Podcast Summary: Markets Daily Crypto Roundup Episode Title: Crypto Update | Crypto Under a New Administration: Regulatory Outlook From Coinbase's Paul Grewal
Host: Jen Sanasi, CoinDesk
Release Date: November 5, 2024

Introduction

In this episode of Markets Daily Crypto Roundup, host Jen Sanasi engages in an insightful discussion with Paul Grewal, Chief Legal Officer at Coinbase. The conversation centers around the impact of the U.S. presidential election on the cryptocurrency landscape, the emerging influence of crypto voters, and the anticipated regulatory shifts under potential new administrations.

Election Day and Crypto's Resilience

Timestamp [01:09]
Jen opens the discussion by highlighting the significance of Election Day, noting Bitcoin's volatility as it surpassed $70,000 but briefly dipped below at the time of recording. She frames the election as potentially the closest in modern U.S. history, with crypto playing a pivotal role in the narrative that may influence the outcome.

Paul Grewal emphasizes crypto's inherent advantage irrespective of election results:

“Regardless of who wins in the presidential election or in any of the congressional races, it's become very clear crypto wins regardless.”
[02:19]

He cites that 52 million Americans own digital assets, and 1.8 million have joined "Stand with Crypto," actively registering to vote or learn about crypto-friendly candidates.

The Emergence of the Crypto Voter

Timestamp [03:23]
Paul discusses the substantial number of Americans invested in crypto and their growing political influence. He attributes this rise to extensive polling by organizations like Morning Consult and the Federal Reserve Bank of Philadelphia, which consistently show tens of millions owning digital assets.

“Tens of millions of Americans... all want to see crypto in their financial future and in the broader economic future.”
[03:44]

Grewal asserts that both major political parties recognize the necessity of crafting legislation that provides clarity and stability for the crypto market to maintain voter support.

Impact of Crypto Voters on Election Outcomes

Timestamp [04:31]
Jen probes whether crypto voters will significantly impact the election results. Paul responds affirmatively, highlighting that while crypto may not be the sole issue for every voter, it remains a crucial factor, especially in battleground states where thousands of crypto advocates could sway tight races.

“Crypto will emerge as an important consideration for these results.”
[04:47]

He underscores the collective influence of crypto voters across various races, emphasizing their role in shaping legislative priorities.

Key Races to Watch and the Presidential Influence

Timestamp [05:54]
Paul identifies the presidential race as paramount due to the president's role in appointing key regulatory figures, such as the heads of the SEC and CFTC. Control of the House and Senate is also crucial, as it determines legislative direction and the leadership of influential committees like the House Financial Services Committee and the Senate Banking Committee.

Policy Stances of Presidential Candidates: Trump vs. Harris

Timestamp [07:09]
Jen delves into Coinbase's interactions with both presidential candidates. Paul contrasts Trump's proactive embrace of crypto with Harris's measured approach:

• Trump's Stance:

  “President Trump... has bear hugged crypto in a way that very few of us could have imagined...”
  [07:26]

  Trump views crypto as a national security issue with substantial economic potential, advocating for its inclusion in the Republican platform and demonstrating personal involvement in crypto projects.

• Harris's Stance:

  “Vice President Harris... sees crypto as a part of a pro-innovation agenda...”
  [08:00]

  She balances innovation with consumer protection, emphasizing the need for regulations that foster growth while safeguarding investors.

Paul remains optimistic that both candidates understand the importance of crypto and will support legislation that provides market clarity and stability.

Authenticity of Crypto Support from Trump and Harris Camps

Timestamp [09:03]
Jen questions the genuineness of Trump’s crypto commitments. Paul affirms the authenticity based on direct interactions and public statements:

“If you stood in the crowd at the Bitcoin conference in Nashville... it's very clear that he and his campaign and his advisors understand that we need a reset in crypto.”
[09:27]

He contrasts this with Harris's limited time to develop economic policies, which may explain her more reserved stance. Paul criticizes the current administration's reliance on litigation over rulemaking, advocating for legislative solutions to bring lasting clarity to crypto markets.

Regulatory Outlook: SEC Under New Administrations

Timestamp [10:52]
Jen asks about the potential future of the SEC under either Trump or Harris administrations. Paul explains that both candidates would likely seek to appoint new SEC leadership to replace Gary Gensler, signaling a shift from the current enforcement-heavy approach.

“Any new administration is going to expect there to be a review of the pending cases... rulemaking legislation is the long term, durable solution to providing certainty and clarity.”
[11:20]

He highlights the importance of appointing heads to other regulatory bodies like the CFTC and the Treasury to ensure a cohesive and forward-thinking regulatory framework for crypto.

Coinbase's Political Contributions and Industry Leadership

Timestamp [15:05]
Jen brings up Coinbase's significant political donations and strategic involvement in Super PACs. Paul explains that these contributions reflect the crypto industry's recognition of the necessity for supportive legislation:

“The crypto industry recognizes that good policy, good regulation is going to be critical to the continued growth and development of this technology and of this industry.”
[15:42]

He emphasizes that Coinbase's political engagement aims to advocate for the crypto voter and ensure that policymakers understand and prioritize the industry's needs.

Post-Election Crypto Policy Pathways

Timestamp [17:25]
Jen inquires about the immediate and long-term effects of the election on crypto policy. Paul anticipates significant changes but advises patience:

“We're going to see tremendous change, but I don't know that that change will come tomorrow morning or next week or even this year.”
[17:50]

He anticipates Congress addressing market structure and stablecoin legislation soon, potentially as early as the lame-duck session or in 2025, which would provide the regulatory clarity necessary for innovation.

Regulatory Challenges: FDIC and Banking Services

Timestamp [19:12]
The discussion shifts to recent revelations about the FDIC pressuring banks to halt crypto-related services. Paul elaborates on Coinbase's legal actions to obtain evidence of these directives through FOIA requests, which were initially denied by the FDIC but eventually mandated for release by the court.

“The FDIC... were telling their institutions to stand down from crypto... that crypto is a legal business, we operate in full compliance with the law in the United States.”
[19:44]

Grewal criticizes the FDIC's actions as overreaches that undermine lawful businesses and set dangerous precedents, reaffirming Coinbase's commitment to fighting these regulatory oversteps in court.

Coinbase's Role as an Industry Leader

Timestamp [23:25]
Jen highlights Coinbase's broader industry responsibilities, particularly in light of its battles with regulatory bodies like the SEC and contributions to political efforts such as Fairshake.

“We have a unique responsibility to take actions that benefit not just our shareholders and our employees and our customers, but the industry as a whole.”
[23:55]

Grewal discusses Coinbase's efforts to advocate for sensible legislation, engage in legal battles to protect the industry, and maintain transparency to hold regulators accountable.

Conclusion and Future Outlook

Timestamp [25:16]
As the conversation wraps up, Paul shares his optimism for the future of crypto regulation, anticipating legislative breakthroughs that will foster innovation and provide the necessary legal frameworks for growth.

“I'm very optimistic... we're going to see legislation passed that covers market structure, stablecoins and perhaps other issues in ways that will unleash innovation.”
[17:50]

Jen thanks Paul for his insights, and the episode concludes with a reminder to listeners to engage in the electoral process, emphasizing the critical role of voting in shaping the future of crypto in the United States.

Key Takeaways

• Crypto's Political Influence: With 52 million Americans owning digital assets and millions actively supporting pro-crypto candidates, crypto voters are a significant force in the election.
• Regulatory Shifts: Both presidential candidates recognize the importance of crypto, with Trump advocating for a robust embrace and Harris focusing on balanced innovation and consumer protection.
• Legislative Advocacy: Coinbase and the broader crypto industry are actively involved in political contributions and advocacy to shape favorable regulatory frameworks.
• Ongoing Legal Battles: Coinbase continues to challenge regulatory overreach, exemplified by its legal actions against the FDIC's attempts to restrict crypto banking services.
• Optimistic Future: Despite current challenges, there is optimism for forthcoming legislation that will provide clarity and support for crypto innovation in the U.S.

This episode offers a comprehensive overview of the intersection between the U.S. electoral process and the cryptocurrency industry, underscoring the pivotal role of crypto voters and the anticipated regulatory transformations under new political leadership.