Will U.S. Election Change Crypto? Maybe, but TradFi Giants Likely to Plow Ahead Regardless

Just this week, in the run-up to Election Day, some big finance projects were announced — suggesting no worries about the road ahead.

As the U.S. presidential election nears its conclusion, crypto traders are speculating on how the outcome will impact digital asset prices, at least in the short term. Many believe that a Donald Trump victory would be positive for crypto prices, while a win by Kamala Harris would be negative.

However, large financial institutions appear to be looking past the short-term market action and viewing the election as a temporary catalyst that won't derail the adoption of crypto and blockchain technology over the long haul.

“Adoption of digital assets at the institutional level will very much continue globally no matter who wins the election," said Phillip Shoemaker, executive director of Identity.com, a non-profit organization providing decentralized identity verification.

Several positive developments on that front have emerged this week amid the cacophony leading up to Tuesday's election. Swift – the TradFi interbank messaging system – partnered with UBS and Chainlink to test allowing digital asset transactions to settle with fiat payment systems across more than 11,500 financial institutions in over 200 countries and territories.

Meanwhile, Citigroup and Fidelity International developed a proof-of-concept for an on-chain money-market fund that includes a digital foreign exchange swap.

That's just this week, building on many other similar stories throughout the year. The point is: Firms such as Swift and Citigroup would be unlikely to announce such things if they feared this week's elections were likely to kill these initiatives.

That said, there is a catch. The question isn't whether the election result will stop the adoption; it's whether it will affect timing.

"It’s pretty clear to me that the outcome of the election will have a significant impact on the pace of such adoption," said Shoemaker. "If Trump were to win, I think we’d see a flurry of new ETFs in the United States for a wider variety of digital assets. We’d also see an acceleration in the use of stablecoins for payments, along with more and more corporations incorporating digital assets in one way or another into their strategies," he said.

Echoing his sentiment, Markus Levin, co-founder of XYO Network, the world’s first blockchain geospatial oracle network, said: "If pro-crypto candidates win out in these elections, then we would see not only broader institutional adoption in the United States but also international organizations like the IMF and World Bank really warming up to crypto in a way that we just haven’t seen yet."

On the other hand, a Harris win may slow down the pace of adoption due to a more restrictive regulatory regime. (The Biden administration that she's served in since 2021 has tended to be highly restrictive on crypto.) "If Harris were to win, I still think institutional adoption would happen. But it would happen more gradually," said Levin, pointing out that the Democrats are slowly coming around to crypto, including Harris herself, which means "it will just take more time for growing this Democratic support for the industry to have a material impact on the broader crypto market.”

Both points resonate. It wasn't long ago that the crypto industry was drowning in not only an unrelenting crypto winter but also intense regulatory crackdowns. In the wake of FTX's spectacular implosion, many wondered whether something dubbed "Operation Choke Point 2.0" — an alleged coordinated effort by the Biden administration to cut the cryptocurrency industry off from the U.S. banking sector — was in action. Many industry players took their businesses out of the U.S. and set up shop overseas.

It wasn't until recently—albeit after Trump's endorsement of the industry this year—that this sentiment started to shift slightly among the Democrats, leading to a softer stance on the sector. However, Gensler will continue to remain a question mark for the Democrats, given his tough stance on crypto, despite the call for his replacement by even Democratic crypto voters.

Also, large institutions crave regulatory clarity. So if Harris wins, the uncertainty around how she really feels about crypto might make them a bit cautious about their exposure to the industry. "The current market data suggests that institutional investors are particularly sensitive to regulatory clarity, and a Harris administration would need to change their historical stance to provide the predictability they seek," said Brian Dixon, CEO of Off the Chain Capital.

"Institutional adoption under Harris could follow a more conventional path, with an emphasis on compliance and integration with existing financial infrastructure," he added, noting that a Trump win, on the other hand, will "catalyze" more dramatic market moves.

With election results coming in the hours or days ahead, it's easy to get bogged down in the short-term debate around how the outcomes will change the crypto landscape. However, zooming out, it's worth noting that despite many turbulent market conditions and regulatory roller coasters, the digital assets industry has continued to advance and gained not just more crypto supporters but the attention of giant traditional institutions.

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