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Newsletter | June 20, 2024

Déjà Vu All Over Again: Cryptocurrency Edition

Campaign FinanceCryptocurrencyFinancial Regulation
Déjà Vu All Over Again: Cryptocurrency Edition

Stop me if you’ve heard this before. It’s the summer ahead of a big national election and the crypto industry—despite displaying glaring signs of its own (self-) destructive tendencies—is making its political presence felt. Tech executives make frequent trips to Washington, promising innovation in exchange for light-touch regulation; they can rely on their purchased allies in public office to offer the same hollow promises. Likewise a media ecosystem seemingly committed to taking hype at face value further amplifies industry talking points, lending the grift additional legitimacy in the eyes of the public. Crypto is also shelling out millions of dollars to tip the scales of upcoming state elections in its favor. 

Indeed, just this week we learned that crypto SuperPAC Fairshake had reached to $169 million raised this cycle. That is nearly as much as the entire insurance industries AND oil and gas contributed in the full 2020 cycle.

In response to this tidal wave of actual “fiat” money, previously ambivalent (and even outright hostile) Congressional hopefuls willingly pledge their support to an industry that has, so far proven itself capable of very few purposes: speculative hype and conducting and facilitating fraud (often both at the same time). 

If this all sounds familiar, that’s because it is! This is more or less the same situation we found ourselves facing in the lead up to the 2022 midterms. 

If we think back on the crypto industry’s media profile from around this time two years ago, we’d be reminded that, despite a series of meltdowns which contributed to billions in market losses, figures like Sam Bankman-Fried were still viewed as an “aspiring kingmaker” in electoral politics. We now know that many of these same figures—like Sam Bankman-Fried—bankrolled their political influence campaigns by engaging in white-collar crime. Additional corporate implosions (both within and outside the industry), high profile prosecutions, and regulatory clampdowns since the FTX collapse have further proven fraudulence a feature of crypto, rather than a bug. 

And yet the industry, once again, finds itself in a position of influence ahead of the 2024 electoral season.

As outlets like Politico and Rolling Stone reported earlier this year, crypto-aligned superPACs like Fairshake, Protect Progress, and Defend American Jobs have threatened to mobilize against Democrats in Ohio, Montana, Maryland, and Michigan unless nominees are willing to adopt more industry-friendly stances. Just earlier this week, the Stand With Crypto Alliance—an astroturfed advocacy “movement”-turned superPAC—announced its 2024 House and Senate Endorsements. 

Unfortunately, this flood of campaign finance and lobbying cash seems to be having its desired effect. As my colleague Henry Burke explained back in March, some Democratic nominees have already started changing their tones, even if it means completely reneging on previous positions:

“Despite signing on to a letter led by noted crypto opponent Sen. Elizabeth Warren last year, and never having been an open crypto proponent previously, Rep. David Trone, a Democratic candidate for Senate in Maryland recently began echoing the industry’s calls for [minimal oversight in order to preserve the U.S. technological advantage over rival nations]. His opponent in the Democratic primary, Angela Alsobrooks, has also been promoting crypto. Rather than just echoing the industry calls for new (read: weakened) regulation, Alsobrooks has been promoting it as an opportunity for ‘underserved communities’—a callback to the language crypto was using in Spike Lee’s Cloud Coin advertisement just a couple years ago.”

Likewise, soon to be Republican nominee, former-president, and convicted felon Donald Trump has officially declared himself a pro-crypto candidate. This endorsement, perhaps more than any other, shows how much clout the industry has garnered in the past year. Not just because it represents a reversal of Trump’s previous disdain for crypto, (although he did still end up attempting to cash in on his own branded NFTs) but because it indicates just how much perceived power there is behind having the industry’s backing. 

The successes of crypto’s resurgent influence campaign haven’t just been electoral. Sandwiched within lawsuits from various federal and state regulators this year was a gift from Securities and Exchange Commission Chair Gary Gensler: granting Bitcoin spot Exchange Traded Funds. This has allowed retail investors increased exposure to bitcoin through existing financial instruments that already trade on the stock exchange. (The SEC seems poised to do the same for ether, the cryptocurrency that undergirds the Ethereum blockchain, as well). 

However, the industry’s most significant victory to date has come by way of the House of Representatives passing the Financial Innovation and Technology for the 21st Century Act (FIT21). The bill—which would codify crypto’s long standing aim of regulatory oversight by the considerably weaker Commodity Future Trading Commision, rather than the SEC—moved through the Chamber on a 279-136 vote, with considerable bipartisan support. 

On the one hand, one could look at the notably high level of Democratic backing for FIT21 as a bit of political fencesitting. House Democrats could be hoping to score cheap points by appearing “pro-innovation,” on paper, for a bill that ultimately won’t go into law. A similar calculus was made in relation to an industry-backed effort to overturn SEC rulemaking that mandated more stringent capital requirements to hold custody of crypto assets. H.J.Res 109 passed with bipartisan support in both the House and Senate, but was ultimately vetoed by President Biden in late May. 

However, Biden has indicated that, while opposed to FIT21, he has not completely closed off the pathway for the bill’s signage into law. Meaning that House Democrats, in hoping to cash in on the crypto’s campaign finance goldmine, may well have done more damage than they planned  by offering the industry an easy win. 

Thankfully the collective amnesia about crypto that currently blankets large swaths of our political class is not universal. We at RDP have been early, consistent, and ultimately correct in our opposition to the industry’s attempts to legitimize itself without providing any legitimate use cases. We’ve exposed the revolving door between industry and public service, resisted characterizations of pro-industry policy as sufficient regulation, and even called out opportunistic actors whose affiliations with the crypto ebb and flow when it best suits their interests. We will continue to do this work and urge others to do the same, if not for any reason other than the fact that we’ve already seen how this story plays out and should all be the wiser for it.

Follow the Revolving Door Project’s work on whatever platform works for you! You can find us on that website formerly known as Twitter, Bluesky, Instagram, and Facebook

Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:

The Truth About Matt Yglesias and Inflation

Capital Won’t Love You Back, Mr. President

Economic Punditry and the ‘Hot Dog Guy’ Problem

Pollution from “certified gas” going undetected, says new report

The Mainstream Media Keeps Burying the True Cost of Fossil Fuels

Wide-Ranging Polling Data Demonstrates Voters’ Populist Mood

Toxic Tales

License To Drill

Supreme Court Starbucks Ruling Seen as Gift to Corporate Union-Busters

‘Perilous for democracy, good for profits’: is big business ready to love Trump again?

Big Oil’s Favorite Democrats Are Fighting Biden’s New Climate Policy

IMAGE: “Set of cryptocurrencies on dollar bills by marcoverch is marked with CC BY 2.0.

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