In American politics, issues on which both parties have yet to establish a firm position are rare, representing a significant opportunity for whoever moves first. In 2021, one such area is cryptocurrency regulation.
Cryptocurrency may still be a minor issue for some voters, but with the crypto market now valued at more than $2.5 trillion, its importance is only going to grow—in both economic and electoral terms. Moreover, our research team at Redfield & Wilton Strategies recently found that many voters are already aware of cryptocurrency, making the political stakes even higher.
We polled almost 10,000 Americans across ten politically salient U.S. states, and what we found was that very few respondents—ranging from 8 percent in Florida to 14 percent in Georgia—hadn’t heard of cryptocurrency. Meanwhile, over four in 10 people polled in key states said they’d read or heard “a moderate amount” or “a lot” about the topic.
And voters aren’t just aware of cryptocurrency; they are receptive to it, too. Even without having been exposed to any campaigning on the issue, roughly a third of Americans across all states polled—ranging from 28 percent in Arizona to 37 percent in both Texas and Wisconsin—would vote “yes” on a ballot measure asking whether cryptocurrency should be deemed legal tender in their state.
Whichever party wants to catch these receptive voters should act swiftly, not only to beat the other party to the punch but also to pre-empt legislation that would prove difficult to reverse if enacted.
To wit, the Biden Administration, pressured by officials in the Treasury Department, has recently sought to introduce stricter federal rules for cryptocurrency reporting and exchanges, ostensibly in a push to enforce tax compliance. Yet the effort to include such rules in the recently passed infrastructure bill failed, opening up a fresh opportunity for either party to win over voters who would be more disposed toward an open, crypto-friendly legal and regulatory environment.
In particular, the Republican Party could seize the initiative at the national level, having already established a crypto-friendly legal framework at the local level. In recent years, Republican lawmakers in Wyoming have introduced legislation that allows banking institutions to legally operate with cryptocurrency, resulting in the relocation of several companies in the industry—Ripple and Kraken—to the western state. For the GOP, this local success could be a microcosm of a nation-wide story.
Indeed, our research finds that significant proportions of Americans, from 25 percent in Arizona to 42 percent in Texas, say they would support their state introducing legislation that provides a legal framework for cryptocurrency and encourages cryptocurrency investors to operate as Wyoming has already done.
Surprisingly, support for emulating Wyoming is highest among registered Democratic voters. It’s an opportunity for the Republican Party to win over new voters—as well as a reason for the Democratic Party to reverse course on the issue.
More problematically for the GOP, the party itself appears divided on the issue. While Ted Cruz notably led the effort to strike out the cryptocurrency provisions in the infrastructure bill, former president Donald Trump has labelled Bitcoin a “scam” and has said he sees cryptocurrencies “as a disaster waiting to happen.”
A significant stumbling block for all policymakers has been the close association of Bitcoin, whose value is prone to speculation and wild fluctuations, with the subject of cryptocurrencies altogether. Strong majorities in all states polled say they had heard of Bitcoin, but few had heard of other cryptocurrencies. Public awareness of stablecoins like the world’s largest, Tether, is currently limited.
This, too, is an opportunity. The more widespread use of stable cryptocurrencies like Tether would ensure that transactions that are currently settled in a local currency may soon effectively be settled in U.S. dollars. But if the U.S. were to turn against dollar-backed stablecoins, this move would likely leave a currency vacuum, one which another player—perhaps China, with its central bank issued digital currency—would be more than happy to fill. Backing U.S.-pegged cryptocurrencies thus becomes a means to contain China’s and others’ influence, an argument likely to appeal to voters across the political spectrum.
Capturing voters who favor a crypto-friendly regulatory framework is a major opportunity for both parties in the U.S. But this advantage is time sensitive. The first party to get there will win a long-term advantage, both political and economic.
Louisa Idel is the Head of Insights at Redfield & Wilton Strategies.
The views in this article are the writer’s own.