US Presidential Election: A Turning Point for Crypto?

US Presidential Election: A Turning Point for Crypto?

One of the United States' top financial regulators has told the BBC that cryptocurrency is rife with fraud, hucksters, and grifters. The chair of the US Securities and Exchange Commission (SEC), Gary Gensler, says that the investing public around the globe has lost too much money because crypto companies have not followed the laws his agency tries to enforce.

It comes as the industry spends millions of dollars on political donations, trying to influence November's US elections in the hope of more favorable future laws. In addition to the presidential battle between Donald Trump and Kamala Harris, all 435 districts in the House of Representatives and 33 of the 100 seats in the Senate are up for re-election.

The future of cryptocurrency, one of the world's most hotly debated technologies, is an issue where there appears to be a clear dividing line between Donald Trump and the outgoing Biden administration. Trump has been courting the votes of crypto enthusiasts by promising to make America the crypto capital of the planet, and creating a strategic national bitcoin stockpile similar to the government's gold reserves.

Last week, he launched a new crypto business called World Liberty Financial. Although he provided few details, he said, "I think crypto is one of those things we have to do." It's a huge turnaround from three years ago when he dismissed Bitcoin as something that seems like a scam and a threat to the US dollar. Trump's newfound enthusiasm is a stark contrast to the Biden administration, of which Harris is the vice president. The White House has led a sweeping crackdown on crypto firms in recent years.

In March, Sam Bankman-Fried, the founder and boss of FTX, was jailed for 25 years for fraud after he stole billions of dollars from customers around the world, many of whom are still trying to recover their money. Then, in April, the founder of the world’s biggest crypto exchange, Changpeng Zhao, got four months in prison, and the company paid a $4.3 billion fine. He admitted to allowing criminals, child abusers, and terrorists to launder money on his platform in a case brought by the US Justice Department.

The SEC also has a case against Binance that has been going through the courts. It is one of a record-high 46 enforcement actions the financial regulator took last year against firms trying to profit from what is still an emerging technology. "This is a field that has come along, and just because they're recording their crypto assets on a new accounting ledger, they [wrongly] say 'we don't think we want to comply with the time-tested laws,'" says Mr. Gensler.

He explains that rules that force companies that want to raise money from the public to share certain information with them have been in place to protect investors since the SEC was created. This was back in 1934, in the aftermath of the infamous Wall Street crash of 1929 that heralded the Great Depression. "Crypto is just a small piece of the US and worldwide capital markets, but it can undermine trust that everyday investors have in the capital markets," says Mr. Gensler.

Whilst fans argue that crypto offers a fast, cheap, and secure way to move funds, a survey by the US central bank, the Federal Reserve, found that the number of Americans using it has dropped from 12% in 2021 to 7% last year.