Analysis: The US crypto industry expects friendlier Washington, whoever wins the White House

The cryptocurrency industry has clashed with Democratic President Joe Biden’s administration over regulatory issues for years, but executives expect an easier ride from Washington regardless of who wins the White House next week.

Crypto asset managers including Bitwise and Canary Capital are planning new products ahead of what many executives expect will be a more crypto-friendly administration, while others including Ripple are planning a new push for crypto legislation in the new Congress, executives said and lawyers.

“Regardless of who wins, there will be a new approach to how we move forward with crypto,” said Rebecca Rettig, head of legal and policy at crypto firm Polygon Labs.

Republican nominee Donald Trump has pledged to be a “crypto president,” and executives also expect Vice President Kamala Harris, the Democratic nominee, to take a softer stance than Biden.

Harris has not yet detailed her crypto plans, but executives are encouraged by her pledge to promote digital asset innovation and protect crypto investors.

Harris surrogate and billionaire entrepreneur Mark Cuban, a crypto enthusiast, has also criticized the crackdown on crypto led by Securities and Exchange Commission Chairman Gary Gensler, a Biden appointee.

“It will definitely be friendlier under a Harris administrator,” Cuban wrote in an email to Reuters, adding that her pledge to protect crypto users was “important.”

Gensler has insisted that the crypto industry is a risk to investors, pointing to the collapse of FTX and multiple other bankruptcies and scams that sparked calls for stricter regulation. Since Bitcoin debuted in 2009, the crypto market has been extremely volatile.

Gensler’s SEC has filed dozens of enforcement actions against Coinbase, Kraken and others, accusing them of ignoring U.S. securities laws designed to inform investors of potential risks.

The crypto players have denied the SEC’s allegations. They say cryptocurrencies, which have a global market value of about $2.5 trillion, should be regulated like commodities.

Gensler, whose term ends in 2026, has not said his crypto views have changed. Although Trump has said he will fire Gensler, Harris has not suggested she would look to replace him. An SEC spokesperson declined to comment.

Trump’s plan to promote Bitcoin has won him several major crypto donors, including Gemini founders Cameron and Tyler Winklevoss. At least one industry boss, Ripple chairman Chris Larsen, has given Harris’ super PAC a big check and new Democratic-leaning crypto groups have raised money for her.

Ripple, Coinbase and others have spent more than $119 million supporting pro-crypto congressional candidates, according to Public Citizen data. One of these companies’ goals is to promote legislation that would bring stablecoins, crypto tokens pegged to the US dollar, into the mainstream.

“For the crypto industry, this election isn’t about choosing one party over the other – this is about supporting candidates who recognize that the US must support innovation,” said Lauren Belive, Ripple’s head of US policy, in a statement.

Coinbase, which announced an additional $25 million donation to a pro-crypto PAC on Wednesday, did not respond to a request for comment.

Influential progressive lawmakers have also pressured Gensler to be tough on crypto, but some Democrats raised concerns with the Democratic National Committee in July that that approach was alienating some voters, Reuters previously reported.

CRYPTO THAW?

Crypto executives believe that under Harris, the SEC will revise or even withdraw guidelines that require public companies to treat crypto assets held on behalf of others as liabilities because of their risk.

That ‘SAB 121’ directive is a major annoyance in the crypto industry.

Because strict capital rules require banks to hold cash for their liabilities, this has kept many lenders on the sidelines of cryptocurrency. Cryptocurrencies would become more popular if consumers could store them with trusted lenders, executives say.

Congress voted on a bipartisan basis in May to overturn SAB 121, but Biden vetoed the resolution.

“With the recent bipartisan support… I would expect that regardless of who becomes the next president, SAB 121 will be overturned,” said David Mercer, CEO of LMAX Group, which operates a crypto exchange. “That should be an accelerator for the entire crypto market.”

In August, State Street announced plans to offer crypto custody, expecting the SEC to eventually revise those guidelines, Reuters reported. Some executives are already seeing a thaw.

Last month, the SEC’s chief accountant said that SAB 121 did not apply to some companies, provided they met certain conditions.

Shortly thereafter, the agency granted a “no objection” allowing BNY to take custody of cryptocurrencies held by exchange-traded products without having to account for them as liabilities. Speaking to Bloomberg, Gensler said other banks could replicate the model.

“Both presidential candidates clearly recognize that digital assets can play a positive economic role,” said Sui Chung, CEO of Kraken subsidiary CF Benchmarks, who cited the BNY endorsement as a sign that the political climate was changing.

After losing a lawsuit, the SEC approved bitcoin and ether ETFs this year. Bitwise and Canary Capital filed SEC filings this month to launch similar products that would track Ripple’s XRP crypto token.

“We believe that regardless of who wins on Tuesday, the crypto markets will be looking at a more favorable regulatory environment under a new administration in the new year,” a Bitwise spokesperson said.

Since the SEC has until mid-2025 to rule on these applications, it’s likely a bet on a friendlier SEC, executives said. “These declarations are essentially a down payment for that change in the political climate,” Chung said.

“Canary continues to see encouraging signs of a more progressive regulatory environment,” a spokesperson said in a statement, adding that this was driving investor demand for access to cryptocurrencies beyond bitcoin and ether.