AYESHA RASCOE, HOST:
The cryptocurrency industry is in celebration mode after Tuesday's election. Donald Trump's victory triggered an all-time high for bitcoin last week as the industry funneled more than $100 million towards procrypto candidates in both parties. So what do they expect in return? Brendan Pedersen covers banking and finance for Punchbowl News and joins us now. Welcome to the program.
BRENDAN PEDERSEN: Hi, Ayesha. Thanks for having me.
RASCOE: So, procrypto PACs - they bet really big on the selection. What's been the reaction to Tuesday's results?
PEDERSEN: Yeah, I mean, if you're a crypto person or crypto-friendly, the results could not have been much better for you, I think. There is this sense among the industry that the Biden administration just has not given them a fair shot for much of the last couple of years. The regulatory picture around crypto has been pretty restrictive. Regulators don't like a lot of unfettered access to crypto. And the industry has basically been trying to get some kind of legitimacy for years, and this election feels like the first time in which they're going to have it.
RASCOE: Well, I mean, just three years ago, Trump was calling crypto a scam. Now he has changed his tune. He's pledged to make the U.S. the, quote, "crypto capital of the planet." Does the industry trust him?
PEDERSEN: I think so. It's sort of hard to say for certain with Trump for all the obvious reasons. But his family does have its own crypto company now. So he has a stake in this, which we should note. And I think it's going to incentivize him - whatever the case may be - to consider how the future of crypto regulation should look.
RASCOE: Well, what does that mean? Like, what do these companies want from a Trump presidency?
PEDERSEN: More than anything, they want some kind of more firm legal foothold in our financial system. Right now, like, crypto companies can do some stuff on the periphery. But you have regulators like the Securities and Exchange Commission that have had a really high bar for what they consider to be, like, legitimate or nonlegitimate crypto. Whoever takes that next job as the SEC chair is going to probably do some big moves in crypto. It could be something that just, like, establishes some basic guardrails, whatever form that takes.
But what they really want is legislation because regulation will change every administration. Statutes, legislation will stick for a much longer time. So there are some folks in the crypto industry that are actually a little bit worried that, OK, having a friendly regulatory state is going to be really nice under the Trump administration, but it might actually kill the momentum that has been building in Congress to give them something more lasting.
RASCOE: It's interesting because you don't often hear an industry saying they want to be regulated. But as you said before, you talked about needing or wanting some sort of legitimacy. There was a Pew Research poll from late October. More than 60% of Americans are not confident in cryptocurrency. Can you talk to me about the support that the crypto industry needs to build with the public?
PEDERSEN: With any new financial instrument, you need, like, a critical mass of people who are using it before it has legitimacy. So with something like crypto, I think the uncertainty around this product - exactly how it is captured legally, what the consumer protections are - those are all good reasons for consumers to not want to plow a bunch of money into it. The reason we're talking about crypto right now is because the community, the industry, put so much money into this election.
I actually gave a speech to a group of crypto executives a few months ago before the election happened. And I said - I found myself quoting Chairman Mao when I said, like, you guys know that power flows from the barrel of a gun. And this 100 million - $160 million campaign splurge is a gun aimed at U.S. elections.
RASCOE: It wasn't just about the presidential race, as you're saying. Procrypto PACs spent $40 million in Ohio to help defeat Sherrod Brown, who chairs the Senate Banking Committee. And Brown was very skeptical of crypto. What did that move signal to you?
PEDERSEN: Oh, yeah. The crypto PAC that we're talking about is the crypto PAC called Fairshake. And they actually have a few different, like, sub-PACs. The one that put a bunch of money up in favor of Brown's opponent in Ohio, Bernie Moreno - that was the Defend America Jobs PAC (ph). The fact is, Sherrod Brown is the thing standing between the crypto industry and the Senate picking up legislation in a lot of ways, and the industry was just tired of it. They wanted somebody in that job who would work with them. Or if they couldn't topple Brown, they just preferred having a Republican Senate because a Republican Senate will be easier to work with.
RASCOE: A couple of years ago, it seemed like this industry was really on its heels. FTX collapsed, and then bitcoin and ethereum were tanking. What changed?
PEDERSEN: I think, honestly, it goes back to the politics. If you look at 2022, it's not like crypto didn't have a role in elections, but it was very, very different. A name that might ring a bell is Sam Bankman-Fried, who is the disgraced former CEO of FTX, which collapsed into, like, a - just a big old heap of fraud. Before that happened, he was very politically active. He was giving a lot of money to Republicans and Democrats at that time, and he was getting meetings with senior lawmakers on the Hill kind of to talk about his vision for how crypto should be regulated.
But he was just one guy. What has changed is that, in the meantime, the crypto industry basically professionalized its political operation very, very quickly. Like, there was something sort of blanketly transactional about the way in which Sam Bankman-Fried was going about this. He was just like, I'm giving you money. Let's sit down and have a conversation about it.
And there's something much more palatable, I think, for lawmakers when you're thinking about an industry sort of getting its act together and picking these calls in races across the country and then just sort of seeing where the chips fall. I think lawmakers are taking crypto as an industry more seriously 'cause crypto itself started taking itself more seriously.
RASCOE: That's Brendan Pedersen of Punchbowl News. Thanks for being with us.
PEDERSEN: Thanks for having me.
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