Crypto’s Growing Power: How Digital Assets are Shaping U.S. Elections
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The influence of the crypto lobby has markedly increased this year, significantly impacting key Congressional elections.
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The crypto sector aims to secure the election of sympathetic and knowledgeable lawmakers who could advance a regulatory framework for digital currencies.
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Despite a preference among crypto-holding voters for Trump, there is division within the industry regarding whether a Trump presidency would ultimately be favorable for crypto.
The cryptocurrency industry is leveraging its growing influence in Washington to shape the upcoming U.S. elections. With substantial financial backing, it seeks to elect crypto-friendly candidates and inform legislators, hoping to establish a supportive regulatory framework for digital assets.
Political action committees (PACs) centered around crypto, such as Fairshake, play a pivotal role. Having raised approximately $85 million from various crypto companies, executives, and retail investors, Fairshake has effectively influenced several election outcomes. Notably, it spent $10 million to thwart the campaign of crypto-critical Congresswoman Katie Porter (D-Calif.).
Fairshake also funds two related PACs: Defend American Jobs, which supports Republican candidates, and Protect Progress, which aids Democrats. Both have contributed to multiple victorious campaigns. Recently, Defend American Jobs invested nearly $500,000 in media buys for Republican Mark Messmer, who secured the Republican nomination for Indiana’s 8th district congressional seat.
Protect Progress has similarly backed several crypto-friendly Democratic candidates. For instance, Shomari Figures, a contender for a House seat in Alabama, and Julie Johnson in Texas, have both won their primaries with financial assistance for media campaigns.
“This level of engagement is unprecedented,” remarked Kristin Smith, CEO of the Blockchain Association, a prominent crypto lobbying group.
Even skeptics have had to reconsider their stance due to the industry’s economic clout. Sen. Sherrod Brown (D-Ohio), up for re-election this year and chair of the Senate Banking Committee, has shown newfound openness to crypto legislation.
“Sherrod Brown was historically opposed to crypto, but he’s now willing to consider legislative measures,” said Kyle Bligen, director of financial policy at the Chamber of Progress. “It’s clear he’s aware of the substantial funding from industry groups seeking reasonable cryptocurrency policies.”
The crypto industry, now exerting more sophisticated political influence, seems to have cemented its presence unlike its previous, less successful endeavors.
“The operation is far more adept now,” Smith noted. ”Previously, people saw me as just a blockchain representative. Now, we’re recognized as a formidable force in Washington.”
Focus on the Presidential Election
While the crypto industry’s lobbying has mainly targeted Congressional races, the upcoming U.S. presidential election will also heavily impact crypto regulations.
A small poll by crypto investment firm Paradigm suggests that crypto-holding voters lean towards Trump; however, overall voter ownership of crypto remains low. Betting platforms indicate a narrow lead for Trump. Nonetheless, the industry is divided on whether Trump’s presidency would benefit crypto.
During his tenure, Trump expressed significant reservations about crypto but has since moderated his views, even considering accepting crypto campaign donations. He candidly discussed his market engagements, including selling NFTs, in a CNBC interview earlier this year.
Although Trump’s attitude towards crypto is evolving, it still contrasts with that of Vivek Ramaswamy, a former Republican presidential nominee contender who supported clear regulatory structures for crypto emphasizing token commoditization.
Despite Ramaswamy’s exit from the race, his policies might still influence Trump. “Trump now looks to Vivek on tech and digital asset policy,” noted Lee Bratcher, president of the Texas Blockchain Council.
Biden’s Prospects
The potential re-election of President Biden has sparked mixed reactions within the crypto industry regarding its implications.
Smith anticipates continued regulatory ambiguity and aggressive enforcement unless SEC Chair Gary Gensler steps down. A more open-minded SEC chair could significantly benefit the industry.
At the onset of Biden’s administration, there was some interest in crypto, which waned following several industry collapses. Smith pointed out, “The Biden Administration initially showed interest in crypto, but subsequent industry failures created a negative outlook.”
Although the industry has largely moved on from 2022’s crypto collapses, regulators’ memories linger. “Fresh regulators could help restart essential conversations,” Smith added.
Conversely, Bligen remains optimistic about bipartisan crypto legislation prospects if Biden is re-elected.
“Biden’s re-election isn’t necessarily a loss for crypto advocates. Presently, Democrats and Republicans are collaborating to produce responsible cryptocurrency legislation,” Bligen emphasized.
Current Congressional efforts include a bipartisan movement to regulate stablecoins, among other crypto-related legislation.
Overcoming Legislative Challenges
While legislative initiatives are ongoing, numerous hurdles remain, including garnering broader congressional support for crypto.
Bligen pointed out that many legislators lack a fundamental understanding of crypto, often influenced by negative headlines. “To build a crypto-friendly Congress, we must ensure every office understands the basics of cryptocurrency and its importance to constituents,” Bligen said. “Educating legislators is critical to avoid misconceptions and promote informed policy-making.”
Bratcher emphasized that, in addition to education, the industry might need to compromise on specific issues, such as privacy, to progress with lawmakers.
“We face a challenging situation regarding privacy. Working with various government levels and law enforcement necessitates balancing privacy with issues like money laundering and national security,” Bratcher explained.
He criticized bad actors in privacy services for complicating collaboration with elected officials. “Tornado Cash is not a battle worth fighting; we risk losing larger institutional support if we focus on such divisive issues,” Bratcher affirmed.
Impact at the State Level
Amidst the national attention, some experts like Dennis Porter, co-founder of the bitcoin mining advocacy group Satoshi Action Fund, are directing efforts toward state politics.
Porter’s organization has introduced bills in 16 states to safeguard bitcoin mining and self-custody. Oklahoma’s bill, having passed both legislative chambers, is awaiting the governor’s signature.
“D.C. garners attention and funding, but the key victories are happening at the state level,” Porter stated.
He advocated for focusing more on state-level legislative efforts, suggesting that state success could eventually influence federal policy. “By working state-by-state and using states as democratic laboratories, we can establish pro-digital asset policies with a potential long-term federal impact,” Porter argued.
Drawing from the cannabis industry’s strategy, Porter emphasized that building substantial state-level support could eventually reshape federal regulations. “Our focus should be more on state-level initiatives, investing significantly to alter the policy landscape and support digital assets in America,” he concluded.
