WASHINGTON — Spending by the cryptocurrency lobby hit a record high last quarter, as members of Congress from both parties and chambers proved willing to engage with the industry’s top priorities.
The industry and its advocates spent at least $6.8 million lobbying Congress and the federal government from April through the end of June, up 31 percent from the previous quarter, according to lobbying disclosures. They spent at least $12.1 million in the first half of this year, up 17 percent from the $10.3 million spent in all of 2021, previously the high-water mark.
Cryptocurrency advocates and critics alike point to the flood of legislation addressing different parts of the ecosystem, including tax reporting, stablecoins and regulation of markets, as evidence of Washington’s growing attention to the industry.
“To me, the biggest victory is that we have multiple really-thoughtful bills across a spectrum of issues that have been introduced by bipartisan groups and members in both chambers,” said Kristin Smith, executive director of the Blockchain Association. “We didn’t have that a year ago.”
Smith’s group spent $580,000 on lobbying last quarter and $1.2 million in the first half of this year, according to disclosures.
Meanwhile, consumer advocates warn that the industry’s influence has resulted in legislation that would weaken oversight of cryptocurrencies and potentially harm consumers and undermine financial stability.
“The crypto industry wants to have the appearance of regulation but not the reality of regulation,” said Dennis Kelleher, president of Better Markets. “The real danger of such bills, if they become law, is that they provide a false comfort to trick the American people into thinking that this new, highly speculative financial product and industry is being properly regulated when it is not.”
That lawmakers are scrambling to write new laws to govern cryptocurrencies at all is a result of industry influence, Kelleher said in an interview.
“The bottom line is, if anybody was really serious about consumer protection, financial stability and market structure, they would immediately, significantly increase the budgets of the CFTC and the SEC to go after the current crypto crooks,” he said, referring to the Commodity Futures Trading Commission and the Securities and Exchange Commission. “And yet no one is talking about that.”
The leader board
Smith said that over the past year the industry has established a presence in Washington, positioning itself well to push its legislative agenda on Hill.
“For a long time, most companies in this space had no one in Washington. Nobody looking at policy. Nobody working on building relationships with government,” she said in an interview. “There’s been a pretty big increase, both in terms of the amounts that existing organizations, including the Blockchain Association, are putting towards lobbying, but also new companies that are showing up, that are opening a Washington office and that are here to build relationships and engage.”
Of the 43 companies and groups across the cryptocurrency sector whose lobbying activities CQ Roll Call analyzed — including exchanges, advocates, miners, wallet providers, investors and software developers — Coinbase was the biggest spender both last quarter and so far this year.
The cryptocurrency exchange spent $1.3 million last quarter, almost a fifth of all lobbying expenditures by the industry, with spending on its internal lobbying team accounting for $1 million of that. Coinbase has spent $2.4 million across its lobbying efforts so far this year, according to disclosures.
Cryptocurrency exchanges — including Crypto.com, FTX US and Binance — and advocacy and policy organizations made up eight of the top 10 industry-linked spenders on lobbying efforts so far this year.
Exchanges collectively spent $2.8 million on lobbying in the second quarter and $4.4 million so far this year. Advocacy groups representing the entire industry spent $2 million last quarter and $3.9 million in the first half of 2022.
Stablecoins and spot markets
That push has helped foster bipartisan, cross-chamber interest in cryptocurrency, Smith said.
So far this Congress, members have introduced more than 100 bills referencing cryptocurrency, blockchain, stablecoins or a central bank digital currency. Many of them aligned with cryptocurrency industry priorities, including establishing the CFTC as the primary regulator and allowing stablecoin issuers to operate outside banking regulations.
In the House, Financial Services Chairwoman Maxine Waters, D-Calif., and ranking member Patrick T. McHenry, R-N.C., said they’ll work over August recess to reach a compromise on a stablecoin bill.
In the Senate, Agriculture Chairwoman Debbie Stabenow, D-Mich., and her Republican counterpart, John Boozman of Arkansas, this month introduced a bill that would give the CFTC jurisdiction over “digital commodities” and direct brokers, trading platforms and other service providers to register with the agency.
It’s too early to gauge industry lobbying on those two efforts, but they come on the heels of another bipartisan bill, introduced by Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., that generated a lot of lobbying interest.
Lobbying disclosures are an imperfect method for gauging industry interest on an issue. The filings include a field for specific issues that were lobbied each quarter, but answers can be as vague as “cryptocurrency” or as detailed as specific sections or provisions of a bill. When a filing includes multiple issues, it’s impossible to know how much time or money was spent on each one.
Still, when disclosures are detailed, they lend insight into an industry’s broad policy priorities.
Of the 75 second-quarter disclosures reviewed by CQ Roll Call, 42 cited specific issues or legislation pursued. Of those, at least 14 filings, reporting $3 million in expenditures, cited the Lummis-Gillibrand bill as an area of interest.
Companies lobbying on the bill included cryptocurrency exchanges Coinbase, Crypto.com, FTX US and others. Smith’s Blockchain Association and industry advocates the DeFi Education Fund and Global Digital Asset & Cryptocurrency Association also listed the bill in lobbying disclosures.
The Lummis-Gillibrand bill hits the sweet spot on three industry priorities, most opposed by consumer advocates. It would designate the CFTC, rather than the bigger, better funded SEC, as the industry’s primary regulator; allow stablecoin issuers to operate with disclosure and reserve requirements rather than under banking regulations; and soften tax reporting requirements included in last year’s bipartisan infrastructure law.
Of the 42 detailed second-quarter filings, 17, or about 40 percent, referenced the classification of digital assets as securities or commodities as an area of interest. Those filings reported $3.2 million in lobbying expenditures. Eight of the detailed filings, outlining $2.1 million in expenditures, listed stablecoins as an area of interest.
Smith said the infrastructure law’s tax reporting provisions, which first sparked a political spending spree by the industry, took a backseat this year to more urgent questions around market and stablecoin regulation. Still, tax issues often cropped up in lobbying disclosures. Of the detailed second-quarter disclosures, 17 filings — reporting $2.7 million in expenditures — mentioned tax.
Preaching the ‘techno-optimist’ message
Timi Iwayemi, a senior researcher at the Revolving Door Project, said if the industry gets its way on its priorities, consumers will pay the price. The Revolving Door Project scrutinizes executive branch appointments.
Placing digital assets under CFTC oversight would leave investors vulnerable to scams, wash trades and pump-and-dump schemes, he said, adding that allowing stablecoins to replicate services provided by banks without appropriate safeguards, such as deposit insurance, could threaten financial stability as a whole.
The industry has cultivated lawmakers, particularly Democrats, through a combination of lobbying and campaign expenditures, meetings with industry executives and revolving door hires, Iwayemi said in an interview.
“They’ve been able to successfully convince Democrats that we can have some level of regulation but not too much regulation. I don’t think it’s been a heavy lift to convince Republicans on that case, but I think they’ve been able to preach that techno-optimist message to Democrats,” Iwayemi said.
Both Iwayemi and Better Markets’ Kelleher said the clamor to write new laws to govern cryptocurrencies proves the industry’s political spending is paying off. In most cases, existing banking and financial laws adequately address digital assets and would better protect consumers than alternatives proposed in Congress, they said.
“Just because we move from gas-powered vehicles to electric vehicles doesn’t mean that the seat shouldn’t have seatbelts anymore,” Iwayemi said. “Just because this is a digital financial product doesn’t mean that established law on the books is no longer applicable.”
