Crypto is coming to Washington. Will millions of people live in influence?


WASHINGTON — Erin Houchin prepared for the worst last month when a mysterious and well-funded group began buying television ads in the highly contested Indiana House of Representatives election in southern Indiana.

Houchin thought she would face the same negative offensive that overtook her when she ran for the same seat in 2016. But in reality the opposite happened.

American Dream Federal Action, a super-PAC funded by a cryptocurrency CEO, has flooded the area with advertisements promoting Houchin as a “Trump Tough” conservative who “will stop socialists in Washington.” Her momentum helped her win last week’s Republican primary.

Houchin’s longtime consultant Cam Savage said when she learned about buying ads, “All you can do is hold your breath. It might help you, but the fear that it will end you.” He added that Houchin did not ask for support and had nothing to do with the industry other than filling out a candidate survey for the cryptocurrency group.

The impact of unwanted help shows how the cryptocurrency giant is emerging as a new powerhouse in American politics. They are pouring millions of dollars into primary elections to influence Congressmen, Republicans and Democrats who will make laws governing their industries and other government officials who make regulations.

Records and interviews show that for the first time this year, industry executives have poured money into federal primaries, spending $20 million so far.

It is essentially a delicate but deliberate march of corporations that make money by avoiding government attention.

Records show that in addition to campaign spend, crypto companies and those who would lose money if the crypto industry went mainstream have spent more than $100 million on lobbying around the issue since 2018.

They followed the paved road and retained former senior officials such as Max Baucus, a former Democratic senator from Montana who chaired the Treasury Board.

This push comes as the Biden administration and Congress not only consider the new rules, but also set funding levels for the agencies that will oversee them.

Treasury Secretary Janet Yellen said this week that financial regulators will soon release a report on the risks of cryptocurrencies and other digital assets.

“There are definitely a lot of risks associated with cryptocurrencies,” she said at a financial stability hearing on Tuesday.

Officials are considering what consumer protection and financial reporting requirements should be implemented and how to use the anonymity that cryptocurrencies offer to thwart criminals who evade taxes, launder money, and commit fraud.

“What do they want? They don’t want a regulation or they want to help write a regulation. What else is new?” Industry critic D-Ohio’s Senator Sherrod Brown said:

Cryptocurrency is a digital asset that can be traded over the Internet without relying on a global banking system. They were promoted as a way for people with limited means to accumulate wealth by investing in the next generation. But they are also very speculative and often lack transparency, which significantly increases risk.

Jan Santiago, deputy director of Global Anti-Scam, an organization that supports victims of cryptocurrency scams, said the industry has been reluctant to arrest malicious actors.

“I don’t think they have any financial incentives unless it affects their bottom line or public reputation,” he said.

There are signs that encryption is becoming mainstream. Fidelity Investments, one of the largest retirement account providers in the United States, announced earlier this month that it will allow investors to put bitcoin into 401(k) accounts.

At the same time, government surveillance is intensifying.

The Securities and Exchange Commission (SEC) last week announced plans to nearly double the size of its staff focused on overseeing cryptocurrencies. A few days later, the Justice Department indicted the CEO of the cryptocurrency platform. He claimed to have organized a “$62 million global investment fraud scheme,” one of dozens of civil and criminal crypto cases brought by federal authorities. Prosecutors said he promised generous returns but stole investors’ money.

Meanwhile, members of Congress and the administration raised concerns that Russian oligarchs could switch to cryptocurrencies to evade US sanctions imposed when Russia invaded Ukraine.

However, at least one legislator has been actively involved in promoting the allure of cryptocurrencies.

RN.C. Congressman Madison Cawthorn touts a new cryptocurrency called “Let’s Go Brandon.” The phrase became a conservative abbreviation for the vulgar insult of Joe Biden. In a video posted on her Twitter, Cawthorn appeared next to the cryptocurrency’s founder, emphasizing that “this will go to the moon, honey,” she urges viewers to visit the coin’s website and “get on the train” .

As the Washington Examiner first reported, the value has plummeted after the initial surge and is now worth a very small fraction.

Crypto advocates in Congress acknowledge the problem, but argue that the roughly $2 trillion industry has matured.

R-Wyo invested between $152 and $350,000. Senator Cynthia Lummis said, “I am convinced that Bitcoin protects consumers. You cannot be certain that all cryptocurrencies protect consumers. In fact, I am convinced that the vast majority of them are scammers.”

Others believe that concerns about cryptocurrency scams are overblown.

Ashley Ebersole, a former SEC attorney, said, “It can be an easy conclusion to say that people say there is too much fraud in the field. “It makes headlines, but I don’t know if it’s a bigger proportion.”

In Washington, Democrats were far more hawkish than Republicans. “They call me ‘Hello’ so I don’t have to lobby,” said Republican Lummis. “Democrats are another story.”

Many crypto proponents have long been against regulation. But lobbyists say the debate is now resolved and the current goal is to convince skeptics not to regulate too aggressively.

Perianne Boring, founder of the Chamber of Digital Commerce, has been lobbying lawmakers and federal agencies since 2017 to develop accounting standards for cryptocurrencies and other digital assets, and to help crypto companies become publicly traded companies. help make this happen.

“Many companies are hesitant to get their hands on cryptocurrencies because of the lack of standards.

Some lobbyists are hoping that a wave of campaign spend could help.

Kristin Smith, Director of the Blockchain Association, said, “People in the cryptocurrency world are excited to suddenly join the political fundraising event. Smith of the group, who has spent $4.2 million on lobbying since 2018. “If we don’t get involved constructively, the government can actually step in and mess things up,” she added.

So the industry is pushing certain candidates hard, and resentment is fueling among some Democrats. In a suburb of Atlanta, two US Congressmen, Carolyn Bourdeaux and Lucy McBath, are split after annexing their districts in a redistricting process.

A super PAC called Protect Our Future, funded by Sam Bankman-Fried, the 30-year-old billionaire founder of cryptocurrency exchange FTX, has spent at least $2.7 million on advertising in support of McBath, highlighting McBath’s support for Democratic policy priorities. He didn’t say anything. About cryptocurrency.

“They are not doing this with good intentions. They do this because they want something. And that’s to avoid regulation,” said Bourdeaux.

FTX and McBath’s campaigns did not respond to requests for comment. Protect Our Future, which plans to spend at least $10 million on an interim campaign, says the spending is not related to cryptocurrency regulation.

Group Chairman Michael Sadowsky said in a statement: “There are many factors that influence our advocacy, including our voting records, our policy platforms, our viability as candidates, our public service and our professional experience.”

The crypto super PAC has been active in other major competitions, including the Democratic Senate primaries in Pennsylvania, where a separate crypto group linked to Bankman-Fried spent $212,000 on an ad supporting John Fetterman, the Democratic Lieutenant Governor of the state running for the Senate last week. are doing The ad states that Fetterman “will not be fooled by lobbyists or swayed by politicians.”

But overall, the spending was so high that it questioned the industry’s motives.

“I tell every Democrat you can win two million dollars in the primary. Crypto critic Brad Sherman, chairman of the House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets (D-Calif. If you have a well-paid lobbyist and a large PAC, you need some sort of argument.”

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