What Kamala Harris should do about crypto

As the Financial Times reported a few days ago, Kamala Harris has been trying to “reset” with crypto companies and their disciples, many of whom had defected (or never left) the Republican party. Joe Biden, and more particularly Janet Yellen, the Treasury secretary, and Gary Gensler, the SEC chair, have been super critical of crypto as basically one big speculative scam, while Donald Trump has in recent months changed tack and begun courting the crypto dudes for support (fellow Swamp correspondent Edward Luce has written a bit on that here.)

I would, of course, agree with the Democrats here, and wrote back in 2022 about how the meltdown of FTX exposed all the risks of crypto that were hiding in plain sight.

Sources close to the campaign tell me that for Harris, this is all about fundraising. And that’s fair enough — she needs to gather all the money and support she can during this multi-week honeymoon period. But I continue to think that Harris needs to walk a very careful line with Silicon Valley, given her close ties to tech (including a brother-in-law, former US attorney Tony West, who was chief counsel at Uber and is now a close adviser on the campaign).

I was struck by a post on X that Sara Nelson, president of the Association of Flight Attendants-CWA union, which represents service workers at 19 airlines, sent out last week, which shared an excellent article on crypto by Hamilton Nolan. As he put it, “there is zero reason for the US government to promote crypto and any politician who tells you different is either trying to trick you or rip you off”. Nelson responded, “Can we read this en masse as a society and move on, please? We do have real issues to handle. This crap is beyond weird.”

Couldn’t agree more, and like the use of the word “weird”, which is, of course, becoming a very effective handle for Democrats referring to Trump and JD Vance, his vice-presidential pick. What’s interesting to me here is that Nelson represents the very stakeholders that Harris is well poised to serve, should she win the election. She’s an important union leader, in the service sector (Harris is particularly interested in pushing forward the part of the Bidenomics plan around services and the care economy that didn’t get done in the last four years). So her voice matters a lot here.

She’s also hinting at something really important, which is that crypto is, in some ways, a weird response to neoliberal betrayal by elites on both sides of the aisle. Private crypto has no intrinsic value, but many of the people that buy into it see it as a hedge against a world in which central banks will eventually devalue fiat currency by bailing out banks or large businesses with endless amounts of easy money. That’s kind of how we got out of the financial crisis, right? It’s always been interesting to me that younger investors, and investors from minority ethnic backgrounds, are disproportionately interested in crypto. To me, this says something about their lack of belief in the system.

Of course, the people behind crypto seem to include a fair number of scam artists and money launderers. If I were Harris, I’d distance myself from them and let Trump hold that exploding bag of BS (Harris has enough money behind her at this point that I don’t think she needs that shady branch of Silicon Valley). I’d also think about how to put forward a positive vision for a digital future — there are some green shoots there, which you can read more about in this American Banker article.

As a senator, Harris pushed to increase the budget of the nascent US Digital Service, which handles things like the implementation of any dollar- backed digital currency (very different than private crypto, and a good idea — witness how China has used the digital renminbi to reduce frictions in money flow). I’d love to see Harris push forward my good friend and Cornell professor Bob Hockett’s ideas about using digital dollars to do, say, highly targeted quantitative easing, or reduce tax evasion.

I’ll be writing more on this topic in a future column. In the meantime, enjoy the reading list and I’ll be back with Peter next week after his holiday.

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