Political crypto game intensifies as Kamala Harris jeopardizes 'Trump trade'

The US and global crypto asset industry are taking notice and returning to the drawing board, as their “Trump trade” – hopes that Donald Trump's victory would help the industry – is now at risk.

US Vice President and Democratic presidential nominee Kamala Harris is now leading in the polls and has caught up with Trump in prediction markets, while Democrats are attempting to mend their relationship with the crypto asset industry.

As of August 8th, Harris led Trump by two percentage points, according to an average of 2024 presidential polls calculated by the FiveThirtyEight project. Meanwhile, since August 8th, on Polymarket, the largest crypto-powered prediction market, the Democrat has caught up with Trump, with the betting community attributing equal chances to both top candidates to win the election.

Since then, the chances have fluctuated slightly, with Harris even taking a lead over Trump on August 9th. A few weeks ago, when sitting US President Joe Biden announced his endorsement of the VP, her chances of winning stood at 18%, while Trump enjoyed a much larger lead.

While many factors contribute to this surge, the Democrats' attempts to improve their relationship with the crypto asset industry, which has suffered multiple attacks during Biden’s presidency, likely played a role in this political shift.

Even OMFIF, an independent think tank for central banking, economic policy, and public investment, published a piece arguing that Harris “must lay out her own agenda for crypto assets or risk ceding the ground entirely to the Republicans.”

So, what’s new on the agenda, which is now heavily dominated by Trump? He has made numerous promises, from firing the Chair of the Securities and Exchange Commission (SEC) on day one to making bitcoin a US reserve asset. These and other promises helped Trump raise over $20 million for his campaign during the largest Bitcoin conference, held in Nashville this past July.

Democrats on the move

Most of the moves towards the crypto asset industry have been made by various Democrats and their supporters rather than by Harris herself, as she has yet to clearly state her stance on the matter.

This week, a new 50-member pro-Kamala Harris advocacy group called "Crypto for Harris" was announced. As reported by FOX Business, the group, consisting of industry participants and policy experts, plans to host a virtual town hall meeting next week to discuss Harris’s campaign and fundraising strategies.

In addition to top Democratic leaders, the speaker list also includes billionaire Mark Cuban and Anthony Scaramucci, who briefly served as the White House Director of Communications under Trump. Both Cuban and Scaramucci, the founder of SkyBridge Capital, are heavily invested in bitcoin and the crypto industry. In a recent comment to POLITICO, Cuban stated that from “the feedback” he’s getting, Harris “will be far more open to business, [artificial intelligence], crypto, and government as a service.”

Additionally, billionaire bitcoin and crypto investor Michael Novogratz said during a recent earnings call for his company, Galaxy Digital, that he is fairly certain Harris will soon officially confirm that she wants to be “a pro-innovation, pro-crypto president.”

Meanwhile, Congressman Ro Khanna has emerged as one of the top pro-crypto voices in the Democratic Party, having organized meetings between policymakers and the industry, and participating as a speaker at the aforementioned Bitcoin conference. This Thursday, he also hosted a virtual meeting with representatives from major crypto companies such as Coinbase, Kraken, Uniswap, and Ripple, along with members of Team Democrats.

According to multiple media reports, advisers to the Biden administration did not make any promises regarding possible policy changes, while industry players complained about the unfair treatment they were receiving from the government.

Furthermore, several advisers with experience in the crypto industry have recently joined the Harris team. These include David Plouffe, a former aide to Barack Obama and previous member of the Global Advisory Board at Binance, the largest crypto exchange, as well as a former strategic adviser at crypto payments firm Alchemy Pay; Brian Nelson, a former Treasury Department official who is considered open-minded about this industry; and Gene Sperling, a former board member at blockchain fintech Ripple, which was fined $125 million this week for improperly selling their XRP token (although the SEC had sought a $2 billion fine).

However, according to unconfirmed reports, Harris is also considering Wally Adeyemo, the current Deputy Treasury Secretary, for the position of Treasury Secretary. Adeyemo is known for stating that the lack of action by crypto firms to prevent illicit activity "represents a clear and present danger to national security."

This week, the Democratic efforts to improve their relationship with the crypto asset industry faced a setback when the US Federal Reserve ordered Customers Bank to address compliance shortcomings, particularly those related to cryptoasset clients. The bank's clients include industry giants like Coinbase, Circle, and Galaxy Digital. This news sparked discussions about the return of "Operation Chokepoint 2.0," referring to previous regulatory efforts against the cryptoasset industry.

An unexpected win

Meanwhile, on social media, there’s a perception that the vast majority of the crypto asset industry has been pro-Trump since the spring. However, with Harris becoming the Democratic candidate and gaining ground on Trump, more Democratic supporters have started to emerge, revealing the political divide within the crypto asset community and sparking debates about which candidate aligns better with the values of bitcoin.

At the same time, more balanced perspectives are gaining traction, highlighting that bitcoin and crypto are now important to both parties, which is seen as the biggest win in this political game.

“We are also increasingly optimistic that the next administration, whether Democrat or Republican, will be constructive on crypto. The rhetoric has shifted,” Brian Armstrong, CEO of the largest US crypto exchange, Coinbase, said on the company’s earnings call.

In either case, this shift in rhetoric might help politicians and regulators better understand the crypto asset industry and the opportunities and risks it may present.

“One of my criticisms of the crypto space is that we’ve failed to support policymakers and their staff in becoming literate on crypto, and we’ve failed to provide unbiased, fair advice on what good outcomes look like,” Austin Campbell, founder of Zero Knowledge Consulting, recently concluded.