Trump (and Texas) try to decode the crypto voter

How the next wave of technology is upending the global economy and its power structures

Jun 20, 2024 View in browser   By Christine Mui With help from Derek Robertson The Nasdaq MarketSite in New York’s Times Square displaying the Coinbase logo. | Richard Drew/AP Photo A Texas spat over energy for cryptocurrency has split the state’s Republicans, and their disagreement highlights how the technology is scrambling U.S. politics — even as it draws in waterfalls of cash and a bear hug by former President Donald Trump. Trump recently has been overtly courting the crypto industry. Hours after meeting with executives of leading bitcoin mining firms, Trump declared on his Truth Social platform last week, “Biden’s hatred of Bitcoin only helps China, Russia, and the Radical Communist Left,” and: “We want all the remaining Bitcoin to be MADE IN THE USA!!! It will help us be ENERGY DOMINANT.” It’s a flip for a politician who once hated bitcoin, deriding it as “based on thin air,” but fits in with Trump’s broader play for the rightward-drifting Silicon Valley donor class. Other candidates with a populist bent appear to be chasing the same constituency: a quintessential Robert F. Kennedy, Jr. campaign position is putting the entire U.S. budget on the blockchain. But when it comes to Republicans overall, it’s not obvious that crypto is likely to win the day, especially at the state level. In Texas, the Republican-controlled Senate is digging in against the technology. The argument there touched off after the state’s grid operator testified last week that energy needs would balloon within the coming years and nearly double to a peak of 150,000 megawatts due in large part to crypto miners and data centers. That led the state’s Republican lieutenant governor, Dan Patrick to call the technologies “very niche,” saying, “We need to take a close look at those two industries. They produce very few jobs compared to the incredible demands they place on our grid.” This was a departure from the welcome Texas Republicans initially offered the crypto sector, whose miners flocked to the state in search of abundant energy and lax regulations. Patrick’s skepticism follows a pattern of lawmakers from both parties in states where most U.S. crypto mining is clustered — New York, Georgia, and now Texas — souring on the sector for its growing energy demands. So, who’s risking more, the crypto-courters or its new opponents? That depends on how much power its supporters will wield in the upcoming election. There’s an argument among proponents that the industry has amassed a sizable constituency: a poll commissioned by the exchange Coinbase that found one in five Americans own digital currencies. Another industry-commissioned poll shows a quarter of voters indicating they actively weigh candidates’ positions on digital assets before making a voting decision. Scott Johnsson, a Van Buren Capital partner and expert in digital asset legal issues, said that the figures at the highest end are “completely unreasonable” and overstate the number of voters who consider crypto a primary issue. But he still believes “there’s a material constituency here that feels quite aggrieved,” pointing instead to the success of a new group, Stand with Crypto PAC, in reaching a membership of 1 million Americans this month. That figure, he said, can be thought of as a floor for how many voters really care about crypto. He argues it’s on track to reach around 3 percent in many states. In a closely divided electorate, that’s not irrelevant. “It’s a surprisingly large number,” said Johnsson. “In terms of how effective this grassroots movement is, and how motivated this particular group will be to vote a specific way, it might just be signups and maybe there’s not a huge effect, but we'll end up having the first experiment on that this coming election.” Even if Trump is just mining the margins for votes, Texas Christian University political scientist Grant Ferguson, who has researched the demographics of crypto buyers, said the strategy could still be worthwhile. He described the typical profile of an American crypto owner based on his own survey results: “It’s a young Latin [American] or Black guy. He probably is a little more risk-friendly than average. He’s less religious. He’s not particularly real liberal, real conservative, and he’s maybe ideologically somewhere in the middle. He’s concerned about government spending and inflation.” That, Ferguson said, sounds like the demographic candidates from all parties are looking for: the swing voter.   THE GOLD STANDARD OF DEFENSE POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries, like defense, equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists. Our newsroom is deeper, more experienced, and better sourced than any other. Our defense reporting team—including Lara Seligman, Joe Gould, Paul McCleary, Connor O’Brien and Lee Hudson—is embedded with the market-moving legislative committees and agencies in Washington and across states, delivering unparalleled coverage of defense policy and the defense industry. We bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY.     banned in new york New York Gov. Kathy Hochul. | Susan Watts/Office of Governor Kathy Hochul The war for the future of kids on the internet heated up again today, as New York’s Democratic Gov. Kathy Hochul signed a bill into law making New York the first state to ban algorithmic social media for children. POLITICO’s Rebecca Kern and Ruth Reader reported for Pro subscribers on the novel approach, which doesn’t ban kids from social media entirely like the law signed in March by Florida Gov. Ron DeSantis (R), but requires social media platforms to deactivate algorithmic recommendation systems for users under 18 unless parents consent. California is currently considering a similar bill, as its Gov. Gavin Newsom (D) announced on Tuesday a crackdown on smartphones in school. New York is likely looking at a legal showdown, however. Tech groups say algorithms are a form of speech, and therefore the law violates their First Amendment rights. Rebecca and Ruth write that a formal legal challenge is likely, after a judge blocked a law in California that required companies to build social media platforms with children’s safety in mind. germany's 'lord of the drones' A German drone entrepreneur is trying to sell Ukraine, and Europe at large, on embracing autonomous weapons. POLITICO’s Gian Volpicelli reported for Pro subscribers on the push by Florian Seibel, chief executive of the Munich-based Quantum Systems. His company builds recon drones now in use by Ukraine, and he’s started a new company that will focus on autonomous attack drones. Seibel says their mission is to “disrupt the defense industry.” Seibel is focused on changing norms around the “human-in-the-loop” model that requires humans to make decisions to use lethal force. If humans “cannot communicate back,” he told Gian, “drones will have to make the next step in evolution: Identifying targets for themselves, classifying them as friends or foes, and in case of adversity — hit them.” War watchdogs are, unsurprisingly, alarmed by this. While Seibel says his tools can reduce collateral damage compared to human operators, critics like Anna Hehir of the Future of Life Institute say that the more precise the machines are, the more they need to be reined in: “There was a period in history when major military powers thought they needed biological weapons to counter their adversaries’ own biological weapons programs,” she told Gian. “We need to maintain rational foresight when evaluating new technologies.” Tweet of the Day The Future in 5 links Nvidia has surpassed Microsoft as the most valuable public company. China is a missing piece in Apple’s AI strategy. The FAA authorized software for one company’s planned air taxi service. OpenAI’s recently-resigned chief scientist launched a new “safe” AI company. Laura Kipnis takes you inside a mysterious firm providing “AI reading companions.” Stay in touch with the whole team: Derek Robertson (drobertson@politico.com); Mohar Chatterjee (mchatterjee@politico.com); Steve Heuser (sheuser@politico.com); Nate Robson (nrobson@politico.com); Daniella Cheslow (dcheslow@politico.com); and Christine Mui (cmui@politico.com). If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.   JOIN US ON 6/26 FOR A TALK ON AMERICA’S SUPPLY CHAIN: From the energy grid to defense factories, America’s critical sites and services are a national priority. Keeping them up and running means staying ahead of the threat and protecting the supply chains that feed into them. POLITICO will convene U.S. leaders from agencies, Congress and the industry on June 26 to discuss the latest challenges and solutions for protecting the supply lines into America’s critical infrastructure. 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