Bitcoin – The Kingmaker

Bitcoin is becoming an important factor in US politics. Political candidates and elected officials at the municipal, state and national level are portraying themselves as “pro-Bitcoin” in order to win votes. We contend that Bitcoin will become increasingly important to voters and become an integral part of the national public discourse. The first political party or presidential candidate to officially embrace Bitcoin will gain a significant electoral advantage.

As inflation soars to 40-year highs, public deficits balloon and national debt reaches unsustainable levels, more people will be looking to Bitcoin as a superior monetary alternative. The electoral impetus for Bitcoin will rise up through various levels of government. Last year witnessed the beginning of municipal and state-level competition over the Bitcoin vote and industry. This will likely accelerate and reach the national stage. The growing grassroots demand for Bitcoin-friendly legislation and legal-tender status will be complemented by a growing and increasingly professionalised Bitcoin lobby. These combined factors will win over a growing number of politicians looking to be elected and re-elected.

As more states begin to consider legal-tender status for Bitcoin, the issue will eventually reach the national level. An increasing portion of the electorate will recognise the historic opportunity that Bitcoin offers the US. Apart from bringing great economic wealth and innovation, Bitcoin gives the US a chance to restructure its economy on robust foundations. The pushback will come from the permanent bureaucracies whose power relies on a monopoly over money. The final showdown will be one between politicians, who will rely on a growing electoral push towards Bitcoin, and bureaucracies, who will favour central bank digital currencies (CBDCs).

City

Local government has attracted a lot of political activity related to Bitcoin. Predictably, it has been more responsive to local issues and has adapted faster to the growing grassroots adoption of Bitcoin.

A week before his landslide re-election in November 2021, Miami Mayor Francisco Suarez announced that he would be taking his first paycheck in Bitcoin. This made him the first US politician to ever be paid in Bitcoin. Suarez also wants to enable municipal workers to be paid in Bitcoin and has enacted a number of measures to attract innovation and investment in the crypto sector. Miami is trying to place itself as the refuge for Silicon Valley entrepreneurs fleeing California. This bullish stance on the sector has given him national attention, which may foreshadow where the debate around Bitcoin will go next. In an interview, he remarked that every time he mentioned crypto on Twitter, his “analytics would go through the roof”.

Shortly after his election, the new mayor of New York City, Eric Adams, decided to upstage Suarez and announce that his first three paychecks would be paid in Bitcoin. He added that he would work towards New York City becoming “the center of the cryptocurrency industry and other fast-growing, innovative industries! Just wait!” The mayor of Tampa quickly followed suit.

The mayor of Jackson, Tennessee, Scott Conger, also promised to instantly convert his paycheck into Bitcoin and pledged to give municipal employees the same option. He also wants the city to start mining Bitcoin in unused rooms in City Hall and has expressed his admiration for Bitcoin as a “great financial equalizer” and “a hedge against inflation”. The competition among US mayors to appear the most pro-Bitcoin has recently begun but is quickly accelerating.

State

Competition over the Bitcoin vote has also reached state-level politics. In January 2022, Wendy Rogers, an Arizona state Senator, introduced a bill to make Bitcoin legal tender. This bill would make Bitcoin equivalent to fiat for the payment of debt, public charges, taxes and other dues in Arizona. Regardless of potential constitutional challenges, the existence of this bill reveals the growing public sentiment in favour of Bitcoin. Should this pressure continue increasing, these bills could reach the national level and even lead to a constitutional amendment.

Rogers noticed a flurry of attention ever since she began legislating in favour of Bitcoin.

This is likely to encourage her and her colleagues to take further legislative steps towards Bitcoin adoption. A day after commenting on her 10,000 new followers, she thus unsurprisingly tweeted that she “wanted to make Arizona the most crypto-friendly state in the nation.”

Beyond state legislatures, sitting governors and gubernatorial candidates have jumped on the Bitcoin bandwagon. Colorado Governor Jared Polis was the first US political candidate to accept donations in Bitcoin and is a long-time supporter of Bitcoin. In 2014, he sardonically responded to Senator Manchin’s concerns over Bitcoin by saying that “the exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity”. In 2021, he said that “Colorado is and will be the center for blockchain innovation in the United States, attracting investments and good jobs and innovators…” On 29 January 2022, he also reiterated his plan to have Colorado accept state tax payments in Bitcoin.

Bitcoin is also becoming an increasingly important electoral issue in Texas. Texas is already host to some of the world’s biggest Bitcoin miners and Governor Greg Abbott has been very welcoming to the Bitcoin industry. Last year, the state facilitated the holding of crypto assets for businesses and their ability to use them as collateral for loans. In September 2021, Governor Abbott established a work group on blockchain matters to “develop a master plan for the expansion of the blockchain industry in Texas”.

Texas has an upcoming gubernatorial election and candidates have been keen to show their Bitcoin credentials. On 21 January, Texas gubernatorial candidate Don Huffines released an upbeat statement about Bitcoin and the role he foresees for Texas in Bitcoin’s future. Huffines said: “I have owned Bitcoin for years and am a strong believer in both its value as an asset and potential as a currency. As a leader in innovation, Texas must lead the nation on Bitcoin policy and cryptocurrency adoption. I am committed to making Texas the Citadel for Bitcoin and protecting the industry from the federal government.” His Bitcoin plan also mentions making Bitcoin legal tender in Texas and “holding a portion of state reserve funds” in Bitcoin.

Eight short days later, rival candidate Allen West also issued a very positive statement regarding Bitcoin on his campaign website. He said “Texas has the opportunity to lead the world during the greatest technology shift since the beginning of the Internet. The adoption of Bitcoin has revolutionized how capital markets work. Utilizing blockchain, Bitcoin has become the “gold standard” of digital currency and removed the traditional boundaries created by banking regulations that require countless unnecessary human interactions.”

The political debate around Bitcoin in Texas is important to follow. Texas is the second-largest state in the US in terms of population and area. What is happening in Texas may well happen on the national stage and politicians, on a national level, will begin to pursue the Bitcoin vote just as aggressively.

Furthermore, whereas the embrace of Bitcoin is traditionally seen as a Republican issue, the Bitcoin vote is starting to cross political lines. Five Democratic congressional candidates are now pro-Bitcoin. There are also 17 Democrats in the Congressional Blockchain Caucus alongside 18 Republicans. Florida’s Democratic gubernatorial candidate, Nikki Fried, has also spoken in favour of Bitcoin as part of her campaign efforts. Her campaign started accepting Bitcoin and she stated her belief that “democratization of money should be a priority for government.”

Nation

On a national level, Bitcoin is starting to emerge as a political issue. Senator Lummis from Wyoming, Wyden from Oregon, Toomey from Pennsylvania and Congressman Emmer from Minnesota have become vocal supporters of Bitcoin. They have fought back against regulatory overreach and spoken out in favour of the cryptocurrency industry on numerous official occasions. Most recently, Tom Emmer has pointed out that Canada’s emergency measures make a compelling case for Bitcoin. This followed proposed legislation by Ohio Congressman Walter Davidson to protect non-custodial wallets.

Texas Senator and former presidential candidate Ted Cruz has also become a vocal supporter of Bitcoin and himself owns Bitcoin according to recent financial disclosures. He was one of the main opponents of the controversial crypto provisions in the Infrastructure Bill and also proposed a resolution that would allow “restaurants, vending machines, and gift shops at the capital complex” to accept cryptocurrencies as payment. In an interview in February, he extolled Bitcoin’s virtues and portrayed it as a monetary system opposed to authoritarianism.

This is a significant development, as Ted Cruz came second in the Republican presidential primaries in 2016 and is likely to run again. In doing so, he might make Bitcoin an issue in his next campaign.

Political lobbying efforts on a national scale are also intensifying. According to a study, crypto lobbying expenditure in the US doubled in 2021 to reach ~$5m. The growing wealth and coordination of the Bitcoin lobby first became apparent during the efforts against the Infrastructure Bill in 2021. The CEO of FTX, Sam Bankman-Fried, is increasing his lobbying efforts for the sector by launching super PACs, funding campaigns and recruiting seasoned lobbying professionals. In the last presidential election, he spent over $5m to support Joe Biden. He has also spent money supporting the campaigns of Republican senators Susan Collins, Mitt Romney, Lisa Murkowski and Ben Sasse.

Major figures in the Bitcoin space are also becoming more public about their political activity. The co-founder and CEO of Kraken, Jesse Powell, published a bipartisan list of pro-crypto politicians he had donated to at the beginning of 2022. Jack Dorsey co-hosted a Twitter space and held talks with pro-crypto Democratic congressional candidate Aarika Rhodes. Wealthy single-issue political donors are likely to increase and keep promoting the Bitcoin agenda. Bitcoin will thus become a growing presence in the national political landscape through organised lobbying and growing grassroots adoption.

Conclusion

Bitcoin is taking US politics by storm. The Bitcoin vote is being aggressively pursued at a municipal and state level and will soon also be a significant factor on the national stage. The midterm elections in November may be the first to witness Bitcoin as a national political issue and this tendency is likely to accelerate as an increasing number of young people become eligible to vote and run for political office.

When Bitcoin will have reached the zenith of the national electoral discourse, it will then be subject to a battle between electoral demands and centralised bureaucracies. Politicians looking to win votes will have to push forward a Bitcoin agenda, while centralised bureaucracies will do everything to hold on to their power. Bitcoin, as a decentralised network, directly challenges government agencies reliant on the centralised control of money. This political battle will result in a showdown between Bitcoin and central bank digital currencies (CBDCs). Voters will support Bitcoin, whereas government authorities will support CBDCs.

At the moment, the permanent bureaucracies are winning the battle. There are growing calls for tough regulations emanating from the White House, government departments, the Federal Reserve and the federal regulatory agencies. In parallel, there is a growing call for CBDCs. As Bitcoin increasingly becomes an important issue for voters, however, the balance will begin to tilt and the permanent bureaucracies will be unable to resist the unstoppable ascent of Bitcoin. This process will take time. It will take many political and legal battles. It will test democratic mechanisms. But, eventually, it will succeed.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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