AYESHA RASCOE, HOST:
The cryptocurrency industry is in celebration mode following Tuesday’s election. Donald Trump’s victory sparked an all-time high for bitcoin last week, as the industry funneled more than $100 million to pro-crypto candidates from both parties. So what do they expect in return? Brendan Pedersen covers banking and finance for Punchbowl News and joins us now. Welcome to the program.
BRENDAN PEDERSEN: Hi, Ayesha. Thank you for inviting me.
RASCOE: So the procrypto PACs – they’re betting really big on the selection. What was the reaction to Tuesday’s results?
PEDERSEN: Yeah, I mean, if you’re a crypto enthusiast or you’re pro-crypto, the results couldn’t have been much better for you, I think. There’s this feeling within the industry that the Biden administration just hasn’t given them a fair chance for much of the last two years. The regulatory framework around crypto has been quite restrictive. Regulators are not very fond of unrestricted access to cryptocurrencies. And the industry has basically been trying to get some sort of legitimacy for years, and this election appears to be the first time it’s going to get it.
RASCOE: Well, I mean, just three years ago, Trump was calling crypto a scam. Now he has changed his tune. He is committed to making the United States, quote, “the crypto capital of the planet.” Does the industry trust him?
PEDERSEN: I think so. It’s pretty hard to say for sure with Trump for all the obvious reasons. But his family now owns their own crypto company. So he has a stake in that, which is worth noting. And I think that’s going to prompt him – whatever it is – to think about what the future of crypto regulation should look like.
RASCOE: Well, what does that mean? For example, what do these companies expect from a Trump presidency?
PEDERSEN: More than anything, they want some kind of stronger legal footing in our financial system. Right now, crypto companies can do some things at the edge. But you have regulators like the Securities and Exchange Commission who have set the bar very high for what they consider legitimate or non-legitimate crypto. Whoever takes the next position as SEC Chairman will likely make big strides in the crypto space. This could be something that simply establishes basic safeguards, whatever form they take.
But what they really want is legislation, because regulations will change every administration. The statutes, the laws will remain in force for much longer. So there are people in the crypto industry who are a little bit worried that, okay, having a friendly regulatory state will be really nice under the Trump administration, but it might actually kill momentum which was created in Congress to give them something more lasting.
RASCOE: It’s interesting because you don’t often hear an industry say they want to be regulated. But as you said before, you talked about the need or desire for some form of legitimacy. There was a Pew Research poll at the end of October. More than 60% of Americans do not trust cryptocurrencies. Can you tell me about the support the crypto industry needs to provide to the public?
PEDERSEN: With any new financial instrument, you need, for example, a critical mass of people using it before it has legitimacy. So with something like crypto, I think the uncertainty around that product – how exactly it’s captured legally, what the consumer protections are – are all good reasons why consumers don’t want to invest a lot of money in it. ‘money. The reason we’re talking about cryptocurrency right now is because the community, the industry, has invested a huge amount of money into this election.
I actually gave a speech to a group of crypto executives a few months ago before the election. And I said – I found myself quoting Chairman Mao when I said, you know, guys, that power flows from the barrel of a gun. And this $100 million to $160 million election splurge is a weapon aimed at the US elections.
RASCOE: It wasn’t just about the presidential race, as you say. Procrypto PACs spent $40 million in Ohio to help defeat Sherrod Brown, who chairs the Senate Banking Committee. And Brown was very skeptical of crypto. What did this movement mean to you?
PEDERSEN: Oh, yeah. The crypto PAC we are talking about is the crypto PAC called Fairshake. And they actually have a few different sub-PACs. The one that put a lot of money into Brown’s opponent in Ohio, Bernie Moreno – it was the Defend America Jobs PAC (ph). The fact is that Sherrod Brown is the thing standing between the crypto industry and the Senate, which passes laws in numerous ways, and the industry has simply had enough. They wanted someone in this position who would work with them. Or if they failed to unseat Brown, they would rather just have a Republican Senate, because it would be easier to work with a Republican Senate.
RASCOE: A few years ago, it seemed like this industry was really on its heels. FTX crashed, then Bitcoin and Ethereum fell. What has changed?
PEDERSEN: I think, honestly, it goes back to politics. If you look at 2022, it’s not like crypto doesn’t have a role in elections, but it was very, very different. One name that might ring a bell is Sam Bankman-Fried, who is the disgraced former CEO of FTX, which collapsed into a… just a big pile of fraud. Before that, he was very politically active. At the time, he was giving a lot of money to Republicans and Democrats, and he was meeting with high-ranking lawmakers on the Hill to talk about his vision for how crypto should be regulated.
But it was just one guy. What has changed is that in the meantime, the crypto industry has professionalized its political functioning very, very quickly. There was something purely transactional about the way Sam Bankman-Fried went about it. He said to me: I’ll give you money. Let’s sit down and talk about it.
And there’s something much more palatable, I think, to lawmakers when you think about an industry getting its act together and picking these calls in races across the country and then seeing where the chips fall. I think lawmakers are taking crypto as an industry more seriously because crypto itself has started taking itself more seriously.
RASCOE: This is Brendan Pedersen from Punchbowl News. Thanks for being with us.
PEDERSEN: Thank you for inviting me.
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