The big wide world

Crypto doesn’t exist in a vacuum (post-debate edition)

Good morning, folks. Welcome to the first edition of The State of Crypto: Election 2020. My name’s Nikhilesh De and I’ll be your host. 

Today’s issue: What happens to Big Tech matters for those building decentralized networks.

Campaign briefing

There’s no way around it: the U.S. election is here. Voting began weeks ago in some states and an estimated 47 million individuals have already cast their ballots to vote in their preferred candidates for President, the Senate, the House of Representatives and scores of local and state races. 

Sadly, fintech policy did not come up during last night’s debate, despite the far-reaching impact it might have. It’s a unique election in many respects, but from the crypto viewpoint, 2020 will mark the first time AP records race calls on an immutable ledger, through a collaboration with Everipedia and Chainlink. 

But the most immediate and obvious impact to crypto will come from who the President appoints to lead the financial regulators and which bills might be introduced and passed by Congress. 

There are also much broader questions at play. Much of crypto policy is by necessity tied to existing financial and technology regulations, which means that crypto-adjacent issues will ultimately have an impact on the space we’re in. The Big Tech debate is one such example. This week the U.S. Department of Justice and a number of state-level regulators filed a massive antitrust lawsuit against Google, alleging it controls and abuses its control over online search and advertising services. Google, naturally, denies it has a complete monopoly, saying alternative services are readily available and easy to access. 

The case is likely to continue regardless of who wins the election as this isn’t just a partisan issue. The Section 230 debate around social media platforms is another hot topic these days with various points of agreement and disagreement between different political ideologies. Further back, we saw President Donald Trump try to ban Tik Tok and WeChat. This all suggests that the U.S. government might want to find ways of exerting better control over up-and-coming technologies, particularly those that might become the next Google or Amazon or Twitter. This could apply to crypto and blockchain platforms.

What we do know is that centralized platforms are subject to the whims of government officials who want to control what information is shared. Another risk is monopolization. There have been several opportunities for blockchain platforms to show up and say “hey, look, we see these issues with our centralized counterparts and here is our response.” But those networks maybe aren’t ready yet. 

My colleagues David Pan, Benjamin Powers and Brady Dale have covered a few of them, noting that while people are building – and to be sure, a lot has been built this year in terms of infrastructure and mature products – we’re just not there for mass adoption of big, blockchain tools.

Still, policy positions on technology platforms are being determined by those who are elected and appointed. Privacy and encryption are two concepts that I believe are near and dear to the hearts of many in the crypto community. Recent policy statements by the DOJ and international agencies would appear to threaten these rights, whether in the form of an explicit “enforcement framework” or as more of an international, coordinated statement asking developers to build backdoors into their encrypted systems.

Fast fact

On the ballot

A number of this year’s candidates for federal office have proposed crypto-related bills or suggested policies. Meet a few of them, courtesy of my colleague Sandali Handagama:

Rep. Darren Soto (D-FL)

Crypto stance: Pro blockchain, accepts crypto donations, introduced bills to have the federal government actually implement blockchain tools.

Rep. Soto, a first-term congressman, introduced two bills on digital taxonomy and blockchain innovation that passed the House of Representatives and were incorporated into the Consumer Safety Technology Act (H.R. 8128). Soto also introduced two amendments to the National Defense Authorization Act that could boost the use of blockchain tech in the U.S. military, which were unanimously passed by the House. 

Rep. Cynthia Lummis (R-WY)

Crypto stance: Pro-bitcoin

Then-Rep. Lummis, who served in the House between 2009 and 2017, first invested in bitcoin in 2013, and has said she is impressed by the cryptocurrency’s potential as a store of value. She won her primary race to join the U.S. Senate to represent Wyoming and is expected to win her seat easily.

Rep. Eric Swalwell (D-CA)

Crypto stance: Pro-blockchain, accepts crypto donations

Rep. Swalwell, a fourth-term congressman, accepted bitcoin for his 2020 presidential bid and signed a letter urging the IRS to clarify tax laws as they apply to crypto for a second time. He has been quoted saying, “Blockchain can change the world, if we let it.”

Rep. Trey Hollingsworth (R-IN)

Crypto stance: Pro-blockchain

Rep. Hollingsworth, a second-term congressman, signed a bipartisan letter to Trump adviser Larry Kudlow urging the administration to include blockchain in its “initiatives for emerging technologies.” Along with other lawmakers, Hollingsworth held a briefing with financial regulators to discuss how machine learning and AI can reduce money laundering and terrorist financing.  

Rep. Tom Emmer (R-MN)

Crypto stance: Pro-blockchain, accepts crypto donations, introduced bills to provide tax clarity, safe harbor for startups and securities clarity relating to digital assets

Rep. Emmer, a third-term congressman, is co-chair of the Congressional Blockchain Caucus. He introduced a bill aimed at encouraging innovation by creating safe harbor for blockchain startups. Emmer also twice introduced a bill that would benefit taxpayers holding crypto. His latest bipartisan bill on securities clarity seeks to classify tokens as commodities.

Early returns

Prediction markets are an effort to create better polling by ensuring participants have “skin in the game,” by asking them to actually bet money on the outcome of an event, such as an election. There isn’t a huge market, as my colleagues Benjamin Powers and Brady Dale wrote last month. But people are betting real money, either on centralized prediction markets or on decentralized platforms using tokens. 

CoinDesk is monitoring crypto prediction markets to see how they align with traditional polls and the final election results. 

Here’s what a random sampling of markets says (as of Oct. 22, 2020):

Centralized markets:

PredictIt: Joe Biden (D) has the best odds of winning the presidency 

Iowa Electronic Markets: Democrats are likely to receive the majority of the popular votes 

Decentralized markets:

PrediQt: Donald Trump (R) will not be re-elected for a second term as U.S. President 

Polymarket: Donald Trump (R) will not win the 2020 U.S. presidential election 

Neutral polling:

FiveThirtyEight: Biden is favored to win the presidential election

Sounding board

Feel free to reply any time or email social@coindesk.com or nik@coindesk.com.

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