Crypto arrives in Washington. Will millions buy influence?
Erin Houchin braced herself for the worst when a mysterious group began buying TV ads last month in her fiercely competitive run for Congress in southern Indiana.
Houchin assumed she would face a negative blitz, like the one that crushed her in 2016 when she ran for the same seat. But, in fact, the opposite happened.
American Dream Federal Action, a super PAC funded by a cryptocurrency CEO, saturated the district with ads promoting Houchin as a “Trump Tough” conservative who would “stop socialists in Washington.” That push helped secure his victory last week in a Republican primary.
“All you can do is hold your breath,” Houchin’s longtime consultant Cam Savage said when they learned about ad buying. “It might help you, but the fear is that it will end you.”
The impact of unsolicited aid shows how cryptocurrency tycoons are emerging as powerful new players in American politics. They pour millions of dollars into primary elections as they try to gain influence over members of Congress and other government officials who make regulations.
This year, for the first time, industry executives have spent nearly $20 million so far, according to records and interviews.
It’s a delicate but deliberate march of companies making money in part by avoiding government attention.
More than $100 million has also been spent on lobbying since 2018 by crypto companies, as well as those who could potentially lose out if the industry goes mainstream, according to the records.
The push comes as the Biden administration and Congress consider new regulations and set funding levels for agencies that will oversee crypto.
“What do they want? They don’t want a rule or they want to help write the rule. What’s up?” asked Sen. Sherrod Brown, D-Ohio, an industry critic.
Cryptocurrencies are a digital asset that can be traded on the Internet without relying on the global banking system. They were promoted as a way for those with limited means to build wealth by investing in the next big thing.
But they are also very speculative and often lack transparency, which greatly increases the risk.
Jan Santiago, deputy director of Global Anti-Scam, an organization that helps victims of cryptocurrency fraud, said the industry was reluctant to police bad actors.
“Unless it affects their bottom line or their public reputation, I don’t think there’s a financial incentive for them,” he said.
There are signs that crypto is going mainstream. Fidelity Investments, one of the nation’s largest retirement account providers, announced earlier this month that it would begin allowing investors to put Bitcoin in their 401(k) accounts.
And there are indications that the government is increasing surveillance.
The Securities and Exchange Commission unveiled a plan last week that would nearly double the size of its staff focused on cryptocurrency oversight. Days later, the Justice Department indicted the CEO of a cryptocurrency platform and mining operation, alleging he orchestrated a “$62 million global investment fraud scheme.” of dollars “.
Meanwhile, members of Congress and the administration have raised concerns that Russian oligarchs may turn to cryptocurrency to evade US sanctions put in place when Russia invaded Ukraine. .
But at least one legislator has been actively involved in promoting the allure of crypto riches.
Rep. Madison Cawthorn, a conservative Republican from North Carolina, touted a new crypto coin in a video posted to social media, emphasizing, “This is going to the moon, baby,” while urging viewers to visit the play’s website and “get on the train.” But after an initial spike, its value plunged and is now worth a small fraction of a penny.
Cryptocurrency advocates in Congress acknowledge the problems, but say the roughly $2 trillion industry has matured.
“I believe bitcoin protects consumers,” said Sen. Cynthia Lummis, R-Wyo., who has invested in the currency. “I am not convinced that all cryptocurrencies protect consumers. In fact, I’m willing to bet the majority of them are fraudulent.
Many cryptocurrency proponents have vehemently opposed the regulation. But lobbyists say it’s now a settled debate and their aim is to convince skeptics not to get too heavy handed on regulation.
Perianne Boring, founder of the Chamber of Digital Commerce, advocates for the development of industry accounting standards to help crypto businesses become publicly traded companies.
“Because there are no standards, many companies are reluctant to touch cryptocurrency,” said Boring, whose group has spent $1.9 million lobbying the federal government.
Some lobbyists are hoping a flurry of campaign spending could help, much of which is going to the Democratic primary races.
“Crypto people are, all of a sudden, happy to go to political fundraisers,” said Kristin Smith, executive director of the Blockchain Association. Smith, whose group has spent $4.2 million on lobbying since 2018. She added, “The government could actually step in and really screw it up if we don’t engage constructively.”
This has sparked resentment among some Democrats. In suburban Atlanta, Democratic Representatives Carolyn Bourdeaux and Lucy McBath face off after their districts merged during the redistricting. A crypto-affiliated super PAC is backing McBath, paying over $2 million in TV advertising that praises her.
“They don’t do this out of the goodness of their hearts. They do this because they want something,” Bourdeaux said.
A spokesperson for the Protect Our Future group said the spending had nothing to do with cryptocurrency regulation.
Crypto super PACs are also active in other high-profile races, including Pennsylvania’s Democratic Senate primary, where $212,000 was spent last week on ads supporting John Fetterman, the Democratic lieutenant governor of Pennsylvania. State. The ads say Fetterman will “not be hit on by lobbyists or run by politicians.”
But overall, the spending is on such a scale that it has raised questions about the industry’s motives.
“It tells all Democrats that if you have a primary, they could win $2 million,” said Rep. Brad Sherman, D-California, chairman of the House Subcommittee on Investor Protection, l entrepreneurship and capital markets. “They certainly make a point.