Regulation
Crypto industry’s influence on US elections is greater than ever, industry insiders say
The crypto industry is throwing its weight behind Washington in hopes of influencing the upcoming US election, spending an unprecedented amount of money to elect crypto-friendly candidates and educate lawmakers – all in hopes of finally establishing a crypto-friendly regulatory framework.
Crypto-focused political action committees (PACs) like Fairshake – which have raised around $85 million from a collection of crypto companies, executives and retail investors – have managed to shape the outcome of some relevant races, including spending $10 million to help crush the auction by crypto-critical congresswoman Katie Porter (Democrat of California).
Fairshake also invested money in two affiliated PACs: Defend American Jobs, which donates to Republican candidates, and Protect Progress, which donates to Democrats. Both donated to winning campaigns. Over the past two months, Defend American Jobs has spent nearly $500,000 on media buys for Republican Indiana state Sen. Mark Messmer, who won the Republican nomination for Indiana’s 8th District congressional seat this week.
Some of Protect Progress’ pro-crypto Democratic candidates, including Shomari figureswho is running for a seat in the House of Representatives in Alabama and Julie Johnson in Texas, also won their primaries thanks to media buying assistance.
“It’s at a level that we just haven’t seen in previous election cycles,” said Kristin Smith, CEO of crypto lobbying group Blockchain Association.
Industry insiders say the industry’s economic might has even prompted some crypto skeptics — including Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, who is up for re-election this year — to adopt a more open attitude. -stance towards crypto, lest they face well-funded opposition efforts from the industry.
“Previously he was not a friend of crypto, but recently [Brown] said he was open to the idea of considering cryptocurrency legislation,” said Kyle Bligen, director of financial policy at the House of Progress, which specializes in technology. “I think he is aware of money coming from outside industry groups who are looking for politicians who are open to reasonable decisions, “Common sense cryptocurrency policies and are not just trying to prop up or prop up the traditional financial ecosystem without allowing l ‘innovation. “
Although past industry efforts to influence election results on a national level have been largely unsuccessful – and, in the case of former FTX CEO Sam Bankman-Fried, criminal – the crypto industry’s growing political influence now appears to have more staying power.
“It’s a much more sophisticated operation,” Smith said. “I feel like I was walking around Washington and people were like, ‘Oh, there’s Kristin, she works for this little blockchain industry.’ Now we’re like, “Oh wow, this is the powerful crypto industry and they’re here to influence Washington and they’re using every tool to do it.” »
Although the crypto industry has largely focused its lobbying efforts on the congressional elections, the US presidential election will also have a significant impact on crypto regulation.
According to at least one small poll commissioned by crypto investment firm Paradigm, voters holding cryptocurrencies tend to prefer Donald Trump for president – even if, according to other polls, the the percentage of voters owning cryptocurrencies is lowL. Polymarket punters Currently giving Trump a slight edge to win (47% versus 44% for Biden). But industry insiders are less certain about whether a Trump presidency would actually be better for crypto.
Although Trump’s stance on crypto is changing, it remains significantly less pro-crypto than that of his former competitor for the Republican presidential nomination, Vivek Ramaswamy, who promised to protect crypto developers and create a clear regulatory structure for crypto that would treat most tokens as commodities.
“Trump is looking to Vivek on technology and digital asset policy,” said Lee Bratcher, founder and president of the Texas Blockchain Council. “He didn’t always do this, but when he saw how Vivek captured the Republican — and more centrist — voter [voters] that Trump can’t capture – he’s probably more interested in that [policy]”.
Industry insiders were divided on whether a Biden re-election would be bad for the crypto industry.
Smith said it would probably be “more of the same, unless [Securities and Exchange Commission Chair] Gary Gensler decides to step down, meaning continued regulatory uncertainty and aggressive enforcement actions. A better, more open-minded SEC president, she added, would be “extremely helpful.”
“It’s unfortunate because, early in the Biden administration, there was some interest in crypto – then the industry imploded while they were doing all their reports and as a result they are currently in a clearly negative,” Smith said. . “On [Biden’s] Look, the industry has seen some less good times and it’s understandable that regulators are worried.
Smith said that while the crypto industry has largely evolved since the crypto bust of 2022 – including the implosions of FTX, Terra/LUNA and Three Arrows Capital – regulators have a much longer memory.
“Bringing in a new group of regulators would be helpful in restarting conversations,” Smith said.
Others, like Bligen, seemed more optimistic that pro-crypto legislation would pass after the election if Biden remains in office.
“I can’t say that if President Biden is re-elected it will be a loss for cryptocurrency supporters, because currently in this regime Democrats and Republicans are working together on a bipartisan basis to produce a productive and responsible cryptocurrency . [legislation]” said Bligen.
Efforts are underway in the current Congress to pass crypto legislation, including a bipartisan effort to regulate stablecoins.
These legislative efforts – which in the past have failed to find traction – still have significant hurdles to overcome before passage, including getting more members of Congress on board with crypto .
Bligen said there are still many members of Congress who don’t know much about crypto, and what they do know “comes from headlines about cryptocurrency scams, people misrepresenting coins, People are being scammed out of their money, massive cryptocurrencies.” “The institutions are failing – they see the situation through a protectionist lens,” he said.
“If you want more people to be pro-crypto, every office needs to have a basic understanding of what cryptocurrency is, why it is important to my constituents, and what the policy landscape is that regulates it. Everybody has to I know that,” Bligen said. “If you don’t have that basic information, you’re going to have members who are fumbling around, trying to understand what blockchain technology is…there needs to be more concerted education efforts. We’re not just going to get to a more educated public. By 2025, work must be done.”
Bratcher added that in addition to education efforts, the industry may need to compromise on certain issues — like privacy — in order to make real progress with lawmakers.
“We find ourselves at an interesting crossroads when it comes to privacy,” Bratcher said, referring to the ongoing crackdown on bitcoin mixing services like Tornado Cash and Samourai Wallet.
“People in the digital assets industry want to prioritize privacy above all else. When we work with government – state, local and national, and even law enforcement – we don’t have the luxury To be able to make grandiose statements about it, Bratcher added: “There will have to be a balance between privacy and issues related to money laundering and national security.”
“Tornado Cash is not a hill I’m willing to die on,” Bratcher said. “We could lose a war if we choose to die on Tornado Cash Hill.”
Although the spotlight is on the national election, Bratcher and others — like Dennis Porter, CEO and co-founder of the Bitcoin mining advocacy group Satoshi Action Fund — are focusing their efforts on state politics .
Porter’s group helped introduce bills in 16 US states that provide protections for Bitcoin mining and self-custody. The furthest along bill is in Oklahoma, where it has passed both the House and Senate, and is awaiting the signature of Gov. Kevin Stitt (R).
“DC is fun and sexy. Tons of money is being spent there, but so far we haven’t seen any big victories — all the important battles are happening at the state level,” Porter said.
Porter said the industry should continue to build its presence in Washington, D.C., but said it won’t find the magic cure for all its ills on Capitol Hill.
“The way we’re going to do this is at the state level,” Porter said. “We’re going to advocate, state by state, for pro-digital asset policy, using states as laboratories of democracy, ultimately taking these good ideas and using them to influence policy at the federal level. Or at Bare minimum, create a regulatory regime that protects people at the state level.
Porter’s model for crypto regulation takes a leaf out of the cannabis industry’s playbook: it builds momentum and support in states until the industry is powerful enough to shape federal regulations.
“We’re fighting over and over for home runs in Washington, D.C., but we’re not strong enough yet,” Porter said. “I just think we’re further along than we think…The big story for me is we need to spend a lot more time at the state level, invest a lot more money, because the hundreds of millions of dollars spent in DC, if spent at the state level, would radically reshape the political landscape and radically change the dynamics of bitcoin and digital assets in America.”