When the U.S. Securities and Exchange Commission (SEC) indicated earlier this week that it was suddenly open to the prospect of approving spot Ethereum ETFs, after months of stubborn signals to the contrary, the about-face didn’t just catch Crypto Twitter by surprise.

It also shocked the nation’s top crypto lobbyists, who spend their days tracing minuscule shifts in Washington’s mood on the industry. 

“It is a remarkable pivot,” Kristin Smith, CEO of the Blockchain Association, a prominent crypto lobbying group, told Decrypt. “It is one that I did not foresee.”

How did the pivot come to pass? And after years of relentless hostility against the crypto industry, might the development indicate that the SEC, and the U.S. government more broadly, are changing their tune on crypto?

“I think we've absolutely turned a corner,” Smith said. “It marks a complete shift in understanding about the political importance of crypto.”

Crypto industry lobbyists who spoke with Decrypt attribute the SEC’s sudden tack to a recent change of political winds in the nation’s capital. Most agree the series of events that prompted the change kicked off last week, when President Joe Biden issued a forceful threat to veto a pro-crypto bill. 

The bill, which sought to repeal an SEC rule dubbed SAB 121—which discourages American banks from holding crypto—later passed in the Senate with a surprising amount of support from Biden’s own party. Twelve Democrats supported the bill, including Chuck Schumer, the Senate Majority Leader. 

That degree of Democratic support was not anticipated on Capitol Hill. And it undoubtedly sent a message to the White House, the Blockchain Association’s Smith believes. 

“To have that many [Democrats] break away from the Biden Administration after it already put out a veto threat on it,” she said, “that is significant.”

Exacerbating matters is the fact that, in recent weeks, Republicans including former president Donald Trump have begun embracing crypto more explicitly than ever before—creating the impression among crypto industry leaders that only one political party is on their side.

Cody Carbone, Chief Policy Officer at the Chamber of Digital Commerce, another crypto lobbying group, believes the pressure recently applied by Republicans on crypto, in tandem with the open dissent Biden is now facing on the subject from leaders within his own party, led the president to make a calculated decision to back off crypto—at least for now. 

“The Administration is seeing, in a very tight election that can be swung by a few million votes, that this is not the hill to die on,” Carbone told Decrypt. 

That evolution in Biden’s thinking could already be seen Wednesday, when the president issued a statement regarding another crypto-related bill up for a vote this week—FIT21—which seeks to create a federal framework for regulating crypto. While Biden objected to the bill’s passage, he crucially did not threaten to veto it, as he did last week with the repeal of SAB 121. 

On Wednesday afternoon, FIT21 easily passed a vote in the House, 279-136, with support from 71 Democrats including former Speaker of the House Nancy Pelosi.

Ji Kim, chief legal and policy officer at lobbying group Crypto Council for Innovation, sees the events of the last week as proof that crypto has now—albeit suddenly— graduated into a topic of consensus within U.S. politics. 

“What this all means is that crypto is absolutely a bipartisan issue," he said, "and that members of Congress are further realizing crypto is absolutely here to stay."

For the same reasons the White House is now tacking on crypto to save face, the SEC is too, crypto lobbyists say—especially given that the unexpectedly popular, bipartisan repeal of SAB 121 singled out the policies of SEC Chair Gary Gensler. 

Rubber-stamping spot Ethereum ETFs—which would allow Wall Street firms to buy and store ETH on behalf of their clients—might prove the most visible way for Gensler to take some heat off his back, the Blockchain Association’s Kristin Smith estimates. 

“I think this is his sort of peace offering, to show that he is open to this space, and he realizes now that the political winds are against him,” she said. 

But crypto lobbyists disagree on what the move would mean for the SEC’s long-term crypto policy moving forward. 

Smith is optimistic the change of heart would mark a major shift in how Gensler and the SEC might police crypto from now on.   

“I think he's going to have no choice but to back down,” she said of the SEC Chair. “That doesn't mean he goes back and undoes all the actions that he's initiated—but he's going to have to think twice before doing something aggressive against the crypto industry.”

The Chamber of Digital Commerce’s Cody Carbone, however, has a less cheery outlook. He figures spot Ethereum ETF approvals would represent nothing more than a cold and calculated political maneuver on Gensler’s part. A meaningful change in the SEC’s outlook on crypto? Far from it.

“I don't think you're going to see him dropping any of these cases or stop fighting,” Carbone said of Gensler. “I just don't think you'll see any more headlines. Most of his decisions are driven by PR.”

Edited by Andrew Hayward