Erin Houchin braced for the worst last month when a secretive, well-funded group began buying TV commercials in her competitive southern Indiana congressional race.
Houchin believes she will face a negative blitz like the one that crushed her when she ran for the same seat in 2016. But in fact, quite the opposite.
Operation American Dream Federal, a super PAC funded by crypto CEOs, has flooded the region with ads promoting Houchin as a “Trump hardliner” conservative who will “stop socialists from getting in” Washington. The push helped secure her victory in the Republican primary last week.
“All you can do is hold your breath,” Cam Savage, a longtime Houchin consultant, said of what they learned about ad buying. “It can help you, but worry that it will end you.” He added that Houchin did not seek support and has no ties to the industry other than filling out candidate surveys for cryptocurrency groups.
The impact of offering to help shows how crypto tycoons have become a new force in American politics. They spend millions in primaries trying to influence members of Congress, Republicans and Democrats, who will create the laws that govern their industries, as well as other government officials who set regulations.
This year, industry executives poured money into federal elections for the first time, spending $20 million so far, according to records and interviews.
It’s a subtle but thoughtful parade by companies that essentially make money in part by escaping government attention.
In addition to campaign spending, records show that since 2018, crypto companies, and those that would suffer if the industry goes mainstream, have spent more than $100 million lobbying around the issue.
Along the same lines, they kept former senior officials like 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 oversee them.
U.S. Treasury Secretary Janet Yellen said this week that financial regulators will soon issue a report on the risks of cryptocurrencies and other digital assets.
“Of course, there are many risks associated with cryptocurrencies,” she said at a financial stability hearing on Tuesday.
Officials are considering what consumer protection and financial reporting requirements to implement and how to fight criminals who take advantage of the anonymity provided by cryptocurrencies to evade taxes, launder money and commit fraud.
“What do they want? They don’t want regulations, or they want to help write regulations. What else is new?” asked industry critic Sen. Sherrod Brown, D-Ohio.
A cryptocurrency is a digital asset that can be traded over the internet without relying on the global banking system. They have been promoted as a way for those with limited means to build wealth by investing in the next big thing. But they are also highly speculative and often lack transparency, which greatly increases risk.
Jan Santiago, deputy director of Global Anti-Scam, an organization that helps victims of cryptocurrency fraud, said the industry has been reluctant to regulate bad actors.
“Unless it affects their bottom line or public reputation, I don’t think they have any financial incentive,” he said.
There are signs that cryptocurrencies are going mainstream. Fidelity Investments, one of the largest providers of retirement accounts in the U.S., announced earlier this month that it would begin allowing investors to deposit bitcoin into their 401(k) accounts.
At the same time, government scrutiny has increased.
The U.S. Securities and Exchange Commission unveiled a plan last week to nearly double the number of employees focused on cryptocurrency regulation. Days later, the Justice Department indicted the CEO of a cryptocurrency platform, accusing him of orchestrating a “$62 million global investment fraud scheme,” one of dozens of civil and criminal crypto cases brought by federal authorities. Prosecutors said he promised big returns but absconded with investors’ money.
Meanwhile, members of Congress and the administration are concerned that Russian oligarchs may turn to cryptocurrencies to evade U.S. sanctions when Russia invaded Ukraine.
But at least one lawmaker is actively involved in promoting the allure of crypto wealth.
Rep. Madison Cawthorn, RN.C., touted a new cryptocurrency 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 appeared next to the cryptocurrency’s founder and emphasized, “Baby, this is going to the moon,” while urging viewers to visit the coin’s website and “get on the train.”
As the Washington Examiner first reported, after an initial surge, its value plummeted and is now worth just a penny.
Crypto advocates in Congress acknowledge there are problems but believe the roughly $2 trillion industry is ripe.
“I believe bitcoin protects consumers,” said Sen. Cynthia Lummis of Wyoming, who has invested between $150,002 and $350,000 in bitcoin, according to her financial disclosures. “I don’t believe that all cryptocurrencies protect consumers. In fact, I bet most of them are fraudulent.”
Others argue that concerns about cryptocurrency fraud are overblown.
“One could easily conclude that there is so much fraud in the space,” said Ashley Ebersole, a former SEC attorney. “It made headlines, but I didn’t know it was on a larger scale.”
exist Washington, Democrats are much tougher than Republicans. “They put me on ‘hello,’ so they don’t need to lobby me,” said Republican Loomis. “The Democrats are another story.”
Many cryptocurrency proponents have long opposed regulation. But lobbyists say that is now a settled debate, and their current goal is to convince skeptics not to regulate too aggressively.
Since 2017, Digital Chamber of Commerce founder Perianne Boring has been lobbying lawmakers and federal agencies in an attempt to inform accounting standards for cryptocurrencies and other digital assets and help crypto companies become public companies.
“With no standards, many businesses are hesitant to approach cryptocurrencies,” said Boring, whose team has spent nearly $2 million lobbying the federal government.
Some lobbyists hope a wave of campaign spending, much of it targeting the Democratic primary, will help.
“Suddenly, people in the cryptocurrency space are happy to participate in political fundraising,” said Kristin Smith, executive director of the Blockchain Association. Smith’s team has spent about $4 million since 2018 on lobby. “If we don’t engage constructively, the government could actually step in and screw things up,” she added.
As a result, the industry is struggling with certain candidates, which has sparked dissatisfaction among some Democrats. In suburban Atlanta, two members of the U.S. House of Representatives, Democrats Caroline Bourdeau and Lucy McBath, are at loggerheads after their districts merged during re-election.
A super PAC called Protect Our Future, funded by 30-year-old billionaire founder Sam Bankman-Fried of cryptocurrency exchange FTX, has spent about $2 million on ads supporting McBath, emphasizing McBath’s priority for Democratic policy Matters support, but no mention of cryptocurrencies.
“They’re not doing it out of good intentions. They’re doing it because they want something. It’s to avoid regulation,” Burdo said.
The FTX and McBath campaigns did not respond to requests for comment. Protecting Our Future, which plans to spend at least an additional $10 million on major events, said their spending has nothing to do with cryptocurrency regulation.
“There are many factors in our support, including voting history, policy platform, viability as a candidate, and public service and professional experience,” Michael Sadowski, the group’s president, said in a statement.
Crypto super PACs have also been active in other key campaigns, including Pennsylvania’s Democratic Senate primary, and last week a separate crypto group linked to Bankman-Fried spent $212,000 on ads supporting the state, which is running for the Senate Democratic Lieutenant Governor John Fetterman. The ad said Feltman would not be “gossiped by lobbyists or swayed by politicians.”
But overall, the spending is so large that it raises questions about the industry’s motives.
“It’s telling every Democrat that if you have a primary, they’re probably going to get $2 million. They’re definitely making a point,” said Rep. Brad Sherman, D-Calif., who is Chairman of the House Investor Protection, Entrepreneurship and Capital Markets Subcommittee, and cryptocurrency critic. “You don’t need a good argument Washington If you have a lot of high-paid lobbyists and a big PAC – you just need some sort of argument. “
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