Decoding the Impact of the U.S. Election on Crypto: Past, Present, and Future.

by Martin Bechter Co-Founder of Fountainhead Digital.

This article explores the profound impact of the U.S. election results on the crypto industry.

It is not a political endorsement of Trump put a neutral assessment on the elections impact on the vibrant and promising Web3/Crypto industry.

First, I will discuss why the U.S. plays such a crucial role in the global crypto landscape before i move into the past, present and future.

The PAST: To grasp the euphoria in the industry it's essential to understand the past—specifically, why crypto companies have historically faced challenges in the U.S.

The PRESENT: What prompted Trump's change of heart, and what exactly has shifted since the election? Way more than just

The FUTURE: Finally, I will offer predictions for the future, highlighting which sectors are likely to benefit the most.

Spoiler alerts, two key takeaways upfront:

1. Trump himself seems to have little clue about crypto but his team behind does. There are several people in his team who deeply understand and support the industry.
2. Contrary to some media portrayals, the new administration will not deregulate the crypto industry but it will finally regulate it. This missing regulation slowed down the industry so far.

This shift in US economic policy will likely trigger a Cambrian explosion in crypto, accelerating the already rapid pace of innovation. The market seems to agree—prices have risen strongly after the election. Yet, this may only be the beginning.

Let's explore why. But first, let's start why the US matters that much.

Why is the US so important for the crypto industry?

1. US has one of the highest Crypto adoptions in the world

Crypto can survive and thrive without the US, but it would take much longer. The US is the biggest and most important crypto market both in terms of users, but also in terms of companies.

The US has one of the highest penetration rate of people holding crypto assets. Depending on the survey between 15-20% (50-70 Million people). However over the last year many projects, introduced geo blockers to exclude US citizens from product services or airdrops, in order to be safe from the SEC crusade. This will likely be eased which would accelerate adoption in the biggest market. Probably bad news for VPN service providers.

2. Many of the biggest crypto companies and protocols have strong ties to the US

Many of the worldwide leading crypto companies and software development firms are based in the US. Just to name a few:

Largest exchanges: Coinbase, Kraken, Gemini…

Infrastructure providers: Consensys, Chainalysis….

Protocols (”Software Development companies): Avalanche, Near, Solana

Largest Crypto VCs: A16z, Pantera, Polychain Capital, Multicoin, DCG..

Stable coin providers: Circle,

Media:, Blockworks, Messari....

Many of the companies above have one thing in common: they were either sued by the SEC or they currently limit their products/services because of regulatory scrutiny. Some US companies have set up also subsidiaries in Europe/UAE or Asia in order to have an exit opportunity if things become too hostile in the US, others threatened to leave the US.

This will now change. When regulation becomes clear companies will likely onshore.

But let's first understand why the handling of Crypto regulation by the current administration is so toxic and complicated.

The Past: Understanding the US's painful regulatory history is key to understand the current euphoria

• The Biden administration has exhibited considerable hostility toward the crypto industry across multiple dimensions. High-profile crypto-skeptical senators, particularly Elizabeth Warren and Sherrod Brown (worth checking out the links behind the names), have actively sought to cut crypto companies off the traditional banking infrastructure. This initiative, infamously known within the industry as "Chokepoint 2.0" or the "anti-crypto army," aims to restrict the industry's growth and integration with mainstream financial systems.
• The industry has long sought clear regulations, but the approach taken by the Securities and Exchange Commission (SEC), under the leadership of Chair Gary Gensler, has been more destructive than constructive. Instead of providing the much-needed clarity, the SEC has chosen to pursue lawsuits against the most reputable companies in the sector, including Coinbase, Kraken, Consensys, Uniswap, and Ripple and many more. However, it has notably failed to address the actual malpractices by bad actors like FTX. The SEC's approach has been characterised as 'regulation by enforcement.'
• Amid growing Republican concerns that regulatory uncertainty might erode U.S. technological leadership, companies started setting up subsidiaries in Europe, Dubai, and Asia. Some even openly questioned their ability to continue operating within the U.S.
• Despite losing multiple court cases, SEC Chair Gensler persisted in his regulatory efforts, drawing calls for his removal from numerous high-ranking politicians. Listening to hearings in the U.S. Congress, it was astounding to hear the head of the world's most powerful financial regulator struggle to answer straightforward questions, such as whether Ether is considered a commodity or a security. Moreover, courts have criticized the SEC’s acts 'arbitrary and capricious,' meaning it does not operate based on clear rules.
• While most countries have a single regulatory body overseeing their entire capital market, the U.S. has multiple agencies. The most well-known are the SEC, which regulates securities, and the CFTC, which oversees commodities. This setup leads to ongoing disputes, particularly around whether crypto assets are securities or commodities. Other significant regulators include the OCC, FDIC and FINRA. Some analysts suggest that Chair Gary Gensler may also be engaging in a power struggle, aiming to expand the SEC’s jurisdiction over crypto to increase its power relative to other agencies like the CFTC.
• When evaluating crypto assets, the SEC consistently refers to the well-known Howey Test. This test, originally designed to determine whether something qualifies as a security or a commodity, is based on laws that are over 70 years old. Its most famous application was in a 1946 case involving a citrus farmer. Relying on such outdated regulations to govern modern digital assets is like using horse-era laws to regulate today’s automobiles.
• The SEC discreetly introduced an accounting rule, the SAB121 bulletin, which would have made it impossible for banks and financial institutions to hold crypto assets. In a rare move, Congress stepped in and passed a resolution to overturn the SAB121. However, this resolution was ultimately vetoed by President Biden. Here is a great summary on this sage by DLA Piper.
• The industry has long advocated for sound and reasonable regulation. Often, U.S. politicians have referenced the EU's MiCA framework as a potential threat to U.S. interests. The "Financial Innovation and Technology for the 21st Century Act" ( FIT 21) was designed to address this uncertainty. This important legislation recently passed the House of Representatives, receiving bipartisan support, including from 71 democrats —many of whom are younger representatives. Originally, it was not expected to pass through the Democrat-controlled Senate. However, this has now changed with the Senate under control by Republicans.
• The handling of the Ethereum ETF approval in April was a farce. I've detailed my thoughts on this in this post.

the list goes on and on… but lets move to the present.

The Present: The sudden shift in Trumps Crypto opinion and its implications

Everything shifted in May 2024, when Trump hosted an event in Mar-a-Lago where he invited also crypto entrepreneurs. Initially he was ambiguous but mentioned that Bitcoin and crypto were "great" (in his characteristic Trump manner). He even launched his own NFT collection— although that’s a whole separate story.

I personally suspect that Vivek Ramasvamy (39), a former Republican presidential candidate and Trump endorsee, played a crucial role in shaping Trump’s pro-crypto stance. He likely highlighted to Trump that there are potentially 70 million voters out there who are highly dissatisfied with the Democrats' anti-crypto policies. And Vivek, other than Trump knows what he is talking about when he talks about Crypto.

Then Trump nominated JD Vance as his Vice President. Vance has a background in venture capital and disclosed in 2022 that he holds 7 Bitcoin (in 2022). Like Ramasvamy, Vance is well-versed in technology and industry. At age 40, he also represents the younger generation, which is strongly needed in a country where most politicians are 70 years old or older."

Adding to this pro-crypto team Robert F Kennedy (RFK) also joined the Trump team. RFK is probably the most knowledgable and most Crypto pro politician in the US. RFK also pushed forward the idea to introduce Bitcoin as a national strategic reserve.

Finally the republicans included a very clear crypto policy statement on their campaign platform promising to:

Republicans will end Democrats' unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency. We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control.

Many in the crypto sector who lean Democrat had high hopes that Vice President Kamala Harris would come out with similar pro-crypto policies. However, she has not taken such steps, which may prove to be a big mistake.

While the US faces certainly more pressing issues than crypto, the coming weeks will likely clarify the extent to which single-issue crypto voters influenced the election outcome. Did crypto sway global history? Time will tell.

But the significance for Crypto doesn't end with the presidency. The Republicans have also gained majorities in both the Senate and the House.

In total 291 pro-crypto lawmakers hold now office compared to 134 opponents. This live tracking website provides detailed insights on each politician's stance. It’s worth a look. This profound changes will ease the implementation of crypto-friendly legislation like the above mentioned FIT21 bill.

Last but not least, one extraordinary powerful and very anti- crypto senator, Sherrod Brown, lost his senator seat to a very pro crypto senator.

The Future: What can we expect and which sectors are likely going to be the biggest winners?

Bitcoin - Will the US follow El Salvator and Bhutan to officially buy Bitcoin?

Unlike other cryptocurrencies, Bitcoin’ status as a commodity has not been challenged by the SEC - owing largely to its decentralized nature and anonymous founder.

But Bitcoin will be also a big winner because Trump, RFK and several senators (notably senator Cynthia Lummis) are pushing to include Bitcoin as a national strategic reserve. RFK specifically proposed to buy the same amount of Bitcoin to match its gold reserve.

Web3 will be the biggest winner from regulatory clarity

The ambiguity surrounding the classification of most crypto assets, apart from Bitcoin, as either commodities or securities has posed substantial challenges. Labelling a token as a security entails stringent reporting requirements and regulatory compliance, often impractical for entities characterized by decentralized operations, ownership, and decision-making. This uncertainty has compelled many Web3 projects to establish offshore structures and, more recently, to restrict U.S. citizens' access to airdrops—free token distributions to early adopters— forced to deviate from the foundational ethos of open Web3

Such regulatory ambiguity has particularly constrained the economic design and potential of tokens, known as tokenomics. Many projects are today already seeing tangible profits, ideally meant to be distributed among "stakers" — investors who commit to locking up their tokens for extended periods. However, due to the regulatory landscape, these distributions are often not feasible. This issue is most acute in DeFi, the most profitable sector within Web3, where the lack of clear guidelines stifles the full economic potential of these digital assets.

A DeFi renaissance in on the horizon

Often DeFi tokens today have limited utility beside governance or payments. Yet, many DeFi projects create substantial economic value through revenue and profit generation, though distinguishing between these two is not always straightforward. The “profit and loss statements” of crypto protocols differ often significantly from traditional companies, making financial assessments uniquely complex.

A critical development in the industry is the so called "fee switch" concept, where tokens transform into vehicles for distributing cash flows generated by the protocol (network). However, due to regulatory uncertainties, many projects—especially those that are based in the US —have been hesitant to activate the fee switch. Clear regulations could change this landscape dramatically and hence increase the investor attractiveness of many DeFi assets.

I personally view DeFi as a massive 'laboratory for financial innovation,' where truly groundbreaking financial innovations are developed in realistic, real-life environments. Currently DeFi is still operating somewhat in isolation but will gradually converge with the traditional financial system. Major financial entities like Blackrock are already making strategic moves, and are engaging with and leveraging various DeFi protocols such as Maker DAO (now Sky) and Ondo Finance. This trend suggests that a well-defined regulatory framework could herald a renaissance in DeFi, potentially revealing that many assets are significantly undervalued relative to their counterparts.

Corporates will increasingly add Bitcoin to their corporate treasury

On December 4th, Microsoft shareholders will cast an interesting vote on whether to include Bitcoin as part of their $70 billion cash reserves. This move is particularly intriguing as seven of the top ten Microsoft shareholders are also major investors in MicroStrategy. I wrote a separate post on this. Notably, MicroStrategy has bought over 200,000 Bitcoins and its stock performance has surpassed even Nvidia’s. In December we will know if Microsoft sets a precedent. But with increasing regulatory clarity and broader adoption, we can anticipate more corporations integrating a fraction of Bitcoin into their treasury strategies.

Stable Coin acceleration and CBDC slow down

Stablecoins, which are crypto assets pegged 1:1 to a fiat currency (primarily the US Dollar), play a crucial role in the crypto ecosystem. They facilitate trade settlements and allow investments to be held in “cash” without the complexities and costs of converting to fiat currency. For instance, when you buy 1,000 Tether USDT, Tether backs this purchase by acquiring $1,000 worth of US short-term Treasury bills, maintaining the dollar peg. Tether is now among the world’s largest holders of US Treasury bills, a critical position as the US looks for buyers for its growing debt. While several attempts at clear stablecoin regulation have failed, progress is evident, and with Senate control, a stablecoin bill is likely to pass in 2025, potentially boosting stablecoin adoption further.

Conversely, the Republican stance is firmly against the implementation of a Central Bank Digital Currency (CBDC) in the US “…Republicans….will oppose the creation of a Central Bank Digital Currency…” is stated in their campaign platform. With the world's financial powerhouse opposing a CBDC, this stance could significantly slow global CBDC adoption.

People have with stable coins a much easier access to US Dollars across boarders (USD stable coins in Argentina are soaring during their hyperinflation. USD based stable coin adoption is the much faster way to strengthen the dollar. Thats what politicians in the US increasingly seem to realise.

Conclusion

To sum all of this up.... The outlook is bright for Crypto heading into 2025.

We can expect a stream of positive developments throughout 2025. This regulatory clarity will further accelerate the already impressive pace of innovation, as founders will understand the regulatory framework they need to operate within, reducing fears of SEC litigation. Europe and the rest of the world will need to adapt quickly to keep pace. Crypto is not about “funny money currency speculation” but about a groundbreaking innovation that will change many industries in the next decade.

People need to wake up and realise this.

by Martin Bechter Co-Founder of Fountainhead Digital.