How Will the Results of This Election Impact Crypto?

If you're a fan of crypto — and chances are, you are — you're likely wondering how this US election will impact you.

The fact is, with a total market capitalization exceeding $1 trillion USD, crypto has become a big ticket item in recent elections.

To understand how the 2024 US presidential race could actually have consequences for crypto holders, let's take a deeper look at what both candidates are offering and how previous elections have helped, or harmed, the landscape.

Key Takeaways

• US elections are particularly impactful on the global crypto market.
• The 2016 and 2020 elections had far reaching impacts on the crypto sector.
• Elections even have the power to turn BTC into legal tender, as we saw in El Salvador.
• In the 2024 election, Donald Trump claims to actively support crypto, with policies including a national Bitcoin reserve and a new DeFi venture. 
• Kamala Harris claims to support innovations including AI and digital assets, seeking transparent regulation to protect against risks like fraud.

What Effect Do US Elections Have on Crypto?

The US is undoubtedly a global leader in shaping the blockchain industry, with the country having significant influence over the sector.

This means that, when candidates have differing attitudes toward crypto, the results of the election can have significant implications for the broader industry.

This view is especially expressed by operators of cryptobusinesses and exchanges. The day before the 2024 US presidential election, Gemini co-founder Cameron Winklevoss took to X to express his opinion on its potential impact on crypto.

The Harris-Biden Administration has cost the crypto industry $500 million in legal fees. Vote Trump and this goes to $0. Vote Harris and this will balloon to $ billions. Choose wisely.

— Cameron Winklevoss (@cameron) November 5, 2024

It’s worth noting, of course, that Cameron is an active contributor to the Trump campaign. In the same way that elections impact crypto, the crypto industry itself tries to influence politics. Often, this takes the form of lobbying for crypto-friendly policies and promoting high-profile figures who are more likely to introduce a regulatory landscape that aligns with the goals of these businesses.

Regardless, the outcome of the election runs much deeper than legal fees. There are several key ways that the US election could influence crypto, including: 

1. Ushering in changes to the regulatory landscape: The result of elections directly leads to appointees and policy changes that can deliver specific laws on taxation, digital asset management, and consumer protection.
2. Shaping investor sentiments: Crypto-oriented candidates increase overall market confidence. The favorable conditions they promise to crypto businesses, in turn, may attract institutional investors.
3. Changing perceptions of crypto’s legitimacy: Elected officials can influence the public’s view on the legitimacy of crypto ,either by welcoming digital assets or taking a harsh stance against them.
4. Introducing a central bank digital currency: With 134 countries and currency unions currently exploring the possibility of launching their own government-controlled digital currencies known as CBDCs, election results could mean the difference between whether or not they are introduced to the public in the near future.

What Happened to Crypto After the 2016 and 2020 US Elections?

While crypto was not on Donald Trump’s agenda when he won the US election in 2016, his time as president is often touted as contributing to the industry’s massive rise in value.

Some outlets, such as Binance Square, speculate about this impact, noting that buying BTC for $1,000 USD on election day in 2016 would have yielded a 25x return a year later.

While technically true, correlation does not imply causation. A key driver behind this growth was the ICO boom, which spurred increased investments in crypto. 

Still, the election itself likely played a hard-to-quantity role in the growth of crypto, especially in the short term.

What’s easier to examine is the results of the 2020 election, in which Biden was elected. Biden’s administration appointed one of the most controversial figures in the current crypto landscape: Gary Gensler.

As chair of the US Securities and Exchange Commission, Gensler is known for taking a “regulation through enforcement” approach to crypto, which has proven unfavorable for crypto businesses. 

As recently as last month, Gensler said the crypto landscape is full of "fraudsters, a lot of grifters, a lot of scams," adding that “the leading lights of this field in [2024] are either in jail or awaiting extradition right now."

Donald Trump, if elected, has said he would fire Gensler. If this comes to fruition, it could prove to be one of the most significant changes to the crypto landscape as the result of any recent election.

The Election That Turned Bitcoin Into Legal Tender

When considering how elections can impact crypto, there’s one fringe case that stands above all other examples of what's possible: El Salvador.

The self-proclaimed crypto advocate, Nayib Bukele, was elected as the president of El Salvador in 2019.

Two years later, under his influence, El Salvador became the first country to recognize BTC as a legal tender.

In February 2021, El Salvador’s legislative and municipal elections resulted in a victory for Bukele’s party. By June, the aptly-named ‘Bitcoin Law’ was officially passed. 

This resulted in El Salvador becoming the first country ever to recognize Bitcoin as legal tender, mandating that BTC must be accepted in all financial dealings.

Of course, as a region with a GDP per capita of less than $5,000 USD, El Salvador’s adoption of BTC did not significantly impact the global crypto industry and is far from likely to happen in larger countries like the US.

Still, it serves as an example of how quickly an election can legitimize innovative new technologies like crypto.

The Impact of the US Election on Crypto Market in 2024

A September 2024 study by Grascale found that nearly half of likely voters view blockchain and crypto as the future of finance. 

In no doubt due to these growing trends, both candidates have incorporated innovation into their agendas.

While Kamala Harris has not vowed to introduce specific policies on crypto, her innovation-focused platform could also benefit the crypto industry should she be elected. Her platform could mean:

• Increased focus on innovations: Harris has expressed support for “innovative technologies”, including AI and digital assets, which could lead to favorable conditions for the crypto sector.
• Party influence: In response to Trump’s pro-crypto stance, Democrats are working to strengthen their ties with the crypto industry and balance regulatory concerns with its interests.
• Stricter regulation: Harris plans to make regulation more transparent, aiming to mitigate risks like fraud and market manipulation. This would mean stricter rules for industry participants but could — in theory — improve the landscape’s legitimacy.

Of the two contenders, however, Donald Trump is seen as being more crypto-oriented. He launched a cryptocurrency business in September 2024 and recently took a favorable stance in his speeches to crypto supporters. His platform includes the following initiatives:

• A pro-crypto agenda, with Trump aiming to position the US as a leader in the global crypto landscape.
• Stockpiling BTC: In July, Bitcoin Magazine reported Trump’s plan to establish a national Bitcoin reserve.
• Opposition to CBDCs: Trump has said he recognizes the risks associated with a “digital dollar”, claiming he’ll block the creation of a federal CBDC.
• A vested interest in crypto:. In August, Trump introduced his own crypto venture known as World Liberty Financial.

There’s no crystal ball that can be used to predict how the outcome of this election will meaningfully impact crypto in the long term.

Donald Trump, who once said that Bitcoin "seems like a scam", has emerged as a champion for crypto holders this election cycle. At the same time, Kamala Harris has attempted to present herself as an advocate for innovation by identifying her position as being less stringent and more innovation-focused than the Biden administration.

Above all else, these recent stances are reflective of both candidates trying to appeal to crypto holders — proving that digital assets have become a real election issue.

This means that, if you care about crypto, politicians are increasingly going to need to listen to people like you in order to win your vote.