7 Things To Know About The Crypto Lobby Becoming The New Swamp Bag For US Politicians

7 Things To Know About The Crypto Lobby Becoming The New Swamp Bag For US Politicians

crypto lobby

Image: The Moguldom Nation / Nubai Ventures

The crypto lobby has taken off “on a rocketship” in the U.S. as regulators grapple with how to protect consumers from fraud, how to tax crypto assets and how to stop crypto from being used to launder money.

Most crypto firms didn’t take much notice of regulators until recently but the pressure has increased, The Economist reported. The crypto industry is hiring lobbyists and recruiting government officials and compliance experts from banks with the promise of big paychecks.

Gary Gensler, who leads the U.S. Securities and Exchange Commission and taught a course on blockchain at MIT, has promised tougher policing of the crypto sphere, which he likens to the “Wild West”. 

“(T)he new crypto money further perverts the American swamp political system,” tweeted The Moguldom Nation CEO Jamarlin Martin. “As the American politicians BEND to the crypto lobby and put up ‘for sale’ signs, they become the new ZUCKERBERG.”

Here are seven things to know about the crypto lobby becoming the new swamp bag for US politicians

1. Big tech made big donations to Biden leading up to the 2020 election

Sam Bankman-Fried, the CEO of cryptocurrency derivatives exchange FTX, made the second-largest donation to Joe Biden’s presidential campaign. Bankman-Fried joined the wealthiest Democratic super PAC, Future Forward, which in 2020 included in its membership former Google CEO Eric Schmidt and Facebook co-founder Dustin Moskovitz. The fund also included Patty Quillin, wife of Netflix co-founder Reed Hastings, and Kathryn Murdoch, daughter-in-law of media mogul Rupert Murdoch.

Why did Bankman-Fried do so much for Biden? “Well, because he said he crunched the numbers on how much impact each dollar would have if he donated it,” Theodore Schleifer reported for Vox.

In a Vox interview, Bankman-Fried suggested he could be useful to Biden. “The place I could be most useful to him is — I don’t think Biden’s ever going to put much thought into it — but if [the administration] is ever looking for like an expert on crypto regulation …”

2. Politicians are buying crypto

Seven lawmakers disclosed crypto transactions in 2021 by themselves or family members, according to an analysis from 2iQ Research’s Capitol Trades. The crypto traders tended to be Republicans, with just one Democrat among the seven disclosing crypto trades. Their transactions come as the crypto sector increasingly draws scrutiny in Washington, D.C.

Texas Republican Sen. Ted Cruz was one of them. He has aligned himself with Bitcoin in recent months as Texas emerged as a Bitcoin mining hub. Cruz bought $15,001 to $50,000 worth of Bitcoin during the January 2022 dip, according to a new financial disclosure with the U.S. Senate. Bitcoin dipped as low as $33,000.

Cruz spoke out in August against provisions in the bipartisan Senate bill that would have included new tax rules for crypto-brokers and trading firms. In November, Cruz proposed a resolution that would allow food vendors and other merchants serving Congress to accept cryptocurrency as payment.

GOP Rep. Mark Green of Tennessee and GOP Sen. Cynthia Lummis of Wyoming also traded in crypto in 2021.

In a Nov. 9 tweet, writer and speaker Dave Troy tied Bitcoin to far-right U.S. politics, describing Bitcoin advocacy as a “sequel to the January 6th attack” on the U.S. Capitol building in Washington, D.C.

Politicians buying crypto could influence donations from lobbyists and tilt their regulatory hand.

3. Former U.S. officials have flocked to the cryptoverse

Brian Quintenz, who worked for the U.S government and ran the technology committee of the U.S. derivatives-markets regulator Commodities Futures Trading Commission (CFTC), joined venture-capital firm Andreessen Horowitz in September 2021 as an adviser. Also known as a16z, the Silicon Valley VC firm invests in crypto startups.

“I developed a reputation as being…an advocate of innovation,” Quintenz said, according to The Economist.

Other U.S. government officials who joined the cryptoverse include Jay Clayton, previous head of the Securities and Exchange Commission; Brian Brooks, former acting Comptroller of the Currency; and Chris Giancarlo, head of the Commodities Futures Trading Commission between 2017 and 2019. 

“All of a sudden”, said Loni Mahanta of the Washington, D.C. think tank Brookings Institution, lobbying “is on a rocket ship.”

4. Regulations have long been seen as imminent

Government agencies are looking for a piece of crypto oversight amid the wild swings in prices. These include the SEC, CFTC, Internal Revenue Service (IRS), Financial Crimes Enforcement Network (FinCEN) and Congress.

One set of regulations overseen by lawmakers concerns taxes paid on crypto investments. When President Joe Biden’s infrastructure bill included a clause that required many crypto firms to report transactions, the industry began to fight back.

A second set of regulations involves financial regulation — protecting consumers from fraud, reducing systemic risk and ensuring fair competition.

A third set of regulations involves stopping crypto assets from being used for money laundering. In October 2021, the Financial Action Task Force, an intergovernmental body that sets global standards, recommended new rules for crypto-services providers including those regarding the user data they must collect.

Crypto stakeholders have scrambled to respond to threats by pouring more money into Washington, but the effort has been “late and haphazard.”

Some of the most powerful U.S. financial technology companies in April 2021 launched a new trade association — the Crypto Council for Innovation — to be the industry’s voice in Washington, D.C. They said they planned to “demonstrate the transformational promise of crypto” by funding research and lobbying decision-makers. “Wherever you are, our doors are open,” the group tweeted.

It took almost a year before the group finally announced on Jan. 31, 2022 that Former World Economic Forum executive Sheila Warren would be its CEO.

“This has been a woefully underfunded effort for the last several years,” said Kristin Smith, executive director of the Blockchain Association, one of a handful of existing crypto trade groups. And as the ranks of the sector’s lobbyists swell, she said, “it’s going to be a challenge making sure we get all these people up to speed. There’s not a deep bench of people in Washington who understand the ins and outs of crypto.”

A veteran lobbyist said anonymously that crypto industry DNA doesn’t jive well with centralized organizational structures. “Building a hierarchy to negotiate with government is antithetical to why most of these guys got into this in the first place.”

5. Crypto firms and the revolving door

Crypto firms are luring government officials and compliance experts from banks with big salaries and compensation packets that include stock options, The Economist reported. Senior risk managers are typically promised a salary range of $600,000 to $2 million, according to Deepali Vyas of headhunting firm Korn Ferry. Former high-ranking regulators can be offered share options worth tens of millions of dollars. The ex-head of an American regulator, now at a crypto group, says he spends a lot of time meeting lawmakers and civil servants.

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?

6. Some big firms are trying to preempt regulations by suggesting the fox can guard the henhouse

Andreessen Horowitz is pushing for self-regulation. Coinbase wants a new industry watchdog. Some firms are aligning in crypto trade associations such as the Chamber of Digital Commerce, a U.S. group of mostly crypto firms headed by Perianne Boring. “We’re seeing much higher-level officials engaging with us,” said Boring, whose work ranges from advocating for Bitcoin exchange-traded funds to rebutting arguments linking cryptocurrencies to ransomware.

7. Crypto executives are thinking about campaign contributions ahead of midterms

Some crypto executives say they’re ramping up political donations to elect candidates they think are most likely to support pro-crypto policies.

Jesse Powell, the CEO of the No. 4 crypto exchange Kraken, asked his Twitter followers for ideas for campaign contributions and put together a list of 15 candidates to give the maximum allowable donation. Powell said he gave money to the campaign committees of Republicans, including Ohio Senate candidate Josh Mandel, and Democrats including California Congressman Ro Khanna.

About a third of contributions to GOP Wyoming Sen. Lummis’s campaign committee in the first three quarters of 2021 came from crypto executives or investors. She faces re-election in 2026 and says she’s planning to introduce legislation in 2022 that allows crypto firms to self-regulate.