'Crypto' - US

Trump winning war for ‘crypto’ votes as Biden’s ‘pivot’ greeted with skepticism

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‘Crypto’ operators are pushing hard to make their sector a key consideration in the 2024 U.S. election cycle, spending big to try to ensure lighter-touch regulation and lower taxes.

On June 20, Tyler Winklevoss—who, along with his twin brother, Cameron, runs the Gemini digital asset exchange—issued a novel-length tweet detailing how he had donated $1 million in BTC to Donald Trump’s presidential campaign. Cameron issued a similar tweet celebrating his own $1 million donation, along with pledges by both brothers that they’d be voting for the short-fingered vulgarian come November.

Predictably, the Winklevii failed to recognize that their donations exceeded the $844,600 maximum that individuals are allowed to contribute under federal campaign financing laws. Bloomberg reported that the Trump campaign returned the excess funds, which the twins will hopefully spend on legal advice next time they engage in this type of ‘ready-fire-aim’ activism.

Tyler’s novel described the brothers’ decisions as based on their dislike of the alleged “weaponization of the banking system against crypto companies and their principals.” This is a reference to right-wing crypto bros’ evidence-light belief in something called Operation Choke Point 2.0, which has about as much heft to it as some other Trump fans’ belief in something called ‘aviation flu.’

Tyler also attacks “the weaponization of the Securities and Exchange Commission (SEC) against crypto.” This claim has little more validity, as SEC chair Gary Gensler has indeed shown little tolerance for crypto operators’ grifting, including Gemini’s, which led to the SEC filing charges for offering unregistered securities.

(Said weaponization apparently extends beyond the federal government. On June 14, New York Attorney General Letitia James announced that her office had recovered around $50 million from the Winklevii’s Gemini Trust Company to compensate some of the 230,000 investors she said were “swindled by Gemini through its bogus Earn program.”)

Some of the SEC’s more recent actions—including allegedly dropping their probe aimed at declaring Ethereum’s ETH token an unregistered security—would seem to add credence to reports that President Joe Biden has belatedly recognized the importance of crypto voters to his chances in November.

Tyler remains unconvinced, stating that actions by Biden’s administration “have been nothing short of an unprecedented abuse of power wielded entirely for twisted political gain.” Tyler added that “[t] here is nothing the Biden Administration can do or say at this point to pretend otherwise.”

Buckchain

The Winklevii’s Trump commitment may not have been expressed publicly before, but it’s hardly a secret that the overall sector was leaning Trump’s way long before he started inserting vague pledges of support for all things ‘crypto’ into his stump speeches.

Trump’s surrogates have also been active on this front, as the New York Times reported last week that former GOP presidential hopeful Vivek Ramaswamy had privately pressed Coinbase (NASDAQ: COIN) CEO Brian Armstrong to officially declare his allegiance to the spray-tanned septuagenarian.

On June 20, Gemini announced an initiative aimed at “empowering crypto-friendly leaders,” which, in practical terms, means they will “facilitate crypto contributions for pro-crypto candidates.” The initiative is allegedly open to “any U.S. campaign that is interested in accepting donations in crypto,” which appears to conflict with Tyler’s ‘no Bidens’ platform, but whatever.

The Winklevii previously donated $5 million to Fairshake, the political action committee that amassed a war chest of nearly $175 million—of which over $100 million remains unspent—to promote crypto-friendly candidates and denigrate those opposed. (Coinbase has contributed $52 million to Fairshake and a pair of related PACs, with contributions from Andreessen Horowitz (a16z) and Ripple Labs not far behind.)

While crypto whales are anteing up, the same apparently can’t be said for the sector’s minnows. On May 21, Trump’s campaign formally announced that it would accept donations in tokens, but a Breadcrumbs analysis of these donations shows a decidedly modest $59,385 received as of June 17.

There are a few caveats to this tally, in that Breadcrumbs was only tracking donations made via the Ethereum, Polygon and Base blockchains. The tally also doesn’t include assets pledged off-chain via Coinbase Payments, which signed on to help process Trump’s crypto donations.

Breadcrumbs’ tally also doesn’t include Trump supporters who inadvertently donated to the “dozens” of bogus websites claiming to be accepting tokens on Trump’s behalf. Some of these sites lure their marks by promising perks like dinner at Trump’s Mar-a-Lago club in Florida, while others are constructed to resemble payment gateways like CoinGate.

Biden’s ‘pivot’: too little, too late?

Biden’s team is now playing catch-up and is reportedly considering whether it, too, should sign up with Coinbase to catch some of that filthy digital lucre. Biden is also reportedly assembling a ‘Bitcoin roundtable’ in Washington early next month at the urging of Rep. Ro Khanna (D-CA) (who has a ‘strongly supports’ rating from Coinbase’s Stand with Crypto advocacy group). In addition to administration officials, federal legislators and billionaire Mark Cuban are reportedly slated to attend.

In supporting Trump, his crypto supporters have somehow rationalized Trump’s transactional approach to everything and his history of flip-flopping. But as Tyler Winklevoss’s statement made clear, Biden isn’t being given the same latitude.

That’s not to say that some aren’t willing to give Biden the benefit of the doubt. Dave Ripley, CEO of the Kraken exchange, told CNBC last week that while Biden’s administration had been “strongly negative” on digital asset issues, Ripley was now seeing “bipartisan support” both in Congress and the executive branch.

Around the same time, Pantera Capital issued a research note saying Biden’s recent veto of a bill intended on clipping the SEC’s wings on crypto accounting policies “more likely reflects his reluctance to publicly oppose” Gensler and instead taking “the quieter path of asking the SEC to change the rule on their own.”

That favorable view of Biden is bollocks, according to lobbyist Michelle Bond, the romantic partner of former FTX exec/convicted felon Ryan Salame. Bond declared that Biden couldn’t just “jump on the bandwagon at this 11th hour a few months before an election and be like ‘I’m the crypto candidate.’” Despite Trump’s own jump coming at the 10th hour and 59th minute, Bond says Trump is “extremely friendly.” Well, alrighty then.

Biden and Trump will face off this week in a CNN-hosted debate, and Stand with Crypto is trying to enlist its members to press the network to “add crypto to the debate agenda.” Trump would likely relish the resulting exchange, while CNN presumably won’t be able to resist the urge to look ‘hip.’

Are you tough enough?

It remains to be seen what all this portends for FIT21, the pro-crypto legislation recently passed by the House of Representatives and currently languishing in the Senate. Among other things, the bill would hand the bulk of crypto oversight to the Commodity Futures Trading Commission (CFTC), which not only has a more pro-crypto stance but also has a fraction of the SEC’s budget, meaning far fewer resources to police illegality (and perhaps a comparative lack of interest in looking for it).

During a recent Senate Appropriations subcommittee hearing, Sen. Dick Durbin (D-IL) voiced concerns that the CFTC wasn’t up to the task of ensuring crypto operators toe the line. Durbin warned that the CFTC was “biting off a hell of a lot more than they can chew” and asked CFTC chair Rostin Behnam “what in the world makes you think” that the CFTC can do the job that might be asked of it.

Behnam claimed the CFTC was “adequately equipped to oversee the markets we are mandated to oversee,” but adding crypto to that mix would require a fatter annual budget. Gensler, who appeared alongside Behnam, mused that the CFTC was “a great agency, but it was set up to do derivatives,” not oversee securities, which the SEC maintains describes the bulk of digital assets.

Behnam insisted that the CFTC had teeth, pointing to the 135 crypto cases it had brought over the past decade, including 47 in fiscal 2023 alone. Behnam said the tally was even more impressive given that this was “a market where we don’t have direct authority and jurisdiction.”

Might as well Jump

Behnam appears interested in bolstering this ‘tough-as-nails’ image. Last week, Fortune reported that the CFTC was probing Chicago-based trading firm Jump. Specifics were scant, but the CFTC was said to be casting a critical eye on Jump Crypto, the firm’s digital asset offshoot.

Last year, a class-action suit accused Jump of manipulating the price of UST, the ‘algorithmic stablecoin’ issued by Terraform Labs, the spectacular collapse of which kicked off 2022’s ‘crypto winter.’ Earlier this month, Terraform reached a $4.5 billion settlement with the SEC over its fraudulent activities. The SEC previously cited an unidentified “U.S.-based proprietary trading firm” involved in propping up UST, which was later confirmed as Jump.

Jump has since scaled back its crypto operations but still somehow found $10 million to donate to the Fairshake PAC last week. Jump previously donated $5 million to Fairshake, putting its total contributions behind only Coinbase, a16z and Ripple.

Movin’ on up

Biden recently nominated two sitting CFTC commissioners to head up other federal entities. Biden nominated Christy Goldsmith Romero to lead the Federal Deposit Insurance Corporation and wants Kristin Johnson as the Treasury Department’s next Assistant Secretary for Financial Institutions.

Romero and Johnson are both Democrats who have pressed the CFTC to take steps to better protect consumers when it comes to digital assets, including strict rules on separating customer deposits from companies’ operating capital. Their potential departures could open up spaces for even more crypto-friendly commissioners at the CFTC’s decision desk—a more likely scenario should Trump prevail in November.

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