Industry Insiders Report Unprecedented Influence of Crypto on U.S. Elections
May 17, 2024
- The crypto lobby is more influential than ever this year, already impacting key Congressional elections.
- The crypto industry anticipates that a more supportive and informed group of lawmakers will finally establish a regulatory framework for cryptocurrencies.
- While crypto-holding voters generally lean towards Trump for president, industry insiders are divided on whether a Trump presidency would truly benefit crypto.
The crypto industry is making a powerful push in Washington to influence the upcoming U.S. elections. They're spending unprecedented amounts to get crypto-friendly candidates elected and educate lawmakers, aiming to establish a favorable regulatory framework for crypto.
Crypto-focused political action committees (PACs) like Fairshake have raised around $85 million from crypto companies, executives, and retail investors. They've already shaped the outcome of several key races, including spending $10 million to defeat crypto-critical Congresswoman Katie Porter (D-Calif.).
Fairshake is also backing two affiliated PACs: Defend American Jobs, which supports Republican candidates, and Protect Progress, which supports Democrats. Both have successfully donated to winning campaigns. Recently, Defend American Jobs spent nearly $500,000 on media buys for Republican Mark Messmer, who won the Republican nomination for Indiana’s 8th district congressional seat.
Protect Progress has also seen success, with crypto-friendly Democratic candidates like Shomari Figures in Alabama and Julie Johnson in Texas winning their primaries, bolstered by media buy support.
"We've never seen this level of activity in past election cycles," said Kristin Smith, CEO of the Blockchain Association.
The industry's economic clout is even swaying some crypto skeptics. Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee and up for re-election this year, has recently adopted a more open-minded stance towards crypto, likely influenced by the industry's well-funded efforts.
"Previously he was no friend of crypto, but recently [Brown] said he was open to considering cryptocurrency legislation," said Kyle Bligen, director of financial policy at the Chamber of Progress. "He’s aware of the significant financial backing from industry groups looking for politicians who support innovative, common-sense cryptocurrency policies."
While past efforts to influence national elections have had mixed results—and, in the case of former FTX CEO Sam Bankman-Fried, led to criminal charges—the crypto industry's growing political influence now appears more formidable.
"It’s a much more sophisticated operation," Smith said. "I used to walk around Washington and people would say, ‘Oh, there’s Kristin, she works for that little blockchain industry thing.’ Now it’s, ‘Oh wow, that’s the powerful crypto industry, and they’re here to influence Washington, pulling out all the stops to do it.'"
All eyes on the Presidential
The crypto industry has primarily targeted its lobbying efforts on Congressional elections, but the U.S. presidential election will also have a major impact on crypto regulation.
A small poll commissioned by crypto investment firm Paradigm indicates that crypto-holding voters tend to prefer Donald Trump for president. However, other polls show that the percentage of voters who own crypto is small. Currently, Polymarket bettors give Trump a slight edge to win (47% to Biden’s 44%). Industry insiders remain uncertain about whether a Trump presidency would actually benefit crypto.
During his presidency, Trump was vocal about his distaste for crypto but has since softened his stance. He recently stated he was open to accepting crypto campaign donations. In a CNBC interview earlier this year, Trump admitted to dabbling in the markets himself, having sold several tranches of non-fungible tokens. He stated that he is "not sure [he would] want to take it away at this point," though he implied he could curb crypto’s influence if it threatened the U.S. dollar’s dominance.
Trump’s evolving stance on crypto remains less favorable compared to his former Republican presidential rival, Vivek Ramaswamy. Ramaswamy pledged to protect crypto developers and establish a clear regulatory framework for crypto, classifying most tokens as commodities.
Despite Ramaswamy no longer being in the race and reportedly not considered as Trump’s running mate, industry insiders believe his crypto policies could still influence Trump if elected.
"Trump looks to Vivek on tech and digital asset policy," said Lee Bratcher, founder and president of the Texas Blockchain Council. "He didn’t always do that, but when he saw how Vivek captured the Republican voter—and more centrist voters than Trump can capture—he’s probably more interested in that policy."
Biden, re-elected
Industry insiders are divided on the impact of a Biden re-election on the crypto industry.
Smith confidently asserted that a Biden re-election would likely mean "more of the same, unless [Securities and Exchange Commission Chair] Gary Gensler steps aside," leading to continued regulatory uncertainty and aggressive enforcement. She emphasized that a more open-minded SEC chair would be "hugely helpful."
"It's unfortunate because, at the beginning of the Biden Administration, there was some interest in crypto. However, the industry's implosion during their reports led to a clearly negative stance now," Smith stated. "On Biden's watch, the industry faced significant challenges, so it's understandable regulators are cautious."
Smith noted that while the crypto industry has moved past the 2022 collapse, including the implosions of FTX, Terra/LUNA, and Three Arrows Capital, regulators have longer memories. "A new batch of regulators could rejuvenate discussions," she suggested.
Others, like Bligen, are optimistic about crypto-friendly legislation post-election if Biden remains in power.
"I can't say that Biden's re-election would be a loss for cryptocurrency advocates, as Democrats and Republicans are currently collaborating on bipartisan, productive, and responsible cryptocurrency legislation," Bligen remarked.
Ongoing efforts in Congress aim to pass crypto legislation, including a bipartisan initiative to regulate stablecoins.
Challenges to progress
Efforts to pass crypto legislation, which have previously faltered, still face significant challenges, including gaining more congressional support.
Bligen noted that many members of Congress lack a deep understanding of crypto, primarily influenced by sensational headlines about scams, fraud, and the collapse of major crypto institutions. These incidents often shape a protectionist view.
"For more lawmakers to become crypto-friendly, every congressional office needs a foundational understanding of cryptocurrency, its relevance to constituents, and the policy landscape regulating it," Bligen emphasized. "Without this basic information, members will struggle to grasp blockchain technology. More concerted education efforts are essential. Achieving a more informed 2025 requires proactive work."
Bratcher highlighted that alongside education, the industry might need to compromise on certain issues, such as privacy, to make real progress with lawmakers.
"We're at a critical juncture regarding privacy," Bratcher said, citing the crackdown on bitcoin mixing services like Tornado Cash and Samourai Wallet.
"While the digital assets industry prioritizes privacy, working with various government levels and law enforcement means we can't make sweeping claims. There must be a balance between privacy and concerns like money laundering and national security."
Bratcher pointed out that the behavior of services like Samourai, which promoted its mixing services to dubious market participants, complicates cooperation with officials.
"Tornado Cash isn't a battle worth fighting," Bratcher asserted. "We risk losing the larger fight if we focus on defending Tornado Cash."
State-level politics
While national elections capture the spotlight, Bratcher and others, such as Dennis Porter, CEO and co-founder of the bitcoin mining advocacy group Satoshi Action Fund, are strategically targeting state politics.
Porter’s group has successfully introduced bills in 16 U.S. states to protect bitcoin mining and self-custody. The most advanced of these bills is in Oklahoma, where it has passed both the state House and Senate and is awaiting Governor Kevin Stitt’s (R) signature.
"Washington, D.C. might be glamorous and heavily funded, but we haven't seen major victories there yet – the critical battles are unfolding at the state level," Porter emphasized.
He believes the industry should maintain a presence in D.C. but recognizes that Capitol Hill won't provide a comprehensive solution.
"Our strategy involves championing pro-digital assets policy state-by-state, using states as a democracy laboratory. Successful ideas from these efforts can eventually shape federal policy or at least establish protective regulations at the state level," Porter stated.
Porter’s regulatory approach mirrors the cannabis industry’s strategy – building momentum and support at the state level until the industry is influential enough to impact federal regulations.
"We're aiming for big wins in D.C., but we’re not there yet," Porter noted. "We need to focus more on state-level efforts, investing more resources there. The hundreds of millions spent in D.C. could dramatically reshape the policy landscape at the state level, significantly altering the dynamics for bitcoin and digital assets in America."