WASHINGTON (AP) — Erin Houchin braced herself for the worst when a mysterious, well-funded 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.” He added that Houchin had not solicited support and had no industry connection other than completing a survey of candidates for a cryptocurrency group.
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 congressmen, Republicans and Democrats, who will write laws governing their industry, as well as other government officials who craft policies. regulations.
This year, for the first time, industry executives have flooded cash into federal races, spending $20 million so far, records and interviews show.
This is a delicate but deliberate march of companies that, by their very nature, make money in part by avoiding government attention.
In addition to campaign spending, more than $100 million has been spent lobbying the issue since 2018 by crypto companies, as well as those who stand to lose if the industry goes mainstream, records show.
After a well-established course, they have retained former senior officials, such as Max Baucus, a former Democratic senator from Montana who chaired the finance committee.
The push comes as the Biden administration and Congress not only consider new regulations, but also set funding levels for the agencies that will oversee them.
Treasury Secretary Janet Yellen said this week that financial regulators will soon release a report on the risks of cryptocurrency and other digital assets.
“There are certainly many risks associated with cryptocurrencies,” she told a financial stability hearing on Tuesday.
Officials are considering what consumer protections and financial reporting requirements to implement and how to crack down on criminals who take advantage of the anonymity offered by cryptocurrency to evade taxes, launder money and commit fraud.
“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.
At the same time, government surveillance is intensifying.
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, alleging he orchestrated a “$62 million global investment fraud scheme,” which part of dozens of civil and criminal crypto cases brought by federal authorities. Prosecutors say he promised generous returns but instead got away with the investors’ money.
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, RN.C., touted a new crypto coin called “Let’s Go Brandon” — a phrase that has become a conservative shorthand for a vulgar insult to Joe Biden. In a video posted to Twitter, Cawthorn appears alongside the cryptocurrency founder and flatly states, “It’s going over the moon, baby,” while urging viewers to visit the coin’s website and “get in the train”.
After an initial spike, its value plunged and is now worth a tiny fraction of a penny, as the Washington Examiner first reported.
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 between $150,002 and $350,000 in the currency, according to her financial disclosure. “I am not convinced that all cryptocurrencies protect consumers. In fact, I’m willing to bet the majority of them are fraudulent.
Others think the concern over cryptocurrency fraud is overblown.
“It may be an easy conclusion for people to say there’s so much fraud in this space,” said Ashley Ebersole, a former SEC attorney. “It’s making headlines, but I don’t know if it’s a bigger proportion.”
In Washington, the Democrats have been much more hawkish than the Republicans. “They had me at ‘Hello,’ so they don’t need to pressure me,” said Lummis, a Republican. “Democrats are a different story.”
Many cryptocurrency proponents have long opposed regulation. But lobbyists say that is now a settled debate and their current aim is to persuade skeptics not to regulate too aggressively.
Perianne Boring, founder of the Chamber of Digital Commerce, has been lobbying lawmakers and federal agencies since 2017, trying to advocate for the development of accounting standards for cryptocurrency and other digital assets and to help crypto businesses to 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.”
Thus, the industry is pushing for certain candidates and this has generated feelings of resentment among some Democrats. In suburban Atlanta, two members of the United States House, Democrats Carolyn Bourdeaux and Lucy McBath, face off after their districts were merged in redistricting.
A super PAC called Protect Our Future, funded by Sam Bankman-Fried, the 30-year-old billionaire founder of cryptocurrency exchange FTX, has spent at least $2.7 million on ads supporting McBath, highlighting the support of McBath to Democratic politics priorities but saying nothing about cryptocurrency.
“They don’t do this out of the goodness of their hearts. They do it because they want something. And that’s to avoid regulation,” Bourdeaux said.
FTX and McBath’s campaign did not respond to requests for comment. Protect Our Future, which plans to spend at least $10 million on mid-term campaigns, said their spending had nothing to do with cryptocurrency regulation.
“There are a number of factors that go into our endorsements, including voting history, political platforms, viability as a candidate, public office and work experience,” the president said. of the band, Michael Sadowsky, in a press release.
Crypto super PACs are active in other high-profile races, including the Pennsylvania Democratic Senate primary, where a separate Bankman-Fried-linked crypto group spent $212,000 last week on ads supporting John Fetterman, the state’s Democratic lieutenant governor running for the Senate. 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 come in with $2 million. They certainly make a point,” said Rep. Brad Sherman, D-California, a crypto critic who serves as chair of the House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets. “You don’t need a good argument in Washington if you have a lot of well-paid lobbyists and a big PAC — you just need some kind of argument.”
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