(Kitco News) – As the 2024 election season begins to ramp up in the U.S., the emergence of cryptocurrency as a point of focus for many voters is causing consternation for politicians on the Democratic side of the aisle following years of showing no love for the industry and proposing bills looking to limit access to the asset class.
Recently, two pro-crypto bills have advanced out of their committees and are due for a full vote on the floor of the U.S. House of Representatives, and according to an email sent from Democrat Party leaders to House members Monday, the party is not forcing members to vote on the measures, but they are strongly urged to do so.
The bills in question – The Financial Innovation and Technology for the 21st Century (FIT21) Act (H.R. 4763) and the CBDC Anti-Surveillance State Act (H.R. 5403) – are Republican Party-led bills that have been making headlines in recent months despite strong opposition from leaders on the Democratic side.
The main goal of FIT21 is to clarify the process for classifying if a cryptocurrency is a commodity or security and give most regulatory control of the sector to the U.S. Commodity Futures Trading Commission (CFTC).
This week, the House will consider the bipartisan FIT for the 21st Century Act.#FIT21 sends a clear message about our priorities to protect consumers, cement the US as a technological leader, and promote an innovative, inclusive financial future.
It’s time to get this done.??— Rep. Wiley Nickel (@RepWileyNickel) May 20, 2024
The CBDC Act is intended to prevent the Federal Reserve from issuing a central bank digital currency (CBDC).
Both bills have been perceived as positive for the crypto industry if passed.
The email indicates that both Representatives Maxine Waters and David Scott “strongly oppose” FIT21 and Waters opposes the CBDC act. They argued that FIT21 “weakens investor protections and opens the door to fraud and market manipulation” by giving a “safe harbor” where some entities can lodge an intent to register, “effectively shielding” them from the SEC until it and the CFTC finalize crypto rules.
In support of H.R. 5403, they argued that stopping CBDCs would hamper the “primacy of the U.S. dollar” as other countries looking to evade sanctions are moving ahead with their own CBDCs.
“According to the Congressional Budget Office (CBO), the bill’s overly broad definition of CBDC raises concerns the bill could undermine the Fed’s ability to conduct monetary policy,” the email said. “Particularly concerning as it attempts to navigate a soft landing in regard to inflation.”
While the leadership opposes the measures, they understand the precarious position of some lawmakers heading into the election and don’t want them to unnecessarily alienate voters who would otherwise support them.
“House Democratic leaders said today they will NOT whip against House Republicans’ crypto bill, I’m told,” Politico reporter Eleanor Mueller wrote on X, referring to FIT21.
The floor debate and vote for approval or denial of FIT21 is expected on Wednesday.
The attempts to try and avoid upsetting key voting blocks come amid a pivot by the Biden Administration in recent weeks to appear more welcoming to the cryptocurrency industry after Donald Trump came out strongly pro-crypto and voters have expressed their displeasure with the government's approach to the industry.
“Been saying for weeks that Biden is going to soften on crypto going into the election,” tweeted Haseeb Qureshi, Managing Partner at Dragonfly. “He doesn't want to lose votes in a tight race over what is ultimately a minor issue to him. ETF is the first sign of this—I think we see other agencies also softening next few months.”
Crypto expert Vijay Boyapati minced no words, tweeting, “The abrupt about-face by the SEC on the Ethereum ETF approval is nakedly political. The Democrats have seen that their hostility could potentially cost them the election and Biden likely commandeered the SEC to be more friendly despite the Warren wing of the party.”
On Thursday, Senate majority leader Chuck Schumer and 10 other Democrats defied the White House by voting to undo SEC guidance on accounting practices for digital assets.
Adam Cochran, partner at CEHV, expanded further on Boyapti’s comments, stating that he doesn’t “think people appreciate how huge that vote” regarding Ether ETFs was.
“[Elizabeth] Warren had a stranglehold over financial policy under the Dems. This is showing the WH and Senate Dems are starting to realize that’s toxic to their election odds,” he said. “They also realize there are *a lot* of moderates, independents and swing voters who vote primarily on financial matters and like crypto. Including a lot of moderate/fiscal Republicans, who would take another Biden term if it wasn’t for Warren/Gensler.”
“This is a big and rapid shift in crypto policy, and shows that someone who was one of the most powerful U.S. powerbrokers has been sidelined,” Cochran added. “If that’s accurate, it’s more important than the ETF itself. It could mean the winter is over and it’s time for a US renaissance in crypto!”
Mike Novogratz, CEO of Galaxy Digital, also said the latest development indicates Democrats are changing their tune on crypto in the lead up to the 2024 elections.
“But assuming, you know, the market is right, and the market is usually pretty smart, it feels like someone at the Biden White House made a call and said, guys, we can’t be the party against crypto anymore,” Novogratz said during an interview with CNBC’s Squawk Box on Tuesday. “I think that’s a seismic shift. If those things actually happen, prices are going to be much higher than here.”
Novogratz reiterated his point for clarity, saying the Democrats don’t want crypto to cost them the election.
“I am sensing a widespread shift amongst Democrats that don’t want to let crypto be a big election issue,” he said. “The crypto super PACs (Political Action Committees) have raised over $150 million, and they have targeted Sherrod Brown and Jon Tester, elections that matter dearly to Democrats in swing states, in vulnerable Senate seats.”
Novogratz stressed that “Crypto should be bipartisan. And quite frankly, for our industry to do well, it needs to be bipartisan.”
“It has been really Elizabeth Warren and a small group of people that have held the Democrats hostage on this,” he concluded. “What the Senate broadly said, Chuck Schumer being the Senate leader who voted to overturn against Elizabeth, was, enough, enough. Like, this is becoming dumb. And so I’m sensing a real shift.”
