Battle lines drawn: Trump advocates for crypto while Biden looks to regulate the industry

(Kitco News) – The 2024 Presidential race is starting to heat up, with President Joe Biden and former President Donald Trump ramping up their public appearances as they attempt to appeal to undecided voters – and crypto is shaping up to be a key campaign issue. 

On the pro-crypto side is Trump, who lamented the fact that crypto companies are fleeing the U.S. market for more welcoming jurisdictions, which he sees as a long-term detriment. 

“Crypto is moving out of the U.S. because of hostility towards crypto,” Trump said at an event he hosted at his Florida home on Wednesday for a group of non-fungible token (NFT) enthusiasts. “We’ll stop it because I don’t want that – if we’re going to embrace it, we have to let them be here.”

He used the opportunity to paint himself as pro-crypto, as opposed to the U.S. Securities and Exchange Commission (SEC) and the Democrats, whom he painted as decidedly anti-crypto. 

“Gensler is very much against it. The Democrats are very much against it, [but] I’m fine with it; I want to make sure it’s good and solid and everything else, but I’m good with it,” Trump said. 

He also took credit for the revival in the NFT market, claiming that his Mugshot NFTs and other collections “made NFTs hot again” at a time when the NFT market was stuck in the doldrums. 

Trump also took a swipe at the Joe Biden-linked Jeo Boden (BODEN) meme coin, which currently has a market cap of $217 million after hitting a high of $655 million on April 10. 

“That’s a lot of money for a coin; I don’t like that investment,” he said.

On the opposite side of the spectrum is President Biden, who has specifically targeted the crypto industry in various proposals, including the March reintroduction of a controversial proposal to impose a 30% excise tax on the cost of electricity used for Bitcoin mining.

The Digital Asset Mining Energy tax (DAME) has widely been lambasted by industry professionals, who say it could push U.S.-based Bitcoin miners like RIOT Platforms and Marathon Digital Holdings to more welcoming jurisdictions, as alluded to in the comments made by Trump. 

“A proposed 30% punitive tax on digital asset mining would destroy any foothold the industry has in America,” tweeted Republican Wyoming Senator Cynthia Lummis. “I will not let President Biden tax the digital asset industry out of existence.” 

Independent Presidential candidate Robert F. Kennedy Jr. also pushed back against the proposal, tweeting, “Cryptocurrencies, led by bitcoin, along with other crypto technologies, are a major innovation engine. It is a mistake for the U.S. government to hobble the industry and drive innovation elsewhere. Biden’s proposed 30% tax on cryptocurrency mining is a bad idea.”

“Just as a biodiverse ecosystem is a resilient ecosystem, so too will our economy be more resilient if it has a diverse ecology of currencies, not just a single, centrally controlled one,” he added. “We are seeing today how fragile our over-centralized system is.”

Biden further showed which side of the crypto camp he’s on by promising to veto H.J. Res. 109, a resolution approved by the U.S. House of Representatives on Wednesday that rejects the SEC’s cryptocurrency accounting guidance that the industry said has deterred banks from handling crypto customers.

The SEC’s Staff Accounting Bulletin No. 121 – also known as SAB 121 – was designed to help clarify accounting treatment for crypto assets, directing banks holding a customer’s digital tokens to do so on its own balance sheet, potentially incurring massive capital expenses. 

A review of the bulletin by the Government Accountability Office (GAO) determined that the agency should have handled it as a rule, with full public comments and submission to Congress.

“SAB 121 was issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers,” Biden said in a statement, adding he “strongly opposes” disrupting the SEC’s work on this.

“By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets including financial stability,” the statement said. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty. If the President were presented with H.J. Res. 109, he would veto it.”

Despite the statement, the House voted strongly in favor of the resolution, with 21 Democrats joining Republicans in passing the measure. 

With so much focus on the crypto industry in Congress and from the SEC, the topic is shaping up to be an influential platform in the coming election amid the rising awareness of digital assets following the launch of multiple spot Bitcoin exchange-traded funds (ETFs) in the U.S. 

According to a Tuesday note from Geoffrey Kendrick, digital asset researcher at Standard Chartered, a Trump administration would be more welcoming and less strict on Bitcoin and crypto than another Biden term would be. 

“While officials in the Biden administration have taken a relatively tough stance on digital assets, Trump said in a March interview that if elected, he would not crack down on Bitcoin or other digital assets,” Kendrick wrote. 

He added that Trump would also support a more positive regulatory environment and said the risk of U.S. fiscal dominance with the monetization of government debt by the Fed is growing, which is supportive of alternative assets like crypto. 

“We think that a second Trump administration would be broadly positive via a more supportive regulatory environment,” the report said. “In a scenario of U.S. fiscal dominance, we think Bitcoin would provide a good hedge against de-dollarization and declining confidence in the U.S. Treasury market.” 

Kendrick added that U.S. fiscal dominance would likely have three effects on the U.S. Treasury curve: “a steeper nominal 2-year/10-year curve, a greater increase in breakevens than real yields, and an increase in term premium.” 

He noted that Bitcoin’s price has a positive correlation with all three of these potential developments. 

Kendrick also warned that if Trump were to win the election, a second administration could accelerate the withdrawal of foreign official U.S. Treasury buyers due to fiscal concerns, highlighting that in his first term, the average annual net selling of U.S. government debt was $207 billion a year versus only $55 billion under Biden’s presidency.

“In addition to the passive boost to BTC from de-dollarization, we would expect a second Trump administration to be actively supportive of BTC (and digital assets more broadly) via looser regulation and the approval of U.S. spot ETFs,” he said. 

The report closed by reiterating Standard Chartered’s end-of-year Bitcoin forecast, with the bank expecting a price of $150,000 in 2024 and $200,000 by the end of 2025, and noting that import tariffs under Trump would lead “several large reserve managers to be buying BTC in 2025.”