by fine margins. A presidential candidate’s appearance as the headliner of a crypto industry event sends a pretty big, nay, yuge, message, and what’s more, it’s a polarising issue, the sort that stokes the flames of culture wars and plays well to the social media algorithms that shackle us to a perpetual state of foam-at-the-mouth anxiety and disbelief. 

Trump, or at the very least his team, is well aware of this. Leaning into a libertarian streak, Trump used his Nashville speech to call out ‘attacks’ on crypto, and promised to end the ‘persecution’ and ‘crusade’ against the industry that he partially attributed to ‘left-wing fascists’. It’s true that the current regime hasn’t been especially embracing of cryptocurrencies, but this is fierce rhetoric. Battle lines have been drawn.

Rhetoric is important but less so without substance, so let’s look at Trump’s proposed policies on crypto. From the stage in Nashville, he outlined the following:

1. For the US to encourage excess energy from power plants to be used for crypto mining
2. The creation of a presidential advisory council for bitcoin and crypto, to promote innovation and give industry insiders a platform
3. Firing SEC chairman Gary Gensler
4. That the Federal Reserve should never sell off its bitcoin holdings
5. To turn the U.S into the ‘crypto capital of the planet’

There are some big ideas here and you could feasibly write pages on them. Instead, I’ll offer some topline analysis:

1. Excess energy being used for crypto mining is a reasonable suggestion, and perhaps an easy win. Some have argued that crypto mining could play an important role in stabilising power grids, and all the better if this can generate healthy revenues. 
2. A presidential council could be a forum for informed decision making or an opportunity for people to forward their commercial interests. Or both! But is it overkill? Crypto is currently a $2 trillion global market, and if I can offer a ‘banana for scale’, U.S GDP is $28.78 trillion. That said, crypto is seriously misunderstood, and seeing as bitcoin is still a teenager (born in 2009) I guess that checks out. 
3. Trump is not the first presidential candidate to suggest firing the SEC chair, as John McCain insisted he would fire former chair Chris Cox during his 2008 presidential campaign. But can Trump actually fire Gensler? The blunt answer would be ‘no’, although there are ways he could force it through if he’s able to jump through several hoops and prove that some form of negligence or malfeasance has taken place. Nonetheless, as Professor Tonya Evans points out in the previous linked piece, the process of doing this would likely take years. Thankfully for Trump, Gensler will in all likelihood resign if he wins the election. Every SEC chair in history, since 1934, has done so when the presidency changed party.
4. The U.S is genuinely sitting on a stockpile of bitcoin! The stash, retrieved from criminal asset seizures and held by the U.S Department of Justice and several other agencies, has already brought in over $350m in sales, and the unsold stash appears to have a value that hovers around $5 billion. There’s an argument for not selling it. If the U.S had never cashed in that $350m-ish of bitcoin, its current value would now be more than $11bn higher than that.
5. The notion of a ‘crypto capital of the planet’ defies the premise of decentralisation, but the basic point is that Trump’s saying he’ll support crypto and intends for the U.S to profit from it. 

Hold the phone... is a bitcoin reserve on the way?

Trump stopped short of saying the U.S will buy loads of bitcoin, but let's take a minute on this as the likes of RFK Jr. and Senator Cynthia Lummis, of Wyoming, have proposed that the Treasury stockpiles a ‘strategic bitcoin reserve’. Senator Lummis has even said that the U.S, “will be debt-free because of bitcoin,” and proposes that 1 million are purchased. RFK Jr. has suggested buying four times as many. 

The US national debt currently stands at around $35 trillion, so based on a purchase price of $60,000 USD, the price of bitcoin would need to rise astronomically to clear this debt. Or perhaps the U.S dollar would need to fall off a cliff. Either way, this looks a highly unlikely solution, and even more so when we consider that global GDP is around $110 trillion.

Back to the main script. If Trump's five policies send any message to crypto aficionados, then it's “we’re going to support the crypto industry,” and more crudely, the message is “vote for me.” But that’s not all, as Trump also leaned into the partisan political climate and declared that his Democrat presidential rival, current vice president Kamala Harris, wants to see the crypto market burn. “She’s against crypto by the way… she’s against it very big,” said Trump to the crowd in Nashville, despite Harris’s stance on the industry being somewhat ambiguous. 

As Steven Levy sagely remarked for Wired, Harris is yet to set out her crypto policy, and the Financial Times reported that Harris has contacted senior figures from crypto exchange Coinbase, leading stablecoin Circle, and blockchain solutions provider Ripple Labs, presumably to collaborate or hold talks on some level. 

What does Trump actually think of Crypto? 

Newcomers to this conversation might not realise that Trump’s public stance on crypto has undergone a transformation. In 2019 he tweeted that he’s not a fan of crypto and described it as ‘not money’, and in 2021 he told Fox Business that ‘bitcoin seems like a scam’. Despite his about-face, his comments on the topic still seem a little unfocused. In Nashville he said things like:

-”If crypto is going to define the future, I want it to be mined, minted, and made in the U.S.A.”

-”Do you know what a stablecoin is? Does anyone know?”

The first comment is defensible but sounds like bluster. I can’t escape the fact that it sounds like he’s talking about coal mining, yet I’d concede this isn’t a robust criticism on my part. The second comment relates to what some consider to be crypto’s killer use case, and a use case that, coincidentally, could arguably promote U.S dollar dominance. While I’m well aware of Trump’s speaking style and his tendency to go off script, these comments do little to suggest that his change of heart is a result of hours of reflection and studying, and of course there are other incentives that might have provoked it. As I said earlier, crypto is a vote winner. It’s also a source of funding, and to some extent it’s a more publicly palatable source than it was in previous elections.

To speak of funding, $3 million of Trump’s election funding in the last quarter was paid in crypto (which was less than 1% of his total funding for that period, for clarity), and the wider impact of supporting crypto could be far greater. For instance, Marc Andreesen and Ben Horowitz, who have raised roughly $8 billion to invest in the crypto sector, are publicly backing Trump having previously thrown their shoulders behind Democrat candidates. Likewise, BTC Inc. CEO David Bailey, who leads Bitcoin Nashville and recently co-ordinated a meeting between Trump and a group of bitcoin miners, committed to raising over $100 million and 5 million voters for the Republican campaign. This is quite the claim, and likely worthy of a revisit. 

In short, there are several influential figures in the crypto industry who are courting Trump. This may be in the hope of favourable treatment if he’s elected, or it could be a response to the expected Democrat stance on crypto. And on that…

A  Word or 250 on Kamala Harris:

Kamala Harris faces interesting decisions in response to the above. Her big challenge is probably to offer some direction on what a Harris presidency means for the U.S crypto industry. There’s plenty of scope for nuance here, but many of those invested and involved in crypto will be seeking basic reassurances rather than detail, at least for now. Whatever might be said of Trump’s pledges to fire Gary Gensler and to free Silk Road founder Ross Ulbricht (who Trump could have pardoned while President), they at least give a strong indication of which side of the fence Trump sits on.

But Harris’s hesitance to ‘take sides’ has merit too. The world of digital assets, cryptocurrencies and decentralised finance (DeFi) is incredibly diverse. Regulating it and fostering it will require considered thought; it’s a complex market and ‘crypto good’ or ‘crypto bad’ doesn’t do it justice. If you’re taking it seriously, it makes sense to engage with blockchain innovators, stablecoin providers, crypto exchanges and so on, as Harris’s team has reportedly done. Even if that doesn’t provide all the answers, it should at least resolve lingering questions like, ‘what is a stablecoin?’ (does anyone know?)

While Trump has welcomed the support of bitcoiners, and let’s face it, the campaign funding and votes that are expected to accompany them, Harris’s decision to hold fire is fairly well considered. But to reiterate, unless she intends to shun crypto she’d do well to eventually offer some explanation of how her presidency will support positive innovation for DeFi in the U.S. 

What are the Politics of Crypto? Moving beyond the U.S.

Crypto should be a bipartisan issue. Ethereum co-founder Vitalik Buterin and Ripple CEO Brad Garlinghouse have said similar in response to the current political climate, and to put another spin on it, collapsed crypto exchange FTX had been sending considerable sums of money to pro-crypto candidates from both major U.S parties before its spectacular collapse in 2022. Even if we use reductive labelling, this isn’t really a left versus right issue.

Cryptocurrency is a contentious type of money, but we also need to recognise that it takes many different forms and does whatever it’s programmed to do. This doesn’t make it apolitical, but when we're talking 'crypto' or DeFi it's best to establish the functions and features of the currency or protocol in question. To make a random comparison, it's clear that Circle's U.S dollar stablecoin is a very different proposition to bitcoin, a memecoin, or a privacy coin.

Instead it’s better to acknowledge that peoples’ political ideals may mesh better or worse with specific coins or aspects of DeFi. In Why DeFi Matters, I noted that 78% of users of altcoin Dash, initially known for use in darknet markets, identified as right-wing, and that 55% of Ether users identified as left-wing, while 36% of privacy coin Monero considered themselves anarcho-capitalists. Cryptocurrencies have different characteristics and often reflect very different philosophies, however vague or distinct. Crypto enthusiasts aren’t a unified block of people who will vote identically, hence my point on there being scope for Harris to apply some nuance.

It’s also worthwhile to scrutinise claims made about the philosophies that supposedly underpin crypto. There’s much talk about crypto being used to promote a new financial order, and yet in 2024 the likes of Blackrock, Fidelity, the U.S government and the Chinese government are reported to be among the top 10 holders of bitcoin in the world. Besides examining how far crypto has strayed from the initial vision of cypherpunks, we can also ask how decentralised the main currencies are, especially in relation to wealth inequality. Economic consultant Nouriel Roubini noted a few years back that bitcoin has a worse Gini coefficient than North Korea, which would actually suggest a highly centralised system, regardless of the notionally democratic access to ownership. 

On one hand, it’s confusing that an alternative and peer-to-peer financial system would start to mirror the traditional one. On the other hand, should we really be surprised that an unregulated market is starting to resemble free market economies? Probably not. “Give me liberty or give me death,” and give me a bitcoin ETF. 

So What is the Charge? 

Or rather, why did I write this? To be clear, here’s what I’m trying to say:

1. Crypto is influencing the U.S elections and the two presidential candidates are approaching it very differently. 
2. Crypto, like a lot of stuff, is getting sucked into the culture war. This isn’t productive and devalues conversations on the topic.
3. I was genuinely taken aback to see Trump headlining a bitcoin event, and I wanted to reflect on what he said, what it means, the reasons why he’s made certain statements, and what it might mean for the presidential race and the U.S’s future in crypto. I’ll be keeping an eye on Harris’s next moves.
4. Let’s face it, what in the fresh hell is going on here? This latest story in the crypto saga says a lot about the institutionalisation of the decentralised dream, and marks a moment where bitcoin could play a role in shaking up the established economic order, despite the fact that it’s starting to mimic it in certain regards. 

There’s a lot more that can be said about all of this, and of course I’d welcome your thoughts. As an intrigued onlooker from across the pond, I’ll struggle to take my eyes off of this election and of course the role of cryptocurrencies in it. Let’s see how democracy manifests. 

Ta ta, and farewell. 

Ps. If you want to learn more about decentralised finance, then Why DeFi Matters covers everything you need to know about the rise of bitcoin, DeFi, blockchain, and its impact on the world of finance.