Democratic Party Crisis in the Era of Trump
After being twice rejected by American voters in favor of Donald Trump, the Democratic party is grappling with a profound identity crisis, the most severe it has seen in the last forty years. One of the most notable attempts at regaining relevance in Trump’s America is the party’s newfound interest in cryptocurrency—an industry that fundamentally relies on bypassing the financial regulatory framework that Democrats have built over the past century. This is exemplified by Democratic representative Ritchie Torres, who represents the impoverished South Bronx, collaborating with Republican Tom Emmer to promote cryptocurrency as part of their newly formed congressional Crypto Caucus.
Republican Solidarity and Democratic Inroads
Historically, congressional Republicans have been unified in their support for cryptocurrency, with just three members opposing a bill aimed at relaxing digital token regulations in May 2024. However, since 2016, the cryptocurrency industry has steadily made gains within the Democratic party. If this trend continues, it may signify a retreat to pre-New Deal financial politics, which the party has long rejected.
Historical Context on Financial Politics
The intersection of money politics and financial risk has been a cornerstone for political coalitions throughout U.S. history. The Democrats haven’t aligned with deflationary “hard money” since the 1896 election. Historians Anton Jäger and Noam Maggor highlight how the merger of the Populist and Democratic parties turned the latter into a means for directing investment towards economically deprived areas of the nation.
From Hard Money to Financial Regulation
Although the party, especially under Franklin D. Roosevelt, abandoned the gold standard in 1933 and developed consumer protection measures, this established a new framework for financial governance. Regulations included separating commercial and investment banking through the Banking Act of 1933 and imposing stringent disclosure requirements, which aimed to protect the public from speculative financial excesses.
Contemporary Struggles with Cryptocurrency
Pro-cryptocurrency Democrats, including Torres, believe that blockchain could benefit low-income communities by alleviating high banking fees. However, the essence of cryptocurrency itself challenges the tools for economic management that the Democratic party has historically endorsed. Cryptocurrency exchanges do not provide deposit protection like the FDIC, and the decentralized nature of digital tokens undermines the regulatory protections established by the SEC.
Cryptocurrency’s Financial Landscape
The cryptocurrency industry’s political contributions are substantial; nearly half of all corporate campaign funds for 2024 came from this sector, yet major crypto PACs favor Republican candidates. Trump’s comprehensive plan for cryptocurrency includes significant state support, positioning the cryptocurrency landscape firmly within the Republican domain and leaving Democrats scrambling to catch up.
Democrats’ Dilemma in the Crypto Sphere
If the Democrats wish to compete effectively against Republicans for cryptocurrency investments, they will need to go beyond merely advocating for deregulation; they must engage in reshaping the financial landscape, a move that contradicts the party’s long-held principles. This could represent a significant compromise for the party, one that could contradict its commitment to the American working class.
