In the last decade, the cryptocurrency industry has faced a challenging regulatory landscape in the United States, with the Biden administration taking a particularly hard stance on the rapidly evolving digital asset sector. However, as the U.S. presidential election approaches, the industry is anticipating a potential shift in regulatory policies, irrespective of who wins. This prospect could have profound effects on the global cryptocurrency market, creating opportunities for new products, wider adoption, and increased investor confidence worldwide.

Crypto executives are hoping that a new administration might introduce a more lenient, innovation-driven approach toward crypto regulations, with promises from both major candidates suggesting a departure from the current policies. Republican candidate Donald Trump has pledged to be a “crypto president,” advocating for policies that would ease restrictions on digital assets. Vice President Kamala Harris, the Democratic candidate, is also expected to adopt a more moderate position, with her public statements emphasizing the importance of fostering innovation while protecting investors. Harris’s stance, however, remains somewhat undefined, leaving crypto enthusiasts hoping for relief from the restrictive policies of the past four years.

For many in the crypto space, this election is about more than political alignment; it’s about regulatory clarity and the global positioning of the U.S. in digital finance. With the recent momentum toward cryptocurrencies in Europe, Asia, and the Middle East, a favorable U.S. stance could transform the global market.

Growing Optimism in the Crypto Sector

With a more crypto-friendly stance potentially on the horizon, asset managers and blockchain firms are gearing up for new product launches and renewed legislative pushes. Major firms like Bitwise and Canary Capital have already begun preparing products aimed at a U.S. market they believe will soon be more open to digital asset investments. Ripple, a prominent player in the industry, is preparing to advocate for legislation that would establish a regulatory framework for digital assets, providing clearer rules for companies navigating the complex legal landscape.

Rebecca Rettig, Chief Legal and Policy Officer at Polygon Labs, emphasized that “regardless of the election outcome, there will be a new approach to how we move forward with crypto,” expressing a shared optimism in the sector for future policy evolution. If the U.S. government opens to more crypto-friendly policies, the impact would likely extend well beyond its borders, possibly setting off a wave of new investments and regulatory recalibrations globally.

Trump’s Pro-Crypto Stance and Harris’s Moderate Approach

Donald Trump has already positioned himself as a “crypto president,” promising to support digital assets and reduce the regulatory pressures that have plagued the industry under the Biden administration. This pledge has garnered significant financial support from prominent crypto advocates, including the Gemini co-founders Cameron and Tyler Winklevoss. Trump has also suggested removing Gary Gensler, the current Chair of the Securities and Exchange Commission (SEC), whose term lasts until 2026 and who has been a vocal critic of the crypto industry.

Vice President Kamala Harris, while less explicit in her stance, has signaled an openness to innovation and has been backed by several prominent industry figures. Billionaire entrepreneur Mark Cuban, a strong supporter of digital assets, has voiced support for Harris’s balanced stance, noting her emphasis on both innovation and investor protection as critical for the industry. Harris’s administration, should she win, would likely not outright dismiss Gensler but could moderate the regulatory tone. For crypto businesses, this implies a hopeful pivot away from punitive actions to a focus on innovation and growth.

Global Implications of a Regulatory Shift in the U.S.

The outcome of this U.S. election will not only determine the regulatory future for cryptocurrencies domestically but could also shape global market dynamics. A more lenient U.S. regulatory environment could elevate the global status of the cryptocurrency market, with more international firms likely to enter the U.S. market and integrate American standards into their own. This could provide a model for global regulations, encouraging countries in Europe and Asia to follow suit with more progressive approaches.

Asia, for example, has seen rapid adoption of digital assets, with countries like Singapore and South Korea actively working to establish clear regulatory frameworks. Meanwhile, Europe’s Markets in Crypto-Assets (MiCA) framework, set to be implemented fully by 2024, provides comprehensive regulations for crypto assets across the EU. Should the U.S. align with this approach, it would foster greater global interoperability in crypto markets, potentially accelerating digital asset integration into traditional financial systems.

The SEC’s Impact on Market Sentiment and Innovation

Under Gensler’s leadership, the SEC has aggressively targeted crypto firms, arguing that digital assets need to be treated as securities to protect investors. High-profile enforcement actions against major exchanges like Coinbase and Kraken, coupled with strict guidelines such as SAB 121 — which requires companies holding crypto assets for customers to account for them as liabilities — have hampered growth in the U.S. market. These actions have created a bottleneck for institutional investors, such as banks, who would otherwise provide crypto custodial services but are reluctant to enter the market under current rules.

The bipartisan push in Congress to overturn SAB 121, though vetoed by Biden, reflects a growing sentiment that current regulations are overly restrictive. David Mercer, CEO of LMAX Group, believes that a change in leadership could finally bring relief, calling it “an accelerant for the whole crypto market.” If overturned, SAB 121’s removal would lower operational costs for financial institutions, making it more feasible for them to offer crypto services — a shift with the potential to increase adoption and improve liquidity globally.

Crypto’s Mainstream Potential

The wider implications for the global financial system are significant. Should the U.S. ease its regulatory stance, major traditional financial institutions would likely accelerate their entry into the crypto market, mainstreaming digital assets and potentially stabilizing their value through increased liquidity. State Street’s recent announcement that it would provide crypto custody services — anticipating a more supportive regulatory environment — is a sign of the potential for digital assets to become a mainstream investment class in the near future.

Beyond investment products, the ripple effect could extend to stablecoins, digital assets pegged to fiat currencies, which are rapidly gaining traction. Stablecoins have the potential to transform cross-border transactions, making them faster and more cost-effective, with less reliance on traditional banking systems. Many global companies, particularly in emerging markets, are exploring the use of stablecoins as a means to reduce currency volatility and transaction costs. A more favorable U.S. stance on crypto could accelerate this trend, establishing a strong use case for stablecoins in global commerce.

Market Enthusiasm and the Path Forward

With the presidential election around the corner, crypto players like Bitwise and Ripple are positioning themselves for a potential regulatory thaw. Bitwise, for instance, has already filed SEC applications for new crypto-based products, which, if approved, would further integrate digital assets into mainstream finance. These companies view the election as a turning point, expecting a new political environment in 2025 to be more supportive of their objectives.

Sui Chung, CEO of Kraken subsidiary CF Benchmarks, captures the optimism of the industry, stating, “There’s clearly a recognition by both presidential candidates that digital assets can play a positive economic role.” This recognition may lead to increased participation from institutional investors, more robust regulatory frameworks that support innovation, and broader global adoption of crypto assets.

The upcoming U.S. presidential election is shaping up to be a pivotal moment for the global cryptocurrency industry. With both candidates signaling a shift toward a more supportive regulatory environment, the global market is poised to benefit from the U.S.’s renewed engagement with digital assets. A friendlier U.S. stance could catalyze global financial integration, encourage innovation, and ultimately position cryptocurrencies as a fundamental part of the global economy, potentially reshaping the financial landscape for years to come.

(Adapted from Reuters.com)