A Partisan Issue? The Ongoing Political Polarization of Crypto

The United States has been at the forefront of crypto innovation since the creation of this asset class. America has also been the birthplace of some of the world’s biggest cryptocurrency companies.

However, in the last few years, U.S. regulators — in particular, the Securities and Exchange Commission (SEC) — have shown opposition to the crypto industry.

The SEC has frequently sued crypto companies, protocols, and organizations. In fact, just recently, it was revealed that the SEC was investigating the Ethereum (ETH) Foundation.

This hostility from regulators has pushed some crypto companies to move overseas and led to a loss of crypto jobs in the United States.

If America wants to remain at the forefront of tech innovation, it must learn to embrace the cryptocurrency industry.

The crypto market is currently trading in a neutral pattern. The chart of Ethereum below illustrates how current political and regulatory issues are making investors anxious. ETH is battling that $3,000 line and has been volatile since the SEC’s investigation came to light.

If you’ve read Friday’s issue of Crypto Investing Daily, you know that there have been some significant developments concerning this issue recently. Today, let’s explore them further.

What’s the Deal With SAB 121?

The SEC’s Staff Accounting Bulletin (SAB) 121 requires banks that have custody of a client’s cryptocurrency holdings to do so on their own balance sheets. The regulation has posed a significant challenge to the mainstream adoption of crypto custody services by traditional financial institutions.

Recently, the House of Representatives passed a resolution that would nullify this policy. The resolution’s passing signifies a potential step toward enabling broader access to crypto custody services and facilitating institutional participation in the crypto market.

However, President Biden has vowed to veto the resolution if it arrives at his desk. To illustrate how politically polarizing the issue has been, every House Republican voted in favor of the resolution, while all but 21 Democrats voted against it.

Polarizing Crypto Politics

Traditionally, the cryptocurrency industry has not been particularly political. Many of the big cryptocurrency companies have been based in liberal cities such as San Francisco and New York. The crypto data startup where my career began was based in Denver and certainly did not lean Republican.

However, many workers in the crypto industry have become single-issue voters because they believe that the current regulatory stance on crypto is a dire issue.

President Biden’s administration has signaled a cautious and restrictive approach to crypto — evident in his plans to veto SAB 121.

On the other hand, former President Trump appears to acknowledge that there’s a problem with opposition to the industry. Just last week, he advocated for friendlier regulation to keep crypto companies in the U.S.

During an event at Mar-a-Lago. Trump promised to address the regulatory hostility toward the asset class, signaling a potential shift in policy direction. Compared to the current administration’s policies, were Trump to win, this could promise a more favorable regulatory environment for crypto.

The November elections could serve as a turning point for crypto regulation in the U.S., with potential implications for an ongoing bull run in the market.

A victory for Trump, if he sticks to his commitment to fostering crypto-friendly policies and retaining crypto jobs in America, could fuel investor optimism and further boost market sentiment.

Conversely, a win for Biden could cause more strain on an industry seemingly just finding its footing among financial institutions.

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