Trump’s Crypto Policy After the Assassination Attempt: A New Direction for the Presidency

Author: Mike Orcutt, Translator: Block unicorn

What does Trump's support for cryptocurrency mean?

We have a sentence in this issue: Cryptocurrency is all-encompassing. It is a technology, a market, an industry, and even a culture. Recently, it has also tried to become a political faction. So now that Donald Trump has officially supported cryptocurrency, it's worth examining what this means.

The Trump campaign released a 16-page document this week called the "2024 Republican Platform," which adds a layer of detail to Trump's campaign rhetoric over the past month or two - what is called the party's political "distribution."

In a section called "Driving Innovation," the platform has two sentences specifically targeting cryptocurrency:

The Republican Party will end the Democrats' illegal and un-American cryptocurrency crackdown and oppose the creation of a central bank digital currency. We will defend the right to mine Bitcoin and ensure that every American has the right to keep their digital assets for themselves and trade them without government surveillance and control.

Behind the partisan language, we get a glimpse into how President Trump might approach cryptocurrencies, but there are also unanswered questions about how he differs from Joe Biden, so let’s take a line-by-line look.

The Republicans will end the Democrats’ illegal and un-American crypto crackdown…

The Biden administration is widely believed to be hostile to cryptocurrencies, including by Democratic voters. This is not because of anything Biden himself said or did. If there is a so-called “crackdown,” it is largely due to enforcement actions taken by executive agencies within the Biden administration, most notably the Securities and Exchange Commission (SEC), the Treasury Department, and the Justice Department.

The Trump administration will end the tenure of current SEC Chairman Gary Gensler, who most crypto enthusiasts consider to be a major antagonist. They say he has hampered crypto innovation in the U.S. by filing baseless lawsuits against bona fide players in the industry. Whoever Trump appoints to lead the SEC in the future will almost certainly be friendlier to the industry than Gary Gensler, who has aggressively sought to impose the same strict regulatory regime that governs stock and bond trading.

Another battle the Biden administration has picked up in the cryptocurrency space is in the realm of national security. Most notably, the Justice Department has indicted two developers of the Ethereum-based privacy app Tornado Cash, charging them with money laundering and violating sanctions against North Korea. This comes after the FBI determined that North Korean state-backed hackers used Tornado Cash to cover their tracks after stealing $600 million from the crypto game Axie Infinity.

Defenders of the Tornado Cash developers have argued that the indictment is an unconstitutional attempt to criminalize software development. But is this part of the “illegal” crackdown that Trump has mentioned in his new platform? We don’t know yet.

And that’s where things could get awkward.

As we’ve discussed before, the North Korean government’s adoption of Tornado Cash puts crypto in a difficult position. This “permissionless” privacy tool allows anyone with an internet connection to transact in cryptocurrency without leaving any trace. By design, this means North Korea is free to use it to launder stolen cryptocurrency used to fund its weapons programs. Crypto purists will say that’s just the price of being permissionless. But let’s not kid ourselves: no American president would like this situation.

This isn’t a Republican vs. Democrat issue. This is about America’s national security and geopolitical power. Because the dollar is the world’s reserve currency, other countries must hold it if they want to trade. That means most of the world’s trade flows through American banks. That means the United States has the ability to effectively shut other countries, especially adversaries like North Korea, out of the global financial system by imposing economic sanctions.

Trump understands this as well as anyone. So why (and just as importantly, how) might a Trump administration treat software developers like Tornado Cash differently than a Biden administration?

Andoppose the creation of a central bank digital currency

It’s a little odd that Trump’s platform features this stance so prominently in the cryptocurrency section. What does support for cryptocurrencies have to do with central bank digital currencies (CBDCs)? If cryptocurrencies are the future of money, why aren’t governments embracing the technology?

In short, it’s partisan politics. Just a few years ago, the idea that the Federal Reserve might suddenly issue a “digital dollar” was hardly controversial in Washington. After all, our lives are increasingly digital. China and many other countries are developing digital versions of their own currencies. Why wouldn’t the United States?

However, about two years ago, Republican politicians began claiming that the Biden administration wanted to issue a central bank digital currency (CBDC) so that it could monitor and scrutinize the purchases of ordinary Americans. Florida Governor and then-highly-regarded presidential candidate Ron DeSantis said the government wanted to use the CBDC network to prevent people from buying guns and fossil fuels. Conservative lawmakers began introducing bills to prevent the Fed from issuing digital currencies.

It’s a bit of a mystery how the anti-CBDC stance ties into the Republican Party’s overall stance on cryptocurrencies. Perhaps it’s just that the politicians who most actively oppose CBDCs also tend to support cryptocurrencies. One Republican argument is that a CBDC shouldn’t be allowed to be issued unless it is “open and permissionless.” How this would technically be possible has yet to be explained.

In fact, neither the Fed nor the Biden administration ever planned to issue a CBDC. How a CBDC would work, including how it could be private and cash-like, remains a subject of academic research. Advanced cryptographic tools such as zero-knowledge proofs have shown potential to provide both privacy and compliance, and there is no reason (other than skepticism of governments) to think that a future CBDC couldn’t or wouldn’t take advantage of this.

Before the issue became so heated, the Federal Reserve Bank of Boston was conducting a complex study of how a retail-scale system would work from a technical perspective—including how advanced privacy technologies could be incorporated. But in late 2022, the bank halted the study after coming under fire from Republican members of Congress, who may have helped draft this policy position.

In fact, the CBDC discussion is more complicated than domestic politics. As China and other countries develop more innovative ways to transfer money digitally, some believe that unless the United States upgrades the dollar’s ​​technology, its position in the world may decline. Incidentally, one of the promises in Trump’s platform is to “maintain the dollar’s ​​status as the world’s reserve currency.”

We willdefend the right to mine Bitcoin…

For some reason, Trump has recently shown a special fondness for Bitcoin. He has even adopted the popular views of Bitcoin enthusiasts. Last month, he met with executives of Bitcoin mining companies at Mar-a-Lago, and later posted on his social media platform that “Bitcoin mining may be our last line of defense against CBDCs, and it will help us dominate the energy sector!!”

The latest news is that Trump plans to speak at a large Bitcoin conference in Nashville later this month.

…andensure that every American has the right to self-custody their digital assets and trade them free from government surveillance and control

It’s hard to overstate how dramatically the politics of cryptocurrency have changed since the collapse of Sam Bankman-Fried’s FTX, an event that angered crypto skeptics in Washington, most prominently Massachusetts Senator Elizabeth Warren.

In late 2022, Warren introduced the Digital Asset Anti-Money Laundering Act, a bill that angered and frightened the crypto lobby because it was interpreted as an attempt to ban “self-custody,” or the power to control one’s own cryptocurrency rather than relying on a third party. Doing so requires a piece of software called a wallet, and Warren’s bill would require 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 attack on cryptocurrency self-custody.”

In February 2023, Politico reported that Warren (Democratic Vice Chairman), who is influential within the party, was "building an anti-crypto army." Her radical stance is seen in the industry as a real existential threat. An anti-crypto army has begun to gather in Washington, D.C. to fight back, and recently, this army has been on a winning streak.

Its main opponent is a super PAC called Fairshake, which is backed by companies such as Coinbase, Ripple, Andreessen Horowitz, and has raised $169 million, making it one of the richest political action committees in the election cycle. According to CoinDesk, Fairshake has supported more than 20 congressional primary victories to date and targeted "anti-crypto" candidates through advertising spending.

And Trump himself. His even using the term "self-custody," not to mention raising it to the level of a presidential campaign, is a direct attack on the anti-crypto army.

But now it seems that there is not much left of that army. In May, a large number of Democrats voted with Republicans - against the guidance of Gensler and Warren - to pass two bills supported by the crypto industry. This week, Anita Dunn, one of Biden's closest advisers, participated in a "crypto roundtable" hosted by Democratic Rep. Ro Khanna. According to Decrypt, some industry members in attendance were encouraged and "optimistic" that the Democratic Party and the government can work with the industry.

The Trump campaign's decision to express its cryptocurrency policy stance in politically charged language reflects an attempt to use this issue as a starting point to cast themselves as the destroyers of the anti-crypto army, who may have been destroyed by Trump. Two years ago, self-custody may have been in danger, but Washington seems to have moved on. Gary Gensler (SEC Chairman) and Warren (Elizabeth Ann Warren Democratic Vice Chairman) have lost their influence. The question now is, if Trump is elected, what specifically will he do in terms of cryptocurrency policy?

If you're not familiar with Donald Trump, he says a lot of things, including a lot of things he doesn't mean. So all this pro-crypto talk is probably political lies that will disappear after the election. However, the anti-crypto army may soon find a powerful ally in the White House.