[US Presidential Election and Virtual Assets] ① Virtual Assets Become 'Election Power Players'... Sharpening Regulations After 4 Years

Chairman Michael Saylor Encourages Voting Participation via SNS
Ripple Tops Political Donations... Unusual Move in Emerging Industry
Legal Dispute with US SEC... Criticism of Regulatory Uncertainty

Former U.S. President Donald Trump, the Republican presidential candidate, and Vice President Kamala Harris, the Democratic presidential candidate.

"Vote for #Bitcoin"

This phrase was shared on the 11th (local time) by Michael Saylor, chairman of MicroStrategy, a major player in the virtual asset industry, via the social networking service 'X'. Chairman Saylor is known as the industry's 'big player' holding the largest amount of Bitcoin worldwide. Given the stark differences in virtual asset policy stances between the Republican and Democratic parties, crypto advocates, regardless of industry or investors, have been publicly encouraging voting and courting voters politically.

According to the virtual asset industry on the 15th, the upcoming U.S. presidential election in November is expected to be a major event that will change the regulatory and industrial landscape of the virtual asset sector. Along with the Federal Open Market Committee (FOMC) meeting scheduled for September next week, it is considered the biggest issue in the virtual asset industry in the second half of the year.

According to U.S. consumer groups such as 'Public Citizen' last month, political donations from the virtual asset industry directly contributed to this year's U.S. presidential election amount to $119 million. This accounts for about 48% of the total corporate donations of $248 million. It is known that cryptocurrency exchange Coinbase and individual foundations like Ripple accounted for about 82% of the donations. They donated to a super PAC in the cryptocurrency and blockchain field called Fairshake, which is known to fund 'virtual asset advocacy' candidates regardless of party or candidate.

Ripple CEO Brad Garlinghouse is speaking at a press conference in Korea on the 3rd. Photo by Ripple

It is unusual for a nascent industry to invest such a large amount of money in the U.S. presidential election. This is due to the virtual asset industry's distrust and dissatisfaction with the U.S. Securities and Exchange Commission (SEC). Led by Chairman Gary Gensler, the SEC has maintained a 'tough regulatory' stance over the past four years under the Biden administration, engaging in litigation battles with the virtual asset industry. The Biden administration has also indirectly supported this stance through choke point regulations (Operation Choke Point), a method where the U.S. government suppresses the virtual asset industry by scrutinizing banks and other financial institutions. The SEC's approval of a Bitcoin spot exchange-traded fund (ETF) listing in January this year was only granted after losing a legal battle. Hong Seong-wook, a researcher at NH Investment & Securities, noted, "From a corporate perspective, the costs could be used for investment or business activities, but investing in the election means they believe the company's prospects depend on the election outcome."

In fact, Coinbase and Ripple, which topped the list of donors, are representative companies that have been involved in long-term legal battles with the SEC. In Ripple's case, it took 3 years and 7 months from being sued in December 2020 to the final court victory in July 2024. On the 7th of last month (local time), Judge Analisa Torres of the U.S. District Court for the Southern District of New York ruled that the SEC's requested penalty and civil fines of $2 billion would be reduced to a penalty of $125 million (about 172 billion KRW). This is a 94% reduction from the amount initially proposed by the SEC. Judge Torres maintained the previous position that the sale of XRP to general investors did not violate federal securities laws. However, the sale of XRP to institutional investors was deemed a violation of securities laws. This is because 'securitization' depends on the 'circumstances' themselves. The ruling was based on whether the investment contract securities requirements under securities laws?such as monetary investment, business execution, and investors' expectation of profits?were met.

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC).
[Image source=Reuters Yonhap News]

The main target of the virtual asset industry's hostility is Chairman Gensler, who leads virtual asset regulation. Brad Garlinghouse, CEO of Ripple, expressed a sharp stance toward Chairman Gensler at a press conference in Korea on the 3rd, saying, "I would bet money that even if Kamala Harris wins the U.S. presidential election, Chairman Gensler will not complete his term." He also showed hostility by stating, "Senior Democratic officials are seriously concerned about the SEC's war with the virtual asset industry." Jung Seok-moon, head of the Presto Research Center, pointed out, "To ensure the healthy development of the nascent industry, regulatory uncertainty must be resolved. The SEC sees the virtual asset industry as under its jurisdiction, but the industry believes this is a mistaken view. The industry opinion is that a new digital asset-specific law is needed." Jang Kyung-pil, head of the Zangle Research Center, also said, "If the SEC would just say whether something is a security or not, they would comply, but instead, they keep getting involved in lawsuits. From a business perspective, providing clear guidelines is very important."

However, there are also social concerns about the virtual asset industry's bold political moves. Renowned economist Paul Krugman criticized the reality of massive political donations flowing into campaigns in a New York Times column. He said, "I did not anticipate how big a problem virtual assets would become," adding, "Not because virtual assets fulfilled their promise to replace traditional currency, but because they have become a powerful force distorting politics." Professor Paul Krugman has consistently maintained a critical view of virtual assets, arguing they have 'no economic utility.'

Meanwhile, the virtual asset industry is also indirectly demonstrating its influence through its own polls. According to a 'Global Virtual Asset Status' survey released by Gemini on the 10th (local time), 73% of Americans holding virtual assets responded that "the stance of presidential candidates on virtual assets will influence their vote." Grayscale also revealed through its own survey that "more than half of voters (47%) expect to include virtual assets in their portfolios." This is a 7 percentage point increase from 40% last year.