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Erin Houchin prepared for the worst when a mysterious, well-funded group began receiving television commercials last month in the highly competitive southern Indiana congressional race.
Houchin assumed that when he ran for the same seat, he would face a negative blitz like the one that crushed him in 2016. But actually it was the opposite.
American Dream Federal Action, a super PAC funded by a cryptocurrency CEO, has filled the area with ads promoting Houchin as a “Trump Tough” conservative who will “stop the socialists in Washington”. That push helped him win in a Republican primary last week.
“The only thing you can do is hold your breath,” said Cam Savage, Houchin’s longtime adviser, when they learned about ad buying. “It may help you, but fear will finish you off.” He added that Houchin did not seek support and had no ties to the industry other than filling out a candidate survey from a cryptocurrency group.
The impact of unsolicited aid shows how cryptocurrency magnates are emerging as new power players in American politics. They are pouring millions of dollars into primaries as they try to gain influence over Congress, Republican and Democratic members who will write laws governing their industries, as well as other government officials who make the regulations.
This year, industry executives have poured money into federal races for the first time, spending $20 million so far, according to records and interviews.
It’s a delicate but deliberate march of companies that by nature make money based in part on avoidance of government.
In addition to campaign spending, more than $100 million has been spent lobbying around the issue since 2018 by crypto companies and those who will lose if the industry enters the mainstream, according to the record.
In an old fashioned way, they retained former top officials like Max Baucus, the Democrat senator from Montana who once chaired the Finance Committee.
The pressure comes as the Biden administration and Congress not only consider the new regulations, but also set funding levels for the agencies to 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,” he said during a hearing on financial stability on Tuesday.
Authorities are considering how to crack down on criminals who take advantage of the anonymity offered by cryptocurrency to evade tax, money laundering and fraud, and what consumer protection and financial reporting requirements they will enforce.
“What do they want? They don’t want the edit or they want to help write the edit. What else is new?” asked Senator Sherrod Brown of D-Ohio, an industry critic.
Cryptocurrencies are a digital asset that can be bought and sold over the internet without relying on the global banking system. They were promoted as a way to build wealth by investing in the next big thing for those with limited means. But they are also highly speculative and often lack transparency, which increases risk significantly.
Jan Santiago, deputy director of Global Anti-Scam, an organization that helps victims of cryptocurrency scams, said the industry is reluctant to police bad actors.
“I don’t think there is any financial incentive for them unless it affects their profits or public reputation,” 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 will begin allowing investors to put bitcoin in their 401(k) accounts.
At the same time, government control is increasing.
The Securities and Exchange Commission last week announced a plan to nearly double the size of its staff focused on cryptocurrency auditing. Days later, the Department of Justice accused the CEO of a cryptocurrency platform, alleging that he orchestrated a “$62 million global investment fraud scheme,” which is among the large number of civil and criminal crypto cases brought by federal authorities. Prosecutors said it promised generous returns but instead got away with investors’ money.
Meanwhile, members of Congress and the administration have expressed concerns that Russian oligarchs may switch to cryptocurrency to evade the US sanctions imposed when Russia invaded Ukraine.
But at least one lawmaker has been an active participant in promoting the lure of crypto wealth.
Representative Madison Cawthorn, RN.C., promoted a new cryptocurrency called “Let’s Go Brandon,” which has become a conservative acronym for a vulgar insult to Joe Biden. In a video posted on Twitter, Cawthorn appears alongside the cryptocurrency’s founder, emphasizing “It’s going to the moon baby” while urging viewers to visit the cryptocurrency’s website and “get on the train.”
After the initial spike, its value plummeted and is now worth a small fraction of a penny, as first reported by the Washington Examiner.
Cryptocurrency advocates in Congress acknowledge the problems but argue that the roughly $2 trillion industry has matured.
“I am confident that Bitcoin protects consumers,” said Senator Cynthia Lummis of R-Wyo, who has invested between $150,002 and $350,000 in the currency, according to her financial statement. “I am not sure that all cryptocurrencies protect consumers. In fact, I bet most of them are scammers.”
Others believe that concerns about cryptocurrency scams are overblown.
“It might be an easy conclusion for people to say that there is a lot of fraud in this area,” said Ashley Ebersole, a former SEC attorney. “It’s making headlines, but I don’t know there is a greater proportion.”
In Washington, Democrats were much more hawkish than Republicans. “They kept me on ‘Hello’, so there’s no need for them to lobby me,” Republican Lummis said. “Democrats are another story.”
Many cryptocurrency advocates have long opposed regulation. But lobbyists say this is now an established debate and their current goal is to persuade skeptics not to regulate too aggressively.
Perianne Boring, founder of the Digital Chamber of Commerce, has been lobbying lawmakers and federal agencies since 2017 to develop accounting standards for cryptocurrency and other digital assets and help crypto firms become publicly traded companies.
“Many businesses are hesitant to touch cryptocurrency because there are no standards,” said Boring, whose group has spent nearly $2 million lobbying for the federal government.
Some lobbyists hope that a wave of campaign spending, mostly aimed at Democratic primary races, may help.
“People in crypto are suddenly happy to go to political fundraisers,” said Kristin Smith, executive director of the Blockchain Association. “If we don’t get involved in a constructive way, the government could really come in and really mess things up,” added Smith, whose group has spent nearly $4 million on lobbying since 2018.
So the industry is putting a lot of pressure on certain candidates, and this is fueling resentment among some Democrats. In the suburb of Atlanta, two members of the U.S. House of Representatives, Democrats Carolyn Bourdeaux and Lucy McBath, are challenged after their district is unified during the redistribution.
A super PAC called Protect Our Future, funded by the 30-year-old billionaire founder of the FTX cryptocurrency exchange Sam Bankman-Fried, has spent nearly $2 million on ads supporting McBath and has emphasized McBath’s support of Democratic policy priorities, but said nothing about it. crypto currency.
“They are not doing this out of the goodness of their hearts. They do this because they want something. And that’s to avoid regulation,” said Bourdeaux.
FTX and McBath’s campaign did not respond to requests for comment. Protect Our Future, which plans to spend at least another $10 million on primary campaigns, said its spending has nothing to do with cryptocurrency regulation.
“There are a number of factors that go into our endorsements, including voting history, policy platforms, viability as candidates, and public service and professional experience,” the group’s chairman, Michael Sadowsky, said in a statement.
Crypto super PACs are active in other marquee races, including the Democratic Senate primary in Pennsylvania, where a separate crypto group affiliated with Bankman-Fried spent $212,000 last week on ads supporting the state’s Democratic lieutenant governor John Fetterman, who is running for the Senate. The ads say that Fetterman “won’t be fooled by lobbyists or swayed by politicians.”
But overall, the spending is so great that it has generated questions about the industry’s goals.
“He tells every Democrat that if you have a pre-selection they can come up with $2 million. They definitely make a point,” said Representative Brad Sherman, crypto critic D-Calif., chair of the Investor Protection, Entrepreneurship and Capital Markets Subcommittee. If you have lots of well-paid lobbyists and a big PAC, you don’t need a good debate in Washington – you just need some kind of discussion.”
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