After a wild few years for digital currencies, the sector has been less financially mercurial this year. In fact, according to PitchBook’s Q1 2024 Crypto Report, January through March marked the first QoQ uptick in total crypto venture deals since 2021’s raging bull market.
What’s now coming into focus for digital assets is the US presidential election—including how a Kamala Harris or Donald Trump administration would look to mold the country’s uneven (to put it charitably) crypto regulation. Current SEC Chairman Gary Gensler has led a crypto crackdown, and the industry is eager to see who the next president will appoint next.
It’s a coinflip as to whether the incoming SEC chairman would drop the agency’s lawsuit against Coinbase, which is at the heart of a number of unsettled crypto policies. The regulator argues Coinbase listed more than a dozen unregistered securities; if the SEC prevails, cryptocurrencies could be defined as securities rather than commodities, putting digital asset exchanges, as well as market makers and custodians, under a regulatory microscope.
Limited partners are ramping up due diligence. They’re grilling startups and asset managers on compliance and risk. And they’re determined to not be burned on co-investments that the SEC may well deem unregistered securities.
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Robert Le, a PitchBook senior analyst covering crypto, said he doesn’t know if “cryptopia is being overly optimistic, but they don’t seem to have much reason to worry.” The reason, he added, is that crypto is now at least “being taken seriously.”
The House of Representatives advanced to the Senate a comprehensive crypto oversight bill. The SEC signed off on bitcoin and ether ETFs. And federal probes into crypto companies have significantly slowed.
Much still depends, though, on the regulators Trump or Harris, the latter now the presumptive Democratic nominee, put in place. Harris, with her ties to the Bay Area, may install Silicon Valley types who could “lean pro-crypto,” according to Le. Something similar could play out with Trump, who pledged at a Bitcoin conference in Nashville over the weekend to make the US the “crypto capital of the planet.”
That said, concrete crypto oversight proposals—floated by either party—have been MIA, according to Will Ogden Moore, a research analyst at crypto investment firm Grayscale Investments.
“To date, neither candidate or party has put forth extensive policy proposals on crypto, despite the bipartisan and bicameral engagement we have seen from policymakers and regulators,” Ogden Moore said last week.
The next administration doesn’t have to be pro-crypto; it just has to be neutral, said veteran crypto PE investor Dan Tapiero.
“The Democrats realize now that this is an important group of American voters and that the hostile approach—even if they don’t want to be necessarily pro—the hostile approach is wrong,” Tapiero said.
“There’s not a lot of [crypto downside] risk coming out of the US, anymore,” Tapiero said.
Valuations were in the green over 2023—spurring seed money into PE tickets—according to PitchBook, with startups claiming $2.4 billion over 518 deals. It marked a 40.3% fundraising pop, QoQ, with a 44.7% volume boost.
With dollars flowing anew, a crypto market in motion may well stay in motion.
A number of consequential hot button issues remain unresolved for crypto investors as the US presidential election nears—and a likely new SEC chairman could shake things up.
Joey Schaffer/PitchBook News
