Just in the last two weeks, a bipartisan group of senators unveiled a proposal to hand over oversight of cryptocurrency cash markets to the Commodity Futures Trading Association, the third bipartisan law since April that establishes a leadership role for the industry’s preferred regulator would.
Sens. Patrick J. Toomey (R-Pa.) and Kyrsten Sinema (D-Ariz.) have teamed up to exempt crypto from capital gains taxes for everyday purchases, like buying a sandwich.
And this pair, along with Sens. Mark R. Warner (D-Va.) and Cynthia M. Lummis (R-Wyo.), proposed limiting the reach of a regulation signed last year that tightened tax reporting requirements for crypto transactions . In announcing the bill, senators commended eight industry representatives.
“The growing stack of proposed legislation is a signal that Washington is taking crypto seriously, and that’s a good thing for all sides,” said Sheila Warren, CEO of the Crypto Council for Innovation, an industry trade group.
Taken together, the spate of crypto-friendly legislation represents a dramatic turnaround from what the industry faced on the Hill a year ago.
Last August, the regulation mandating tougher tax enforcement hit crypto interests flat-footed when it emerged as a revenue stream in a trillion-dollar infrastructure package. The industry, which spent $2 million lobbying in 2020 even as the digital asset market roughly quadrupled to over $750 billion, mobilized what Washington had to mitigate the requirement.
Crypto lobbyists temporarily halted the package’s progress, arguing that the language governing the industry was too broad and stifling innovation. You still lost.
The defeat proved electrifying. In the year since, crypto interests have fueled a spate of spending in a rush to build a political influence machine.
“The industry woke up from that struggle a year ago and decided it really needs to get involved and educate policymakers, and now we’re seeing the results of that comprehensive effort,” said Aaron Cutler, a partner at the law firm of Hogan Lovells and a former representative of the republican leadership.
The crypto industry scores a big win under the long-awaited Senate bill
The industry spent $8.9 million on lobbying in the first half of this year, surpassing the $7.7 million it spent all of last year, according to new analysis from the Center for Responsive Politics. The industry now counts 191 lobbyists among its ranks, up from 50 two years ago, the analysis shows.
Crypto executives are spending even bigger sums on campaign donations.
So far this election cycle, they’ve given federal candidates more than $61 million, according to the center’s analysis. 97 percent of that sum came from the heads of a single company, the Bahamas-based crypto exchange FTX. Sam Bankman-Fried, the company’s 30-year CEO, has donated $38.9 million, making it the fourth-largest donor in the country. Ryan Salame, co-CEO of subsidiary FTX Digital Markets, and his wife have donated an additional $15 million, making them the 10th largest donor nationally. FTX did not respond to a request for comment.
“There’s a handful of people in this industry who are having an incredible amount of influence right now through almost limitless contributions,” said Daniel Auble, senior researcher at the Center for Responsive Politics.
The crypto industry dives into halftime, raising millions to bring Democrats to justice
FTX, like much of the industry, has focused its lobbying efforts to ensure that the CFTC has a leading role in overseeing digital asset markets, as opposed to the Securities and Exchange Commission.
The latest bill, which spells out the role of the CFTC and was proposed last week by Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) and the panel’s top Republican Sen. John Boozman (Ark.), would Giving authority over Bitcoin and Ethereum, which together make up about two-thirds of the cryptocurrency market.
And online exchanges for trading digital tokens like Coinbase would have to register with the agency. The platforms
Stabenow said the debate over which agency, the CFTC or the SEC, will take the lead on crypto regulation is “really not the issue because we need both.”
The bill garnered broad support from crypto interests, a fact Boozman noted on a call with reporters and said it would give momentum to the measure in the Senate. “It makes it a lot easier for members when you don’t have friends who are everywhere,” he said.
Tyler Gellasch, executive director of investor-trade group Healthy Markets Association, said there is an urgent need for the sector to establish the CFTC as its top regulator. “Getting as much out of the SEC as possible must be the top priority for the industry because the SEC has developed dozens of rules to protect investors over decades,” he said. “If SEC rules were applied to crypto, many industry practices would become illegal and many profits would disappear.”
However, crypto insiders and observers alike agree that lawmakers have only just begun what will likely be a lengthy process to write an industry rulebook.
“Right now, it feels like the SEC is falling behind on this, and their view on this is not being heard in the legislature,” said Ian Katz, managing director of Capital Alpha Partners, a Washington-based policy analysis firm. “But there’s a lot of this game that needs to be played and it’s not over yet.”
Kristin Smith, executive director of the Blockchain Association, said a new congress would need to work out the details. She said her group is initially excited that the industry can point to three bipartisan bills, each pro-CFTC, and crypto interests are dominating the debate. “It’s definitely progress,” she said, “and I don’t think it’s going to slow down.”