After the Republican Party’s election sweep last November, Crypto Twitter exploded in “to the moon” emojis while a rash of Trump-related meme coins were minted and Elon Musk’s favorite dog-joke currency, Dogecoin, doubled in value in a week. By early December, the value of a Bitcoin had vaulted past the financially and psychologically significant all-time high of $100,000; other public cryptocurrencies had gains ranging from 35 percent to over 500 percent. Even the ardent Democrats among the crypto faithful breathed a collective sigh of relief.

It’s worth recalling that President Trump was not particularly friendly to the crypto industry during his first term. He called Bitcoin a “scam,” and Jay Clayton, the president’s choice to head the SEC, waged the first big battle on the issue, suing industry stalwart Ripple for failing to register its XRP token under securities laws. But during his 2024 presidential campaign, Trump had a decided change of heart.

He declared the importance of U.S. leadership in digital assets, made a keynote speech at one of crypto’s biggest conferences, teased the idea of creating a national stockpile of Bitcoin – and by far most importantly for the industry, promised to fire crypto’s arch villain, the Biden-appointed SEC Chair Gary Gensler, “on day one.”

What brought on Trump’s road-to- Damascus moment is debated. Some credit his youngest son Barron for proselytizing on the subject, while others point to Trump’s own success in selling the POTUS Trump NFT collection of digital tokens. But Trump surely also noticed the United States falling behind other countries in accommodating a popular and rapidly growing industry. And the $135 odd million that Fairshake and other super PACs spent on procrypto candidates in congressional races no doubt helped crypto-wavering candidates of all ideological stripes get religion.

Far more important to the industry than Trump winning, however, was the Democrats losing. The Biden administration made no secret of its anti-crypto views, and this manifested across multiple parts of the government.

The Democratically controlled Senate failed to pass meaningful legislation on digital assets, in part because the chair of the Senate Banking Committee, Sherrod Brown, was a vocal critic. Meanwhile, the SEC refused to issue clear guidance on what constitutes a security, choosing instead to know one when it sees one by bringing 46 enforcement actions for crypto-related securities violations in 2023 alone. Federal banking regulators placed restrictions on the banking sector’s ability to engage in crypto business, and Biden himself vetoed the repeal of a crypto-hostile SEC staff accounting bulletin under the Congressional Review Act that had passed both houses with overwhelming bipartisan support.

For its part – and somewhat perversely – after years of intense dialogue, the SEC sued the industry’s two largest U.S. exchanges, Coinbase and Kraken, which are among the most committed to operating in the United States as regulated entities. In its opening brief seeking judicial review of the SEC’s refusal to engage in rulemaking, Coinbase summarized the industry view:

The [SEC] is asserting sweeping new authority over a vibrant, rapidly expanding industry – digital assets. But the SEC is pursuing this power grab through enforcement actions and it has refused to set forth its new interpretation of its enabling statutes in a rulemaking, where the lack of legal basis for its self-aggrandizement would be laid bare.

Wyoming native Caitlin Long, the founder of digital asset custodian Custodia Bank, called the SEC’s strategy “shooting the stallion to scatter the herd” – that is, an explicit attempt to crush the industry rather than regulate it.

Industry OG and Castle Island Ventures partner Nic Carter went further, accusing the U.S. government of “using the banking sector to organize a sophisticated, widespread crackdown against the crypto industry” by pressuring banks to limit the deposits of, and deny banking services to, companies working in the crypto industry.

Carter termed this attack on crypto “Operation Chokepoint 2.0” in a series of articles in Pirate Wires that detailed a range of seemingly coordinated policy actions across the White House and the federal financial regulators culminating in the forced liquidation of Signature Bank, a commercial bank that provided critical settlement services to the crypto sector. Since the election, a number of emboldened VC firms and companies have confirmed these accusations, and the narrative is now being reported more widely in the mainstream media. By no coincidence, Marc Andreessen, managing partner at venture capital firm a16z, said Trump’s election victory “felt like a boot off the throat.”

Crypto's Democratic (?) Ideals

Crypto has suffered more than its fair share of fraudsters, embezzlers, crooks and money launderers, so comprehensive regulation will be critical both for protecting investors and for its own healthy growth. Crypto’s early cypherpunk ideal of a parallel, decentralized monetary order wholly outside government control has come crashing down around it, alongside the hacks and scams, and more hacks and more scams, the ecosystem has suffered over its short life.

But despite its worst excesses, I believe that crypto and the blockchain technology powering it should be actively embraced by Washington. Republican support comes from both the libertarian inclinations of some of its stalwarts and from the reality that the Republican Party is generally more inclined to let new businesses develop with few constraints. But crypto promotes a range of core Democratic values, including individual rights, support for the “little guy,” financial inclusion, middle-class wealth generation and the projection of liberal values globally. Politically, crypto should also have some appeal to the left wing of the Democratic Party in its desire to build a kind of “peoples’ alternative” to the centralized power of the Silicon Valley platform giants, and in its disdain for the exclusionary practices of the behemoths of traditional finance.

Pragmatism alone, moreover, should motivate Democrats to take another look at crypto’s merits. For despite its numerous flaws and rotating cast of shady characters, despite its propensity for financial nihilism in the form of meme coins and moronic tap-to-earn games, and – most tellingly – despite the best efforts of the Biden administration, the momentum behind crypto continues to grow, as does the range of transformative uses of its technology. In any event, at this point resistance is (almost) futile: after four years of probable benign regulatory neglect under President Trump, crypto’s place in our financial system will likely be cemented.

Online Liberty and Digital Ownership

In his book Read Write Own a16z general partner Chris Dixon offers a 250-page indictment of the current state of the internet and the potential for a newer, decentralized version of it based on crypto’s blockchain technology. This new “Web3” world of public blockchain would be built on the ideals of open architecture, transparency and decentralization, individual freedom and the right to capture the value of one’s labor.

This is in contrast to how major platforms on the internet operate today. The big Web2 players – Google, Facebook, Twitter, Amazon, etc. – have built user-friendly interfaces and easy-to-use tools. But in doing so they have lured users into walled gardens and then captured and profited from the content and personal data those users generate. While on these platforms, what users see is controlled by algorithms that are not transparent to them (and that are often tailored to benefit the platforms), and they are subject to ever-changing rules of engagement.

These large platforms are the internet’s Hotels California. You can’t save an Instagram photo you like outside of an Instagram wrapper; you can’t share a tweet with someone that doesn’t use X; you can’t sell or use the sword or magic potion you earned outside of the game-world you earned it on. You can “buy” a book on Kindle, but you can’t turn around and sell it to someone else. You can’t even fully delete your own personal history from these platforms. All told, it’s an online Faustian bargain: the platforms are free to use, but one sells one’s digital soul to use them.

It’s even worse for entrepreneurs. With the exception of YouTube, the “take rates” (the percentage that the platforms capture of revenue generated by the apps built on them) is close to 100 percent, earning these platforms about $150 billion per year on the backs of smaller businesses. And, it seems, that isn’t enough. Businesses building apps for the Apple App Store take the risk that Apple will copy their product and drive them out of business.

Both Twitter and Facebook once had vibrant developer marketplaces and open APIs where creators could build and offer tools, extensions, content and services to platform users. But as these products became popular, the platforms cut off access to third-party developers in favor of internally developed products. Jeff Bezos famously described his ruthless approach to competitive merchants, including the ones upon whom he built his platform, as “your margin is my opportunity.” Dixon summarizes the problem succinctly:

Search and social ranking algorithms can change lives, make or break businesses, and even influence elections, yet the code that powers them is controlled by unaccountable corporate management teams and hidden from public scrutiny.

It wasn’t always so. Walter Isaacson explains in his history of the technological revolution, The Innovators, that a mixture of collaboration, competition and, critically, vast amounts of public-sector funding delivered an internet protocol (IP), the Simple Mail Transfer Protocol for email (SMTP), the Hypertext Transfer Protocol (HTTP) (known to us all as The Web), a way to build websites (HTML) and a registry for naming them (DNS). These were and still are based on an open architecture, available to anyone to access, build on and connect to. It’s because of this open architecture that today’s consumers have lots of different email clients and web browsers to choose among, and it is of course why the internet has fostered trillions and trillions of dollars of economic activity globally.

Public blockchains harken back to these early days of the internet, most fundamentally in that they share this open, permissionless architecture. As we have seen with the Web2 platforms, though, promises of open access can be reversed by management teams whenever it is profitable to do so. What makes a public blockchain unique is that it can back up this promise, and that is perhaps its most important technological feature.

Because copies of the blockchain software live simultaneously and in perfect synchrony on hundreds, if not thousands, of computers – controlled by people who do not know, let alone trust, one another – the rules promulgated and administered by the software cannot be altered without a majority agreeing to do so. This means that no single entity can just change the rules of the game. This in turn means that the technological commitments made to an open architecture are credible.

So developers who build on the blockchain can do so without fear that the ground will shift beneath them, or that the very value that they create will render them vulnerable to the predations of the platform on which they build. Whereas, as Dixon explains, no VC will now fund a company built on a Web2 platform like Facebook or TikTok, the Web3 space is teeming with money – and was even during the bear market. On a public blockchain, developers and creators know the rules of the game, control their own business models and decide how much of the value they keep for themselves.

As important for users, this credible promise of a persistent open architecture enables the ownership of digital goods for the first time. When you buy a digital book from book.io, a company offering books on the blockchain, for example, you actually own the book. You can read the book on any platform you like, and you can resell the book at any time. Likewise, on blockchain-marketplace-based games, players can sell the hard-won powers of their gaming characters to the highest bidder.

In other examples, a purchaser of an NFT might also get the licensing rights of that NFT’s likeness, or a freelance software developer contributing to a large project might offer to work for free but be paid for the lines of code that make it into the final product. They wouldn’t have to track the accounting, though. Their contributions would contain the instructions to make the payments.

Information Integrity and Self-Sovereign Identity

The ability for a public blockchain to make credible promises is arguably its most significant source of value. Most importantly, it starts with the credible promise of an open architecture, but it extends to a fundamental promise about the information on the blockchain itself.

That promise: once uploaded to a public blockchain, information cannot be altered. Information can be updated by another entry at a later time, but its initial intention cannot be changed. Therefore, a public blockchain delivers a credible promise that the information on it has integrity. Note that it does not make representations about truth – a blockchain still has the garbage-in-garbage-out problem of every database – but it can provide a credible guarantee that the information on it has not been altered. And this guarantee is not a “c’mon you can trust me!” guarantee from a government or other central authority, but a guarantee premised on this one idea: that the risk that thousands of independent computers will work together somehow to alter the information on the ledger that they collectively maintain is incredibly remote. In the case of Algorand, the platform whose foundation I lead, the probability is calculated to be one in 10¹⁸, an unimaginably small number.

Blockchain information integrity can prove the origin and unaltered persistence of inputs in a supply chain (say, that diamonds came from South Africa and not a slave camp in Sierra Leone) or mark important events. Finboot, a highly regulated supply-chain management company for the oil and gas and chemical sectors, for example, uses the blockchain for ESG record-keeping and credit management. The Data History Museum mints non-fungible tokens (NFTs) in real-time that represent earthquakes and solar flares, so there are permanent digital artifacts of these events.

Consider, too, that in the age of AI agents and deep fakes, a blockchain can help demonstrate that what we are seeing and hearing hasn’t been tampered with. Digital cameras might automatically send a timestamp to the blockchain with every picture taken, for example, in order to lock in a record of the original photo. In a particularly grisly example, a company called LabTrace works with Siemens, the world’s largest manufacturer of MRI machines, to timestamp MRI images in real time and then upload references to those images to the Algorand blockchain. Federico Turkheimer at Kings College London founded LabTrace after he was called to give expert testimony against a well-known medical researcher who was accused of doctoring the temporal order of MRI images. It turns out that if monthly post-drug clinical MRI images of a drug regiment show, say, cancer tumors getting larger over time, a neat trick is to reverse the temporal order of the images to make it seem the tumors are getting smaller.

That’s an example of thwarting a particularly vile behavior. But a more wholesome and affirming example, and perhaps one of the most important applications for blockchain technology, is in the potential for self-sovereign identity. Most people in most countries are issued IDs by their governments, but there are almost one billion people in this world who do not have officially recognized identities. These international refugees, rural villagers and citizens of failed states (among others) have no way to claim their legal rights as citizens.

But what if individuals could create identities for themselves based on their behavior over time, even without a governmentally issued anchor? Imagine that a Syrian refugee arrives in Greece with no formal ID whatsoever. Once there, however, a relief agency takes down their name and gives them a biometrically authorized wallet on the blockchain; it also administers some basic health services – a TB shot or a Covid vaccine, say.

They then travel from Greece to Italy, where they enter a refugee camp. In this world, Italian gatekeepers could verify their identity without having to coordinate with Greek counterparts, and see that they had received immunizations in Greece. From there, they could continue to build on this informal identity – to borrow money and pay it back, to enroll in some education or other services, to find a job and show up to work on time every day. They have now credibly established some good behaviors, easy to demonstrate in a blockchain wallet, that may make them more employable. And they can keep building from there.

Nobody trusts these refugees, though; our refugee cannot credibly claim to the Italian authorities that they got a Covid vaccine in Greece because they could have altered that document. But if an independent entity attested to (think “uploaded”) this health intervention and if everyone understands that it could not have been altered, it is a different story. Of course the credibility of the person or institution that initially attested to the information matters a lot – the more credible the information attestor, the more rock-solid the claim.

Another technical feature of public blockchain technologies creates value in self-sovereign identity, even for citizens of countries where national identities are universal or widespread. Why is it that, as just one example, a 22-year-old woman has to show a male bartender a plastic card with her home address helpfully printed on the front of it when the situation calls only for her to prove that she is over 21? The key feature of a blockchain for this woman is that individual components of information (in this case, her age) can be marshalled independently, with each still maintaining the credibility of the original composite source (in this case, her driver’s license). She can prove the fact that she is 21 without having to reveal other information about herself, including even her birthday.

Financial Inclusion

A third core democratic value supported by crypto technology is financial inclusion. Crypto payments can be made instantly, cheaply and in the tiniest of increments on the blockchain. Highly performant blockchains like Algorand charge sub-penny transaction fees, deliver instant finality and can process 10,000 transactions per second, thus making very small digital payments economically viable for the first time. Blockchains also operate 24 hours a day, 7 days a week, 365 days a year.

Compare this to the modern banking system with its minimum deposit requirements, overdraft fees (still earning banks in the U.S. roughly from $6-8 billion annually), 9-to-5 weekday-only operating hours, and large fees for stuff like wire transfers and brokerage trades. These fees, along with ID requirements and a pervasive lack of trust in legacy financial institutions, explain at least in part why 5.6 million households in the U.S. do not have access to a bank account.

Crypto payment “rails” – financial infrastructure that facilitates moving money from one party to another – particularly in the form of U.S. dollar “stablecoins” (a token on the blockchain that is tied 1:1 to the value of the dollar) have massive potential benefits for the unbanked, and particularly for those living close to the poverty line who need access to wages the day their rent or car payments are due.

Crypto payments settle instantly. And because crypto payments can be made flexibly and cheaply in small amounts, a worker paid in U.S. dollar stablecoins could in theory accrue their salary on a daily basis instead of waiting until the end of an arbitrary weekly or monthly period. On the payments side, crypto firms are the natural allies of the Democrat- created (Republican-loathed) Consumer Financial Protection Bureau since crypto payments undermine payday lenders and other bottom feeders that owe their entire existence to the dearth of bank branches, high minimum- balance requirements and the three days it takes to clear a check.

Problems of financial inclusion are not limited to the poor or marginalized. Public blockchains also help middle-class investors by bringing liquidity to illiquid assets that are normally available only to accredited investors (read: the rich). Take rental income, for example. Rental property, especially at scale (apartment buildings, not the in-law suite over your garage), typically delivers a solid diversified unearned income stream to an investment portfolio. But who can afford to buy an entire apartment building?

That’s where Lofty.ai, a Web3 company, comes in. It offers ownership shares in rental buildings of all kinds in sums as small as $50. Investors simply get the portion of the total rental income commensurate with their share of the total investment. Retail investors browsing the Lofty.ai website will find sales and rental records, legal documents and a host of other information to help them understand the property and the investment. They will find liquidity as well, as the shares are in token form, kept in a digital wallet, and are easily bought and sold with the click of a key.

The tokenization of assets on blockchains – of everything from paintings to money-market funds – is now beginning to make serious inroads into traditional finance. Black- Rock, the giant money manager, announced a tokenized fund last year, which already has $500 million in assets under management.

There is Now an Opportunity...

The right to transparency and openness when engaging with online platforms, the ability to build up personhood based on past behaviors while maintaining sovereignty over information shared, the consumer protection that comes from an iron-clad promise of information integrity, the compelling alternative to costly banking rails – these all strike crypto fans as technological extensions of the deeply democratic, bipartisan notions of liberty upon which this country was founded.

So why the deep animosity from many Democrats? The most likely explanation is that crypto has also been home to a mare’s nest of shady operations and outright crimes, the most important of which was the billions of dollars of damage done to investors through the collapse of crypto exchange FTX. Its founder, Sam Bankman-Fried, is now serving a 25-year term on multiple counts of fraud. And it didn’t help crypto’s cause that his fall embarrassed Democratic Party fundraisers. SBF was President Biden’s second biggest donor in the 2020 election cycle.

In addition to the political calculus, though, the substantive fact of the matter is that crypto breaks entirely new regulatory ground, and on issues that are not always easy to grapple with.

Crypto is a shape-shifter, sometimes like money, sometimes like a commodity, sometimes an expression of utility and in some contexts, a security. It’s hard to wrangle, and the path to sensible regulation is not made easier by the hodgepodge of regulatory authorities in the U.S., each with its own turf to protect.

The net effect of shooting the stallion, though, has been to drive the rest of the herd offshore. The biggest, and for U.S. regulators, most worrisome, companies (Binance, Tether, Telegram/Ton) are all beyond the reach of U.S. regulators – but not, thanks to virtual private networks and other technologies, out of reach of determined investors in the U.S. The net result has been to stifle U.S. companies trying to comply with the law while enabling faster and looser organizations to thrive in a regulatory no man’s land.

By no coincidence, the United States has fallen behind almost every other serious jurisdiction in attempting to grapple with regulation around digital assets. The EU, UK, Singapore, Japan and the UAE – to name just a few of the largest jurisdictions – have taken important steps to promulgate regulations that prioritize investor protection and financial stability but that also support the growth of the industry.

The market rally of Bitcoin and other cryptocurrencies after the election did not happen, I would argue, because the industry envisions a path to a regulatory free-for-all. Rather it sees in the Trump White House an administration that does not question crypto’s very right to exist. The industry hopes and tentatively expects the CFTC, the SEC and other policy institutions to commit to developing a regulatory framework that will bring digital asset companies of all kinds to the U.S., where they can compete on a level playing field with those in other countries, and where they can be monitored closely by some of the world’s most sophisticated regulators.

The crypto industry may now be entering a kind of golden age. Crypto has been badly burned by the industry’s worst actors, and as a result the industry has for the most part distanced itself from its anarchical roots and is now inviting sensible, clear regulation. Happily, the U.S. has an enviable second-mover advantage, as it is able to learn from the best efforts of other jurisdictions over the last several years. And despite the hostility of the Biden administration, close to 100 percent of the stablecoins circulating are dollar-based. The United States now has a real opportunity to become a global leader in digital assets.

...To Join the Revolution

Elusive Bitcoin creator Satoshi Nakamoto believed that governments would try to inflate away the public debt they accumulated in bailing out the banking sector after the 2008 global financial crisis. So in 2009 he invented a currency that did not require trust in the competence or benign intentions of monetary policy officials. Since then, crypto has been gaining traction as a bulwark against the worst kinds of government excess for an everincreasing number of people.

For those who do not trust their government, crypto offers the tentative promise of wealth that cannot be confiscated by authorities or put at risk by banks. 

More broadly, it offers gains in self-sovereign identity and the promise of information integrity against corrupt officials. Because its fundamental value proposition is predicated on non-reliance on the good offices of centralized authorities (public or private), it is hardly surprising that crypto’s popularity is inversely correlated to the quality of national governments.

For some crypto detractors, their fundamental opposition stems from a philosophical idea that money should be exclusively the purview of governments – full stop. I am willing to bet that if you are in this camp you have a bank account, a comfortable buffer against financial vicissitudes, and easy access to a globally convertible currency. If, on the other hand, you live in a country with high inflation and/or capital controls and/or political volatility and/or a predatory government, I bet you like the idea of Bitcoin just fine.

Those who see the Trump administration as a fundamental threat to democratic values would do well to reexamine their notions about what crypto is all about. They may come to see that crypto could serve as a barrier to some of the excesses of a White House they fear and loath. Because (with apologies to poet-lyricist Gil Scott-Heron), the revolution will not be centralized.