Opinion by: Zack Kelman
Five years ago, during our last Global Taxonomy of Crypto Policy, global banking insiders at the International Monetary Fund unveiled a strict new regulatory framework as the US president publicly (if skeptically) addressed crypto for the first time.
Outsiders began sporadically banning Bitcoin (BTC), and exchanges relocated to offshore experimenters like Malta as crypto became irreversibly intertwined with global politics.
Since then, crypto’s entanglement with global politics has only deepened. This year alone, America dismantled four years of anti-crypto policy, inaugurated a president who campaigned on crypto — even creating his memecoin and with plans for a utility token to fuel his social media site — and passed landmark bipartisan stablecoin legislation. In just half a decade, crypto moved from relative obscurity to political hell and back, especially in America.
How did this happen? The short answer is politics.
America’s political crypto shift
For decades, the US leveraged stringent anti-crypto regulations, especially the Financial Action Task Force’s Travel Rule — forcing crypto firms to Know Your Customer (KYC) clients — to preserve its correspondent banking and dollar-clearing monopoly. But US policy shifted as Americans adopted crypto, and dollar-backed stablecoins reinforced dollar dominance.
Initially, American national politics largely overlooked cryptocurrency. Although the Internal Revenue Service weighed in as early as 2014 (unsurprising, since it couldn’t tax what it hadn’t classified), crypto remained finance’s red-headed stepchild, trotted out as a cautionary tale by institutionalists in academia, media and Wall Street banks, while the Securities and Exchange Commission largely looked away.
Beneath the surface, something shifted during the initial coin offering mania of 2017, when retail investors and contrarian venture capitalists began wetting their beaks in earnest. Even after CME Futures popped that bubble in January 2018, the crypto genie was out of the bottle, as crypto flowed from outsider nations like China and Russia to insider strongholds in America and Europe.
These hodlers and adopters were rewarded during the early COVID-19 bull run, which lifted all crypto boats: exchanges, custodians, utilities and VCs. Then came the deliberate shipwreck, delivered by the “institutionalists”: Former SEC Chair Gary Gensler, former US President Joe Biden and Senator Elizabeth Warren.
Stranded and forgotten, US crypto found a lifeline in August 2023 when Judge Neomi Rao ruled Gensler’s rejection of Grayscale’s exchange-traded fund (ETF) arbitrary and capricious. The dam broke, and by January 2024, spot Bitcoin ETFs had arrived, including one from Larry Fink’s BlackRock.
Bitcoin soon surpassed its 2021 all-time high, the SEC was defanged, and the tide turned decisively against the institutionalists. With retail and tech capital aligned amid a populist surge driven by the nearly 21% of Americans owning crypto, the industry escaped its shipwreck aboard the USS MAGA, sailing triumphantly into Washington to deliver the first pro-crypto administration.
Yet ever-mounting hyperpartisanship means crypto-America is either firmly entrenched in the driver’s seat or careening toward severe whiplash. With Trump’s crypto deals in the spotlight, Wall Street primarily onboard and the archetypal “crypto bro” still reviled by the anti-capitalist left, any boom-and-bust — with scams potentially thriving under a more dovish Trump-controlled SEC — could trigger an unprecedented “Empire Strikes Back” moment from the institutionalists of the Gensler era.
Warren has already tipped her hand, casting Trump’s Qatari jet donation, stablecoin project, Elon Musk and nearly everything else she despises as an elaborate conspiracy — so unfathomably corrupt it would make Victor Lustig blush. If institutionalists like Warren regain power, crypto holders could face severe taxes and crackdowns, fueled by lawfare and messaging targeting the previous administration’s crypto largesse, whether real or perceived.
The dollar dilemma
Conversely, a wildly optimistic bull case — almost embarrassingly bullish — has emerged. Trump’s low-tax “grow your way out of debt” strategy (potentially ballooning national debt from $33 trillion to over $50 trillion), a national Bitcoin Reserve, $1,000 investment accounts for Trump-era newborns and Interior Secretary Doug Burgum’s claims of $100 trillion in public-land assets for potential sovereign debt collateral (or more if America somehow obtains Greenland) place Bitcoin’s multimillion-dollar price targets clearly in view.
Here, Trump — the bankruptcy maestro — maxes out America’s credit as the world rushes into non-existent currency alternatives, sending Bitcoin skyward. Meanwhile, the US, already a leading Bitcoin holder (215,000 BTC, ~1% of total supply), and China (~200,000 BTC) enter a Bitcoin Cold…
cointelegraph.com