Posted on Tuesday, August 13, 2024

|

by Andrew Shirley

|

0 Comments

|

Print

The Republican Party is quickly becoming a champion of cryptocurrency. That could be bad news for Democrats.

In the most recent development, Republican Senator Cynthia Lummis of Wyoming unveiled the “Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide Act of 2024” – a.k.a., the BITCOIN Act. The bill appears to be the first legislative effort toward the U.S. government becoming an active holder of cryptocurrency.

Lummis’s bill would specifically require the federal government to purchase 200,000 units of Bitcoin over the course of five years, along with “affirm[ing] self-custody rights of private Bitcoin holders and emphasiz[ing] that the strategic Bitcoin reserve shall not infringe upon individual financial freedoms.” In a statement, Lummis described the bill as a “Louisiana Purchase moment that will help us reach the next financial frontier” and called on Congress to “take bold steps to create a brighter future for generations to come by creating a strategic Bitcoin reserve.”

Notably, the Bitcoin would be acquired by “diversifying existing funds within the Federal Reserve System and Treasury Department,” and not through any new taxes or deficit spending. If the United States indeed acquires one million Bitcoin, it would represent about five percent of the 21 million total Bitcoin units in circulation – roughly equivalent to the fraction of the world’s gold reserves held by the U.S. government.

The concept of a Bitcoin reserve has generated some buzz in recent years as cryptocurrency has continued to revolutionize the global financial system. Unlike government-owned currency, or “fiat money,” cryptocurrencies, of which Bitcoin is the most prominent, are typically issued and managed by decentralized networks of computers using blockchain technology.

This means that governments cannot control the supply of crypto – making them, in theory, a safe haven from inflationary policies like those that have rocked the U.S. economy over the past four years. The value of cryptocurrency is determined solely by supply and demand in the market, as well as the perceived utility and trust in the technology – something which could increase dramatically if the U.S. government begins purchasing Bitcoin.

As a relatively new issue (Bitcoin was just created in 2009) cryptocurrency has so far created some unlikely political rivalries and alliances, with Republicans and Democrats falling on both sides of questions surrounding the regulation and taxation of the technology. But former President Donald Trump, recognizing the potentially revolutionary nature of cryptocurrency to the future of the global economy, has charted a course that other Republicans are increasingly fallen in line behind.

That course includes making cryptocurrency an important part of his re-election agenda and promising to protect the independence of crypto markets from government interference.

In July, Trump spoke at Bitcoin 2024, a national cryptocurrency conference. Along with promising to build a “strategic national Bitcoin stockpile,” Trump pledged to fire Biden SEC Chairman Gary Gensler, who has been openly hostile toward the crypto industry, and to “keep 100 percent of all the Bitcoin the U.S. government currently holds or acquires.”

“If crypto is going to define the future, I want [it] to be mined, minted, and made in the U.S.A.,” Trump told Bitcoin enthusiasts in attendance. “If Bitcoin is going to the moon … I want America to be the nation that leads the way.”

Trump’s leadership on the issue appears to have helped him make inroads in the tech community – a constituency that Democrats have had a virtual monopoly on until very recently. Multiple mainstream publications noted that the Bitcoin conference was filled with attendees wearing pro-Trump clothing. Several individuals were wearing “Trump Save America” shirts, and scores of attendees were wearing the iconic red MAGA hat. A Bloomberg article derisively called it a “MAGA-filled Crypto lovefest.” According to The Verge, “hours before Trump was scheduled to speak, the lines filled out the door and around the block.”

A number of noteworthy tech business leaders have also recently offered their public support for Trump, listing his stance on crypto as one reason why. Late last month, tech billionaire David Marcus announced that he was endorsing Trump for the 2024 election, describing his political evolution from Democrat to Republican as a “gradual political 180” over several years. Marcus is notably the creator of the Libra cryptocurrency, which received significant backing from Facebook. “I believe we need a President who is unequivocally pro: America, the Constitution, business, Bitcoin/crypto, innovation, Israel, small government, legal immigration, free speech, meritocracy, and common sense,” Marcus stated.

The sudden surge of support for Trump among the crypto community has touched off an intra-party squabble within the Democrat Party. While the smart move from a political standpoint would clearly be for Democrats to mimic Trump’s approach and promise to empower the crypto industry by getting government out of the way, the left’s affinity for blanketing everything in layers of regulatory red tape is proving a difficult habit to break. Many Democrats, such as Senator Elizabeth Warren of Massachusetts, are urging Kamala Harris to take a tough stance on crypto regulation.

With so many other pressing issues facing the country this election cycle, crypto may not receive the same attention as the border or the economy. But for a certain number of Americans – including some wealthy and influential figures – it could be a deciding factor, and so far Trump appears to have the edge.

Andrew Shirley is a veteran speechwriter and AMAC Newsline columnist. His commentary can be found on X at @AA_Shirley.

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

The Securities and Exchange Commission (SEC) charged NovaTech Ltd, its operators, Cynthia and Eddy Petion, and the company’s top promoters with running a fraudulent scheme centered on crypto assets.

The defendants are charged with running a multi-level marketing company that claimed it would invest victims’ funds in crypto assets but did so with only a fraction of the funds, the SEC said in a Monday (Aug. 12) press release.

“NovaTech and the Petions caused untold losses to tens of thousands of victims around the world,” Eric Werner, director of the SEC’s Fort Worth Regional Office, said in the release.

NovaTech Ltd. did not immediately reply to PYMNTS’ request for comment.

The SEC’s complaint said that the Petions told investors that NovaTech would invest their funds on crypto asset and foreign exchange markets but instead used most of those funds to make payments to other investors, to pay commission to promoters or to be taken by the Petions, with only a fraction of the funds used for trading, according to the release.

The complaint also alleged that when NovaTech collapsed, most investors suffered substantial losses because they were unable to withdraw their funds, per the release.

The company raised over $650 million in crypto assets from more than 200,000 investors around the world, the release said.

In addition to its charges against the company and the Petions, the SEC charged six of NovaTech’s top promoters, saying that they recruited investors and promoters and were paid “substantial commissions” for doing so, according to the release.

“As we allege, MLM schemes of this size require promoters to fuel them, and today’s action demonstrates that we will hold accountable not just the principal architects of these massive schemes, but also promoters who spread their fraud by unlawfully soliciting victims,” Werner said in the release.

In another case related to crypto, the SEC said in March that it charged 17 individuals connected with Houston-based CryptoFX, alleging that they were involved in a Ponzi scheme.

The SEC’s complaint alleged that leaders of the CryptoFX network solicited investors by promising that the organization’s trading in crypto assets and foreign exchange would deliver returns of 15% to 100%, raised $300 million, and then used most of the funds to pay “supposed returns” to other investors and to pay commissions and bonuses to themselves.