Decoding Kamala Harris and the Democrats’ Crypto Stance

As the 2024 U.S. presidential election approaches, the cryptocurrency industry is closely watching Vice President Kamala Harris, the Democratic nominee, for signs of her potential crypto policy.

After years of regulatory crackdowns under the Biden administration as part of its Operation Choke Point 2.0, many in the crypto space are hoping for a reset under a new president, which was why Donald Trump’s unexpected endorsement of Bitcoin a few months back fueled a bullish run for almost all cryptocurrencies.

However, president Joe Biden’s decision not to run again brought markets back to reality, as a new candidate stepped up to the plate: Kamala Harris. Where Trump was a 70% favorite as new POTUS after a decisive victory in his debate against Biden and the shocking assassination attempt in July, Harris represents a much tougher challenge. Prediction markets like PolyMarket agree, with near odds at present.

The election is still wide open, and the attention now shifts to key areas where it can be won or lost. Crypto presents such an area, and it’s a field where the Dems have a lot of catching up to do.

Where Trump has gone so far as to mention plans of a governmental strategic Bitcoin reserve fund, Harris has remained tightlipped and her exact position on digital assets remains largely undefined, despite some reconciliatory comments by staffers, leaving the industry very nervous.

And with good reason, as last week we saw a continuation of crypto antagonism from Gary Gensler’s SEC who sent a Wells’ Notice to NFT marketplace OpenSea and we previously heard that she had two Operation Choke Point 2.0 “architects” helping develop her economic policy.

Let’s take a look at Harris's history with crypto policy, her current campaign stance, and what her potential presidency could mean for the future of cryptocurrency regulation in the United States.

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September 10 Debate Sees Harris’ Odds Increase

The debate between Vice President Kamala Harris and former President Donald Trump was was their first face-to-face encounter.

Hosted by ABC News in Philadelphia, the debate featured a range of topics including immigration, economic policy, abortion, and foreign policy.

Harris aggressively challenged Trump, often baiting him into heated exchanges. She criticized Trump's economic policies, linking them to rising inflation and emphasizing the need for support for the middle class.

Trump, while initially measured, grew increasingly defensive, particularly on issues like abortion, where he made misleading claims that were challenged by the moderators.

However, there was no mention of cryptocurrencies throughout the debate, much to the dismay of crypto industry observers.

Following the debate, Trump’s odds on Polymarket fell by 3%. Harris is currently leading by a 1% margin.

Harris's Crypto History in the Biden Administration

To understand Harris's potential approach to crypto as president, there’s not much to draw from from the candidate herself as of yet. Therefore, it's important to look at her role in the Biden administration's policies.

It’s important to note that VP Harris has a strong Silicon Valley background and enjoys the support of many companies there, which we’ll look at further down.

The Bad

Operation Choke Point 2.0

The Biden administration has taken an avalanche of criticism from the crypto community and even senators from both sides of the aisle for its so-called "Operation Choke Point 2.0," referring to alleged efforts to discourage banks from serving crypto companies.

In March 2023, the US banking system was jolted by the sudden collapse of Silicon Valley Bank and the subsequent liquidation of Silvergate Bank. Signature Bank was also ordered to cease operations by New York regulators 2 days after Silvergate Bank’s liquidation.

Nic Carter and other analysts called the sudden collapse of the three crypto-friendly US banks “Operation Choke Point 2.0” who saw it as a “coordinated effort” to unbank the crypto industry.

It’s worth noting that while Harris hasn't been directly linked to these policies, she has been part of an administration that has taken a very hard line on crypto regulation.

SEC Enforcement Actions

Under pres. Joe Biden, the Securities and Exchange Commission (SEC) has aggressively pursued multiple enforcement actions against the leading crypto companies. Notable cases include:

Suing Coinbase for allegedly operating as an unregistered securities exchange
Filing charges against Binance and its CEO for various securities law violations
Taking action against Kraken for its staking program
Taking Ripple and its founders to court for securities law violations
Sending subpoenas to Robinhood related to its cryptocurrency business

While Harris hasn't publicly commented on these specific cases, she has been part of an administration that has supported increased regulatory scrutiny of the crypto industry.

Biden's Crypto Custody Veto

In March 2024, President Biden vetoed a bipartisan bill that would have made it easier for financial institutions to offer crypto custody services. As vice president, Harris supported this veto, aligning with the administration's stifling approach to crypto expansion in traditional finance.

Staff Account Bulletin (SAB) 121 is a controversial SEC accounting rule that has faced significant bipartisan pushback in Congress for being overly restrictive and potentially harmful to the crypto industry, despite the SEC's stated goal of increasing transparency and protecting investors.

Issued by the SEC in March 2022, SAB 121 requires custodial entities to record those assets as liabilities on their balance sheets. It was supposed to increase transparency and address risks seen in 2022’s devastating crypto custodial collapses, by making sure companies properly account for custodied digital assets.

However, SAB 121 was issued without consulting the banking industry and skipped the normal rulemaking process. It requires significant capital, liquidity and other costs on crypto custodians, which in turn has discouraged banks from offering crypto custody services, as they are highly regulated institutions.

SAB121 vs HJ Res 109

In 2024, the U.S. House and Senate passed a bipartisan resolution (HJ Res 109) to repeal SAB 121 using the Congressional Review Act. Several Democrats crossed the aisle for the vote.
President Biden threatened to veto the resolution, which he did in May 2024, and the House failed to override President Biden's veto, leaving SAB 121 in effect.
The bill will now again be re-evaluated by Congress and its members. The SAB 121 bill is active till January next year, and can only be rescinded if it can get a 67% majority vote with both Congresses. This is the only way to override the president’s veto and become part of law.

The strong bipartisan opposition to Biden’s veto shocked Democrats, and exposed a party conflicted with its approach to this new asset class. With new research data showing that it may have underestimated the impact of the crypto vote, and opponents like Trump and Robert F. Kennedy (RFK), who has since endorsed DJT, have cashed in on this blunder as a result.

VP Harris’ stance on the repealing of the SAB 121 could be crucial to her courting of the crypto sector.

The Good

Stimulus Checks

Of course, crypto markets have also seen their biggest pump to date during pres. Biden’s pandemic-induced stimulus injections into the US economy, which supercharged risk-on assets like Bitcoin, and saw it jump from a March 2020 low of under $4k to nearly $70,000 in 2021.

Bitcoin and Ethereum Spot ETF approvals

Also, 2024 is undoubtedly the most successful regulatory year for the crypto space, and we’ve at long last, after a decade of lobbying, seen the approval of both Bitcoin and Ethereum spot ETFs by the SEC this year.

Of course, the question remains that if BlackRock didn’t jump in with its ETF application right after regulators went for Coinbase and Binance, would these approvals have happened? BlackRock CEO Larry Fink has big plans to tokenize real-world assets (RWA), and enough was enough.

Also, it’s worth noting that the Fed’s money printing saw inflation spike in late 2021, forcing it to raise interest rates on several occasions, which contributed to put an end to the crypto bull run. Now, with fears of a looming recession, Jerome Powell will in all likelihood begin to drop interest rates in September 2024.

What Are Harris and the Democrats' Stance on Crypto?

As Harris transitions from vice president to presidential candidate, the crypto industry is looking for signs of a potential policy shift. However, her campaign has provided limited concrete information.

Democratic National Convention Statements

During the 2024 Democratic National Convention, a senior Harris campaign advisor made a brief statement indicating that Harris would "support policies that ensure emerging technologies and that sort of industry can continue to grow." While this suggests a potentially more open stance towards crypto, it lacks specific policy details.

Crypto4Harris Meeting

The grassroots organization Crypto4Harris recently held a meeting that included Senate Majority Leader Chuck Schumer. During this meeting, Schumer expressed hope for passing digital asset legislation soon. This event has been seen as a positive sign by some in the crypto industry, suggesting Harris may be more willing to engage with crypto stakeholders than the current administration.

Campaign Outreach to Crypto Executives

Reports indicate that Harris's campaign has been reaching out to crypto industry executives, showing a willingness to listen to their concerns. This marks a departure from the Biden administration's approach, which had almost no engagement with the industry until recently.

Which Factors Could Influence Harris's Potential Crypto Policy

Several factors could shape Harris's approach to crypto if she becomes president:

Political Considerations

Crypto is not a top issue for most voters. A recent Federal Reserve survey found that only about 7% of U.S. adults held or used cryptocurrency, down from previous years. This is a much more manageable contingent as compared to earlier studies, and Harris may feel emboldened by it to prioritize more mainstream issues like inflation and foreign policy.

Democratic Party Platform

The 2024 Democratic Party Platform, a 92-page document, does not mention cryptocurrency. This omission suggests that crypto policy is not a high priority for the party as a whole, despite previous overtures.

Influence of Elizabeth Warren

Senator Elizabeth Warren has significant influence over the Democratic Party's financial policy and is one of crypto’s most bitter antagonists. Her stance could strongly influence Harris's approach to crypto regulation.

Regulatory Agency Appointments

Harris's choices for key regulatory positions, such as SEC Chair, could significantly impact crypto policy. The current SEC Chair, Gary Gensler, has taken a tough stance on crypto regulation and the Washington Reporter cited staff members that she might even elect him as Treasury Secretary in her administration.

Harris’ Pro-Tech Past

Of course, Kamala is no luddite, and her track record speaks of a dynamic young politician who has a deep understanding of the American technology sector and its challenges.

Early career: After law school, Harris worked as a deputy district attorney in Alameda County, which includes parts of Silicon Valley.
San Francisco District Attorney: From 2004 to 2011, Harris served as San Francisco's District Attorney. While San Francisco is not technically part of Silicon Valley, it's closely connected to the tech industry.
California Attorney General: As California's Attorney General from 2011 to 2017, Harris dealt with many tech-related issues and companies based in Silicon Valley.
Fundraising: During her political campaigns, including her presidential run, Harris received significant financial support from Silicon Valley executives and employees.
Personal connections: Her husband, Douglas Emhoff, worked as an entertainment lawyer in California and had connections to the tech industry.
Policy positions: As a Senator and Vice President, Harris has engaged with tech policy issues, including data privacy, antitrust concerns, and the gig economy.
Tech industry support: Many Silicon Valley leaders supported her candidacy for Vice President, viewing her as someone who understands the tech industry.

Potential Scenarios for Harris's Crypto Policy

Given the limited information available, we can speculate on a few potential scenarios for Harris's crypto policy as president:

Scenario 1: Continuation of Biden-era Policies

Harris could maintain the current administration's cautious and enforcement-heavy approach to crypto regulation. This would likely mean continued SEC actions against crypto companies and limited expansion of crypto services in traditional finance. It would be a devastating outcome for the struggling US sector, which has seen an exodus of its brightest talents to friendlier jurisdictions such as Dubai, Singapore and Hong Kong.

Scenario 2: Moderate Shift Towards Crypto

Harris might adopt a slightly more open stance towards crypto, potentially supporting clearer regulations that allow for industry growth while maintaining strong consumer protections. This could involve working with Congress to pass comprehensive crypto legislation.

Scenario 3: Embrace of Crypto Innovation

Of course, in order to win the election, Harris could position herself as a champion of financial innovation, embracing crypto as a tool for economic growth and financial inclusion. This scenario seems less likely given her current lack of pro-crypto messaging, but it's not impossible.

Conclusion

Kamala Harris's crypto policy remains largely a blank page, and not by accident. While there are hints that she may be more open to engaging with the crypto industry than the current administration, concrete policy proposals are lacking, as the Democratic Party probably tries to gauge the importance of the crypto vote.

The crypto community will need to wait for more detailed policy announcements from the Harris campaign to get a clearer picture of her potential approach to digital asset regulation.

For now, the crypto industry can take some encouragement from Harris's Silicon Valley background and her campaign's apparent willingness to listen to industry concerns. However, given the complex political landscape and the many pressing issues facing the country, it's unlikely that crypto policy will be at the forefront of Harris's campaign messaging.

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