Decoding Donald Trump’s crypto agenda
Decoding Donald Trump’s crypto agenda
Crypto has made it all the way into the Republican platform. Now what?
And we’re back! These past few weeks the news has slowed to a trickle. But in case you haven’t heard it’s an election year in the US, and crypto has muscled its way into the main event.
What does it mean that Trump is pro-crypto?
We have a saying in this newsletter: crypto contains multitudes. It’s a technology, marketplace, industry, even a culture. Recently it has dabbled in being a political faction. So now that Donald Trump is officially pro-crypto, it’s worth examining exactly what that means.
A 16-page document the Trump campaign published this week entitled “2024 GOP Platform” adds a layer of detail—coded as partisan red meat—to the campaign rhetoric Trump has adopted over the past month or two.
As part of a section called “Championing Innovation,” the platform features two sentences devoted specifically to crypto:
Republicans will end Democrats’ unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency. We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of [sic] their Digital Assets, and transact free from Government Surveillance and Control.
Beneath the partisan language is a glimpse of how President Trump: Part Deux might deal with crypto—but also unanswered questions about how he would be different than Joe Biden.
Let’s go line by line.
Republicans will end Democrats’ unlawful and unAmerican Crypto crackdown…
It’s a broadly held view within the industry, including among Democratic voters, that the Biden administration has been hostile toward crypto. This isn’t because of anything Biden himself has said or done. To the extent there’s been a “crackdown,” it’s largely been the sum of enforcement actions taken by administrative agencies within Biden’s administration, most prominently the Securities and Exchange Commission (SEC), the Department of Treasury, and the Department of Justice.
A Trump administration would inevitably end the tenure of SEC chair Gary Gensler, who most crypto enthusiasts consider a chief adversary. They say he has hampered crypto innovation in the US by bringing unfounded lawsuits against good faith actors in the industry. Whoever a future President Trump might appoint to head the SEC would almost certainly be much friendlier to the industry than Gensler, who has aggressively sought to impose the same strict regulatory regime that governs stock and bond trading.
The other fight the Biden administration has picked with crypto is in the area of national security. Most prominently, the Department of Justice has indicted two developers of the Ethereum-based privacy application Tornado Cash, accusing them of money laundering and violating sanctions against North Korea. This came after the FBI determined that North Korean state-sponsored hackers had used Tornado Cash to cover their tracks after stealing $600 million from the crypto game Axie Infinity.
Defenders of the Tornado Cash developers see the indictment as an unconstitutional attempt to criminalize software development. But is this part of the “unlawful” crackdown Trump mentions in his new platform? That’s not clear.
This is also where things could get awkward.
As we’ve discussed before, the North Korean government’s adoption of Tornado Cash has put crypto in a bind. The “permissionless” privacy tool lets anyone with an internet connection transact in cryptocurrency without leaving a trace. By design that means North Korea is free to use it to wash stolen crypto-cash it's using to fund its weapons program. A pro-crypto purist would say that’s just the price of true permissionlessness. But let’s not kid ourselves: no American president is going to like that.
This isn’t a Republican versus Democrat thing. It’s about America’s national security and geopolitical power. Since the dollar is the world’s reserve currency, other nations must hold dollars if they want to trade. That means most of global trade passes through US banks. And that means the US has the power to effectively shut off other nations—specifically adversaries like North Korea—from the global financial system by imposing economic sanctions.
Trump understands this as well as anyone. So why (and, just as important, how) might a Trump administration treat the developers of software like Tornado Cash differently than the Biden administration has?
…and oppose the creation of a Central Bank Digital Currency
It’s strange that this stance is featured so prominently in the crypto section of Trump’s platform. What does being pro-crypto have to do with central bank digital currency (CBDC)? If cryptocurrency is the future of money, why shouldn’t governments adopt the technology as well?
The short answer is partisan politics. Just a few years ago, the idea that the Federal Reserve might someday issue a “digital dollar” was mostly uncontroversial in Washington. After all, more and more of our lives were turning digital. China and many other nations were developing digital versions of their currencies. Why wouldn’t the US?
Around two years ago, however, Republican politicians started claiming that the Biden administration wanted to issue a CBDC so that it could oversee and censor the purchases of everyday Americans. Florida Governor and then-trendy presidential candidate Ron DeSantis said the government wanted to use a CBDC network to block people from buying guns and fossil fuel. Conservative lawmakers began proposing bills to prevent the Fed from issuing a digital currency.
How the anti-CBDC stance became attached at the hip to the Republican Party’s overall stance on crypto is somewhat mysterious. Perhaps it’s simply that the most vocal anti-CBDC politicians often happen to be pro-crypto too. A Republican talking point has emerged that a CBDC should not be allowed unless it is “open and permissionless.” Still no word on how that would work technically.
In reality, neither the Fed nor the Biden Administration has ever planned to issue a CBDC. How one might even work—including how private and cashlike it could be—is still the subject of academic research. Advanced cryptographic tools like zero-knowledge proofs have shown the potential to provide privacy and compliance simultaneously, and there’s no reason at this point (other than cynicism toward the government) to think a future CBDC couldn’t or wouldn’t take advantage of that.
Before the issue got so heated, the Boston Fed was pursuing sophisticated research into how a retail-scale system might work from a technical standpoint—including how advanced privacy technologies might fit in. But in late 2022, the bank shuttered that research after it came under fire from Republican members of Congress. Maybe those same members helped write this policy position.
In fact, the CBDC conversation is more complicated than domestic politics. As China and other nations develop more innovative ways to move money around digitally, some argue that unless the US makes technological upgrades to the dollar, the currency’s standing in the world could be reduced. Incidentally, one of the Trump platform’s promises is to “keep the US dollar as the world’s reserve currency.”
We will defend the right to mine Bitcoin…
For some reason, Trump has shown a particular affinity for Bitcoin of late. He’s even adopted popular Bitcoiner talking points. Last month he met with executives from bitcoin mining firms at Mar-a-Lago, posting afterward on his social media platform that “Bitcoin mining may be our last line of defense against a CBDC,” and that “It will help us be ENERGY DOMINANT!!!”
The latest news is that Trump plans to speak at a huge Bitcoin conference in Nashville later this month.
…and ensure every American has the right to self-custody of [sic] their Digital Assets, and transact free from Government Surveillance and Control.
It’s hard to overstate how dramatically the politics of crypto have changed since the collapse of Sam Bankman-Fried’s FTX. The episode galvanized crypto-skeptics in DC—the most prominent among them being Senator Elizabeth Warren of Massachusetts.
In late 2022, Warren introduced the Digital Asset Anti-Money Laundering Act, which infuriated and terrified the crypto lobby because it read as an attempt to ban “self custody” or the power to control your own cryptocurrency rather than rely on a third party. Doing so requires software known as a wallet, and Warren’s bill would have required developers of self-custody wallets to identify their customers and monitor their transactions for suspicious behavior. Policy advocacy group Coin Center called the bill an “unconstitutional assault on cryptocurrency self custody.”
In February 2023, Politico now famously reported that Warren, who is influential within her party, was “building an anti-crypto army.” Her aggressive stance was seen in the industry as a genuine existential threat. An anti-anti-crypto army began to assemble to fight back in DC. Lately, it’s been on a winning streak.
The flagship is a Super PAC called Fairshake, which is backed by Coinbase, Ripple, Andreessen Horowitz, and others and has raised $169 million, making it among the richest PACs in the election cycle. According to CoinDesk, Fairshake has supported more than 20 congressional primary wins so far, targeting “anti-crypto” candidates with ad spending.
There’s also Trump himself. That he’s even using the term “self-custody,” much less elevating it to the level of the presidential campaign, is a direct attack on whatever’s left of the anti-crypto army.
But there doesn’t seem to be much left of it. In May, a critical mass of Democrats voted with Republicans—and against the guidance of Gensler and Warren—to pass two crypto industry-supported bills. This week, one of Biden’s closest advisors, Anita Dunn, attended a “crypto roundtable” hosted by Democratic Congressman Ro Khanna. According to Decrypt, some industry members who attended were encouraged and left “optimistic” that the Democrats and the administration could work with the industry.
The Trump campaign’s decision to drape its crypto policy position in politically charged language reflects how it aimed to use the issue as a wedge, framing itself as the destroyer of the anti-crypto army. But maybe it’s already been destroyed. Self-custody may have been in danger two years ago but DC seems to have moved on. Gensler and Warren have lost influence. Now the question is what specifically might Trump do on the crypto policy front if he’s elected?
In case you’re not familiar with Donald Trump, he says a lot of things, including many things he doesn’t mean. So all of this pro-crypto stuff could be political eyewash that fades after the election. Then again, the anti-anti-crypto army could soon have a powerful ally in the White House. —Mike Orcutt
ODDS/ENDS
Jesse Powell, founder of the crypto exchange Kraken, said he has donated $1 million to Donald Trump. “For too long, the crypto industry has been under attack by Elizabeth Warren, Gary Gensler, and others,” he wrote on Twitter/X.
The US Treasury Department issued the final version of new tax filing rules for crypto brokers—but punted on the controversial question of whether the rules apply to entities that don’t take custody of customer funds, like DeFi operators and self-custody wallet providers. “The Treasury Department and IRS continue to study this area and, after full consideration of all comments received, intend to expeditiously issue separate final regulations describing information reporting rules for non-custodial industry participants.”
The SEC is suing Ethereum software developer Consensys. The agency alleges Consensys is acting as an unregistered securities broker by offering cryptocurrency staking services to users of its popular wallet, MetaMask.
Poe, an AI chatbot owned by Quora, lets users download paywalled articles on demand, according to Wired. It’s the latest sign that the AI industry doesn’t seem to mind undermining the business of journalism.
AU10TIX, which verifies user identities for TikTok, Uber, and X, exposed a set of admin credentials for over a year, reports 404 Media. Something something centralized databases.
During its coverage of the Olympics, Peacock will use generative AI to recreate the voice of Al Michaels. The fake voice will be part of a feature that offers users “personalized sports highlights,” according to The Athletic.
Story, a blockchain startup developing a blockchain designed specifically to manage intellectual property rights, plans to launch its protocol this year. “We want to do for IP what bitcoin did for money,” cofounder Jason Zhao told The Block.
The “widespread availability, accessibility, and hyperrealism” of generative AI has opened the door to “new, lower-level forms of misuse that blur the lines between authentic presentation and deception,” according to a new paper from Google researchers. The mass production of “nefarious synthetic content” could overload people with “verification tasks” and make them skeptical of all digital content, the researchers warned. “If unaddressed, this contamination of publicly accessible data with AI-generated content could potentially impede information retrieval and distort collective understanding of sociopolitical reality or scientific consensus.” 😬
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