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Trump’s Crypto Conversion: Making the Economic Case for Cryptocurrencies
Explore how Donald Trump’s cryptocurrency revival could affect the 2024 presidential campaign and potentially the United States and crypto-economies, with topics on finance, technology and the national debt.
This is official: cryptocurrencies are now a topic in the American presidential campaign.
Donald Trump, who just five years ago called Bitcoin a scam and dismissed it as “another currency competing with the dollar,” appears to have experienced a crypto epiphany. Now advised by David Bailey, CEO of Bitcoin Magazine (the oldest Bitcoin-focused media outlet), the former president is multiplying his pro-crypto statements.
Earlier this month he announced he would start accepting cryptocurrencies for his campaign, boasting that President Biden “doesn’t even know” what cryptocurrencies are. Speaking at the Libertarian National Convention on May 26, Donald Trump declared that he will “ensure that the future of cryptocurrencies and Bitcoin will be made in the United States” and will “support the right to self-custody of the nation’s 50 million cryptocurrency holders.” To be fair, he said a lot of other things at this event and was mostly booed. However, related statements to cryptocurrencies, as well as the promise to pardon Ross Ulbricht, Bitcoin pioneer and founder of the darknet marketplace Silk Road, were met with applause. The former president went on to post on Truth Social stating that he is “very positive and minded open towards cryptocurrency companies and everything related to this thriving industry.”
This being the case, few people in the crypto community are under any illusion that Donald Trump is sincere or even knowledgeable enough about cryptocurrencies. Rather, his behavior is symptomatic of the growing adoption of cryptocurrencies and the urgent need to gain more supporters before the elections. However, now that cryptocurrencies have become one of his fortes, his economic and freedom-preserving reasons can be presented to a wide audience. Whatever the outcome of the election, these topics have the potential to change public perceptions of cryptocurrencies both in the United States and abroad, and while freedom may be harder to defend, the economics are much more real.
Here are some arguments that Trump, or any other pro-cryptocurrency candidate, could use.
Cryptocurrencies to revive finance
Yes, Bitcoin is the natural enemy of the traditional banking system.
The banking lobby has been one of the biggest forces keeping Bitcoin and other cryptocurrencies at bay for many years, fueling politicians with publicly appealing reasons like money laundering or ecology. However, both myths have been debunked multiple times, making the narrative difficult to sustain. Additionally, more and more TradFi companies have started to embrace crypto, reducing the influence of anti-crypto institutions.
Trump’s turncoat comes at a time when Wall Street is increasingly involved in the world of cryptocurrencies. US funds manage almost $80 billion in cryptocurrencies, the largest in the world (source: Coinshare). With the SEC’s approval of an Ethereum spot ETF last week, they will soon be adding the second largest cryptocurrency to their offerings. Additionally, American companies, both traditional and cryptocurrency-focused, are actively developing their own cryptocurrency custody and payment services, further contributing to the growth of the industry.
Cryptocurrencies to enhance technology
The cryptocurrency industry goes beyond just money or finance. Social media, gaming, healthcare, or virtually any other industry can leverage blockchain – and the cryptoassets created on it – to advance. However, uncertain regulation is holding back innovation and forcing companies to relocate to more suitable jurisdictions.
In the long term, this could weaken the American tech industry.
Cryptocurrencies to help maintain the national currency
Even though Trump feared in 2019 that Bitcoin threatened the dollar, he probably never imagined that it could instead strengthen its supremacy.
In fact, cryptocurrencies are often traded against stablecoins, and almost all of them are pegged to the dollar. This means that cryptocurrency markets indirectly use US currency and US government bonds (both held in reserves by stablecoin issuers to maintain the peg).
Cryptocurrencies to help manage national debt
Probably one of the most intriguing economic cases for cryptocurrencies is the national debt, which has become a real problem in the United States, exceeding $34 trillion.
David Bailey, Trump’s crypto advisor, revealed that the former president asked him if Bitcoin could be leveraged to solve the US debt problem. So far, Bailey has not shared his ideas publicly, but potential moves such as adding bitcoin — a nearly noninflationary asset — to the Fed’s reserves could bolster its stability.
There are many reasons why a politician might start supporting cryptocurrencies, and probably the biggest is that nothing can stop an idea whose time has come. They might even take this opportunity to score some political points.