Bitcoin and Crypto Assets have become the focal issues of the 2024 US election.

Crypto Assets Becoming an Important Election Issue Background

The significance of Bitcoin to the United States

The demand for hedging against inflation has increased.

Since the mid-1980s, the real wage levels of Americans have seen little significant improvement. After adjusting for inflation, the purchasing power of the average hourly wage in the U.S. today is little different from that in 1978. This has exacerbated the widening gap between the rich and the poor: the upper class has seen their wealth soar due to holding a large amount of fixed assets, while the wealth of the working class continues to shrink.

Since the 2008 financial crisis, Bitcoin has increasingly been seen by more people as a potential tool to combat inflation and economic uncertainty, particularly offering hope for the middle class to achieve economic independence. The decentralization and limited supply of Bitcoin make it an alternative asset under government and central bank intervention.

Over the past 25 years, the ratio of U.S. federal debt to GDP has sharply risen from 40% to 100%, and in the next 10 to 30 years, this ratio could climb to between 124% and 200%. The upcoming presidential election may trigger what is known as the "Minsky Moment", where the bond market realizes the severity of the debt issue and demands higher returns to compensate for financing risks. Such a moment could lead to a collapse in the bond market, triggering a financial crisis.

Whether it is Trump's tax cut policy or Harris's tax increase plan, both may further exacerbate the United States' deficit and debt burden, increasing the risk of turmoil in the financial markets. The ways to address this high level of debt are limited; diluting the debt through inflation may become the only way for the U.S. government to cope with this predicament. However, the negative effects of inflation will compress the purchasing power of the working class and exacerbate wealth inequality.

It is worth noting that the Bitcoin bill currently awaiting Congressional approval may provide a new solution to the U.S. debt issue. The bill aims to integrate Bitcoin into a broader financial system, potentially helping to stabilize the U.S. debt structure by attracting significant private and institutional capital, and even bringing a certain degree of stability to the global financial system.

Strengthen the international influence of the US dollar

Stablecoins, as one of the most popular crypto assets today, have become a focal point for policy discussions, with the U.S. Congress reviewing several related bills. One of the key factors driving this discussion is the recognition that stablecoins can help continue to strengthen the international influence of the dollar as its status as a global reserve currency gradually weakens. Currently, over 99% of stablecoins are denominated in dollars, far exceeding the second-largest currency for denomination, the euro, which accounts for only 0.20%.

In addition to enhancing the influence of the US dollar internationally, stablecoins may further consolidate the financial foundation of the United States domestically. Although stablecoin development has only been around for ten years, they have already become one of the top 20 holders of US government bonds, surpassing countries like Germany. This indicates that stablecoins not only help to enhance the global dominance of the US dollar but also can become an important part of the US financial system by absorbing a large amount of government bonds, providing additional liquidity support for the economy.

Voter interest in Crypto Assets is on the rise

A national survey conducted by Grayscale, as part of a Harris poll, shows that about half of potential U.S. voters prefer to support candidates who have a positive attitude towards Crypto Assets rather than those who are not interested in Crypto Assets.

At the same time, the attention of swing state voters to Crypto Assets has also significantly increased. In the two key states of Pennsylvania and Wisconsin, where fierce competition is about to take place, the Google search interest in Crypto Assets in these states has risen to fourth and fifth place, respectively, while the search interest in Crypto Assets in Michigan ranks eighth in the country.

encryption enterprises play a core role in donations

In 2024, Crypto Assets companies have become one of the major forces in political donations in the United States. Coinbase and Ripple are now the largest corporate political donors this year, accounting for nearly 48% of total corporate donations. The Fairshake Super Political Action Committee (PAC) was established in 2023, led by former New York State Assistant Governor Josh Vlasto, and has raised over $200 million in support of candidates who back Crypto Assets, making it the highest spending PAC in this election cycle. Fairshake's goal is to elect candidates who support encryption, defeat skeptics, and has garnered support from companies such as Coinbase, Ripple, and Andreessen Horowitz.

These funds not only influence the policies of presidential candidates but also promote congressional election policies favorable to Crypto Assets. As a result, the Crypto Assets industry has moved from behind the scenes to the forefront, becoming an important force in American politics.

The Impact of the Election

The policy propositions of both candidates

Harris

Harris's statements on Crypto Assets policy are relatively limited, only stating that she will "encourage innovative technologies such as artificial intelligence and digital assets while protecting consumers and investors." To address the issue of lower-than-expected support among Black male voters, she recently launched a series of economic security plans, which include a commitment to develop a regulatory framework for Crypto Assets to protect Black men's cryptocurrency investments. However, this framework is only aimed at Black voters, lacking clear regulatory details or specific policy positions, and has been criticized by the crypto community as lacking sincerity, believing that she is merely using cryptocurrency as a tool to gain votes.

The current Biden/Harris administration has a confrontational stance on the regulation of the crypto industry, taking actions including filing multiple lawsuits, restricting traditional banking services, and vetoing bipartisan legislation, while continuously considering the imposition of capital gains tax on crypto assets. Although Harris's crypto policies may be friendlier than Biden's and have the potential to improve the regulatory environment for the industry, her positions on key issues such as taxation, Bitcoin mining, and self-custody remain cautious and are far from Trump's pro-crypto stance.

Trump

The Republican Party has always emphasized individual freedom, and its values align with the decentralized concept of crypto assets (crypto) to a certain extent. The Republican National Committee mentioned crypto assets in its official platform, stating that Trump will defend Bitcoin mining rights and "ensure that every American has the right to self-custody of digital assets and trade without government oversight and intervention." In contrast, the Democratic Party tends to strengthen government power and regulation, which conceptually creates some friction with the crypto assets community.

Trump has shown a strong interest in the digital asset industry, claiming to make the United States the "capital of global crypto assets and Bitcoin". He supports Bitcoin mining and promises to protect the rights of self-custody. Additionally, Trump once used BTC to buy hamburgers for diners during his campaign and publicly criticized the U.S. Securities and Exchange Commission ( SEC ) for its tough stance on crypto assets, stating that if he is re-elected, he will appoint a new chairman who is friendly to crypto. Trump has also launched his own decentralized finance project ( DeFi ) World Liberty Financial.

Trump has proposed a series of Crypto Assets policy recommendations, including:

• Establishing a Bitcoin government reserve: Trump pointed out that his administration will "retain 100% of the Bitcoin currently held by the U.S. government or acquired in the future," and these Bitcoins will form the "core of the national strategic Bitcoin reserve." As of October 2023, the U.S. government is estimated to hold Bitcoin worth over $5 billion, mainly through seizures from criminal investigations. However, it remains unclear how these reserves will be used, whether they are practically feasible, and whether they can be widely accepted by the crypto industry.

• Establishing a Crypto Assets Advisory Committee: Trump proposed the formation of a "Bitcoin and Crypto Assets Presidential Advisory Committee" in Nashville, stating that the committee will be composed of "people who love this industry" to set rules, rather than "people who hate the encryption industry."

• Preventing the Federal Reserve from launching a digital currency: Many countries around the world are advancing central bank digital currencies ( CBDC ), but this trend is being resisted by the crypto community in the United States. Although the Federal Reserve has not yet decided whether to launch a digital dollar, it released a report in January 2022 discussing the potential costs and benefits of CBDC. Trump has repeatedly publicly opposed this idea, calling it "a significant threat to freedom." In May 2024, the House of Representatives passed a bill prohibiting the Federal Reserve from creating CBDC, but this bill has a long way to go before it becomes law.

It is important to note that although Trump has a supportive attitude towards crypto assets, his tariff policies may trigger economic uncertainty, and the long-term impact on the market and the crypto assets industry remains to be seen.

The situation of "split government" may occur.

At present, it seems that unless one party can simultaneously control both the House and Senate as well as the presidency, instability is almost inevitable in other circumstances.

As of October 25, Polymarket data shows that the winning probabilities of different parties in the presidential, Senate, and House elections vary. Among them, the only specific outcome with a relatively high probability is Republican control of the Senate. At the same time, a "divided government" situation is also very likely to occur, which refers to a scenario where the presidency and the Senate are controlled by different parties. The last time a divided government occurred was during Obama's term, and it has not happened during the terms of Biden and Trump.

This political situation often leads to a policy deadlock, as the President and the Senate must compromise on major legislation and personnel nominations. However, if the Republican Party wins decisively, new legislation is expected to be passed within just three to six months, which would be a positive outcome for the Crypto Assets market, as the Republican Party tends to advocate for a more lenient regulatory framework for Crypto Assets.

On September 25, Wednesday, the U.S. Congress passed a temporary spending bill that keeps government funding running through December, temporarily avoiding a government shutdown. The passage of this bill also postpones final spending decisions until after the November 5 presidential election. In other words, from December until the new Congress is sworn in on January 3 of the following year, the government's fiscal budget issues will be somewhat constrained. This means that during this transition period, the president's power may not have a broad impact on fiscal policy until the new House of Representatives is sworn in and a formal fiscal budget can be passed.

The SEC leadership is likely to change.

Since Gary Gensler took office as the SEC Chair, his tough regulatory policies have sparked strong dissatisfaction within the Crypto Assets community. Although he has achieved some success in cracking down on illegal securities offerings, his overly strict enforcement approach has also faced protests from many crypto companies.

Trump has publicly stated that if he is elected again,