Coinbase’s Brian Armstrong says 'money moves the needle' - but does that mean it’s right?

The 2024 election cycle, where four billion people in more than 50 countries will have democratic elections, comes at a pivotal moment in the development of the Web3 space.

Newly elected governments, and more importantly their stance on the Web3 industry and how they seek to regulate it, will have a profound impact on the next phase of adoption and growth. 

Against the backdrop of this maxi election cycle there have been multiple geopolitical crises and an abundance of national issues too, so Web3 was unlikely to be a major election issue in most jurisdictions, El Salvador aside, perhaps. But the extent to which crypto and Web3 has been a talking point of the US election has been fascinating, surprising, and concerning - and there are still over two months to run before polling day.

There are many layers of interest to this particular US election and the Web3 industry. First and foremost, this is without doubt the defining election in the development of Web3. The potential of the US crypto industry has thus far been held back as legislators and regulators have taken a needlessly draconian approach, stifling innovation and providing Asia and the Middle East, in particular, opportunities to steal a march. A more pro-crypto US administration would be a major boost to the industry at a critical time, and with global implications.

In such a close election race (with Polymarket, the Web3 prediction market du jour, currently putting Trump vs Harris win at 50% to 49% respectively), political parties cannot afford to alienate or ignore voting blocks that could be the deciding factor.

‍Recent research by Coinbase identified the role that pro-crypto, pro-innovation young voters could play, highlighting that Gen Z and Millennials will account for 40% of eligible voters in this election, and the majority of the electorate in 2028. Logic dictates that it is ill-advised for any candidate to ignore these young, pro-crypto voters. 

And what about the leaders themselves? After describing Bitcoin as “a scam against the dollar” just three years ago, President Trump has switched to actively court the crypto vote. He has made a range of crowd-pleasing promises such as an intention to fire SEC Chair Gary Gensler and torching cumbersome financial regulations.

He has lampooned the idea of a US CBDC, as well as torn strips off the current administration’s policies. He has positioned himself as crypto literate with the sale of NFTs to raise campaign funds and collecting campaign donations in crypto. As a consequence, he is undoubtedly the pro-crypto candidate as things stand today (whether he remains so pro-crypto if re-elected is another question).

Kamala Harris has, unarguably, had a lot to contend with since being parachuted in as the Democrat candidate just last month, but nevertheless is perceived as being slow to embrace Web3.

It’s encouraging to see reports of behind the scenes conversations between industry leaders and her campaign team, however, she inherits the Democrats’ surprisingly anti-crypto agenda and has a massive task ahead in being seen to credibly support the industry.

With so much to play for it is unsurprising that the industry has sought to lobby for pro-crypto candidates and these efforts should be applauded as it has served to push crypto up the election agenda very successfully. As Coinbase’s Brian Armstrong commented to Axios last year, “Money moves the needle. For better or worse, that’s how our system works”.

That may be true, but is it right? The money being used to move the needle by the crypto industry is truly eye-watering, even by US election spending standards, and therein lies the problem from an industry reputation perspective.

A recent study by Public Citizen revealed that crypto-linked companies have spent $119 million dollars seeking to influence US federal elections so far this year, primarily through non-partisan public action committees (PACs), notably ‘Fairshake’. Donations from crypto companies and high-profile crypto leaders make up nearly half of all corporate funding of PACs in the 2024 election.

As the Public Citizen report states, “This tsunami of corporate crypto cash is a brazen and unprecedented attempt by for-profit businesses to force their private, pecuniary priorities ahead of the public interest,” and it concludes, “crypto’s corporate influence corrupting our political process can only be for worse”.

Not many crypto industry advocates will agree with Public Citizen, and I certainly don’t, but their criticism should not be dismissed outright. Just to be clear, I think it is right that the industry has sought to be heard in this election and to push for more pro-innovation legislators in the US. However, there is a growing risk that the industry comes across as too single-issue-focussed and is failing to communicate the bigger picture.

Converting today’s crypto policy obstacles into entrenched tribal political issues through excessive spend on lobbying could hinder rather than advance future development of the industry.

How can the industry avoid turning its unprecedented lobbying expenditure into a potential own-goal?

The key lies in returning to the fundamental principles of effective political engagement, taking a strategic approach that transcends the controversies surrounding the crypto sector and the polarised US political landscape.

First, full transparency around financial contributions and clarity of purpose are critical, and this is even more important where there is already concern around the sheer volume of donations and their disproportionate influence within the political landscape. PACs such as Fairshake are required to disclose all financial activities to the US Federal Election Commission (FEC), and it’s a critical part of building trust and reducing suspicions of undue influence.

Second, maintaining political neutrality is essential. Funding bipartisan candidates isn’t enough; there must be visible and meaningful engagement with both major parties. Given Trump’s apparent ties to the crypto community thus far, it’s imperative to balance this with more visible engagement with the Harris camp.

A more balanced approach ensures that the industry is seen as promoting innovation and sector development rather than aligning with a particular political ideology. This is critical for sustaining bipartisan support longer-term, and avoiding alienating stakeholders with differing political affiliations.

Third, the industry should prioritise open and non-partisan dialogue with policymakers with differing views on Web3 and crypto. Building relationships across the spectrum ensures that the industry’s interests are understood and considered, regardless of an individual lawmaker’s stance. This demonstrates a commitment to constructive engagement and the responsible evolution of the regulatory framework.

And, finally, the industry must place a stronger emphasis on educating the public and policymakers about the broader societal benefits of blockchain and crypto technologies. Building a wider base of support beyond political elites is crucial, and this means articulating the long-term purpose and rationale for change, not just preaching to the converted. This approach helps mitigate the risk of political lobbying being seen as self-serving or solely profit-driven.

While the industry’s efforts are commendable, it’s important not to create future ticking timebombs by appearing too narrowly focused. The goal should be to foster growth and development across the sector, avoiding the pitfalls of being seen as overly partisan or self-interested.

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George Godsal, Managing Director, REKT Partners