Cryptocurrency industry lobbies Washington
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Cryptocurrency industry lobbies Washington
"Every industry wants to be part of the regulatory discussion, but explaining these concepts to a legislator in their seventies is a huge challenge," said Reid Yager, former lobbyist and current communications director at blockchain marketing firm Blockhaus.
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Source: The Washington Post
Translation: TechFlow
At 2:36 p.m. on Wednesday, a message spread across Twitter: "Crypto red alert!"
The alert came from Fight for the Future, a left-leaning tech advocacy group that urged people to call U.S. senators to oppose a new cryptocurrency provision in a sweeping federal infrastructure bill. Soon after, Senate offices were flooded with calls. Among those opposing the provision were Jack Dorsey, CEO of Twitter and Square, and Brian Brooks, a top banking regulator during the Trump administration who has since become a prominent figure in the crypto industry.
After years of debate over how to improve America's infrastructure and months of delicate negotiations between the White House and lawmakers, the $1 trillion bipartisan infrastructure proposal suddenly stalled—partly due to concerns about how the government should regulate an industry best known for wild financial speculation, internet memes, and its role in ransomware attacks: cryptocurrency.
On Saturday, the Senate took a procedural step toward passing the infrastructure bill. The legislation is expected to emerge in the coming days, but disagreements remain over how much oversight the government should exert over the cryptocurrency industry.
Sen. Rob Portman (R-Ohio) reached an agreement with the Biden administration on a proposal that would give federal regulators new tax reporting requirements for cryptocurrency brokers.
Lawmakers developed the cryptocurrency provision while searching for new revenue sources. Nonpartisan estimates suggest the tax changes could bring in about $28 billion in additional federal revenue over 10 years.
But a rare coalition formed—one that includes tech-libertarian progressives worried about government overreach and fiscally conservative skeptics of financial regulation—arguing the plan would harm innovation and demanding changes.
The backlash triggered a multi-day stalemate lasting until Saturday, during which negotiators fiercely debated which parts of the complex crypto industry should be subject to new reporting rules.
Regardless of the proposal’s final fate, crypto regulation has emerged as a major stumbling block to passage of the bill—a sign of how the industry has grown into a political force in Washington and a preview of looming battles over a financial technology that has drawn billions of dollars from Wall Street, Silicon Valley, and global finance, yet remains poorly understood by most.
"I think what you’re seeing is the maturation of this industry—you see that people in crypto now understand how Washington affects their world, and Washington is slowly understanding the technology," said Mick Mulvaney, former chief of staff to President Donald Trump, who joined the advisory board of the Blockchain Association, a trade group, in September—one of several former officials recruited into the crypto space in recent years.
"The challenge for lawmakers is that they’re still learning the language of the crypto industry," Mulvaney said.
Cryptocurrency is a medium of exchange that allows people to transfer value without government oversight or financial institutions acting as intermediaries. In just over a decade, it has grown from obscurity into a $1.7 trillion industry. Bitcoin, Ethereum, XRP—all are digital currencies whose transactions are recorded on decentralized systems.
Once a niche fascination among tech enthusiasts, crypto is now nearing mainstream acceptance. As institutional investors grow more interested, legislators and financial regulators concerned about potential misconduct are also paying closer attention.
These companies have also intensified lobbying efforts, hiring former officials from both parties.
Former Montana Sen. Max Baucus (D) took on a consulting role for crypto exchange Binance earlier this year. In May, Rosa Rios, former U.S. treasurer under the Obama administration, joined the board of Ripple, a blockchain startup.
Crypto firms now employ nearly 60 registered lobbyists, according to the Center for Responsive Politics—up from just one five years ago. Their lobbying spending this year will exceed $5 million, double last year’s total.
"They see the writing on the wall and want to get ahead of regulation," said Casey Burgat, director of the Legislative Affairs Program at George Washington University. "What surprises me is that they waited this long to start lobbying."
Yet deep skepticism remains about this new form of money. Cryptocurrencies are praised largely because they are untraceable—but that same quality enables their use in drug trafficking, money laundering, and cyber ransomware attacks, drawing criticism. Claims by ardent supporters that the technology could enable beneficial social change and free people entirely from central bank control also raise skepticism. Meanwhile, the massive energy required to mine cryptocurrencies fuels concerns that it could worsen climate change.
Some officials say crafting regulations is especially difficult because cryptocurrency and its underlying digital ledger system, blockchain, are notoriously complex—leaving ample room for lobbying lawmakers unlikely to have deep crypto expertise.
On Saturday, senators sought compromise between two approaches. One favored by the crypto industry, proposed by Sens. Patrick J. Toomey (R-Pa.), Ron Wyden (D-Ore.) and Cynthia M. Lummis (R-Wyo.), would specifically exempt cryptocurrency miners and software developers from new tax reporting obligations, arguing such reporting is technically impossible. Cryptocurrencies rely on “miners”—individuals and companies that produce crypto like bitcoin through complex computational processes.
The Biden administration insists it never intended to impose reporting requirements on miners, but worries broad exemptions could create loopholes the industry might exploit to avoid tax compliance. To find middle ground, the administration and Sens. Rob Portman and Mark R. Warner (D-Va.) discussed narrowing the exemption. Initially proposing to exempt only one category of miners, they agreed Saturday to expand it to include another significant mining group. But by Saturday afternoon, these concessions appeared insufficient for Wyden, Lummis, and Toomey, who sought broader exemptions.
Political alliances around the issue did not follow strict party lines. Toomey, a proponent of laissez-faire economics, has championed the innovative technology. As the top Republican on the Senate Banking Committee, he has made understanding and embracing blockchain his mission in recent months, hiring a crypto expert for his staff and becoming one of the few lawmakers deeply versed in the field.
Wyden, one of the Senate’s leading privacy hawks, has also been drawn into the debate. Lummis, who calls herself the first senator elected while owning bitcoin, represents a state that has become a hub for crypto innovation.
Portman and Warner have worked closely with Treasury officials to draft legislative text giving regulators greater authority. Both maintain strong ties to Wall Street and the banking sector—industries some say crypto could disrupt.
Meanwhile, progressive figures like Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) have urged regulators to strengthen oversight of what they call a volatile market posing risks to consumers. They may eventually align with conservative national security hawks who argue that crypto increasingly aids terrorists, money launderers, and other criminals.
Many in the crypto industry, having resisted government oversight for years, are now changing their stance. They recognize regulation is inevitable—and want to shape the new rules.
This mirrors experiences in other industries, such as gambling or marijuana, which initially tried to evade regulation. "We need a legal framework to support this ecosystem," said Perianne Boring, head of the Digital Chamber. "We need ongoing dialogue with regulators and policymakers," said Burgat of George Washington University, noting that former House Speaker John A. Boehner (R-Ohio) joined the board of publicly traded marijuana company Acreage Holdings before 2018.
After the initial bipartisan infrastructure bill containing crypto provisions was unveiled, the industry mobilized its lobbying forces. The Blockchain Association, a Washington-based trade group, now has more than four times as many members as in 2018 and quickly coordinated with other crypto organizations and companies, including Coin Center and Digital Currency Group.
Their lobbying efforts unfolded via video calls on Google Meet, encrypted messages on Signal, and shared documents on Google Sheets, along with outreach to congressional offices.
"The crypto industry has achieved a new level of cooperation and effectiveness in Washington," said Kristin Smith, executive director of the Blockchain Association.
"For me, our team’s experience this week is completely different from anything before," Smith said.
Crypto has gained support from Silicon Valley figures, including venture capitalists Marc Andreessen and Ben Horowitz, and high-profile investors like Mark Cuban, owner of the Dallas Mavericks.
Crypto’s strongest advocates argue hostility toward the industry stems from ignorance about cryptocurrency and underestimation of the business opportunities created by blockchain technology. Cuban backs crypto ventures, believing the potential of emerging technologies can enhance and expand the internet economy.
In an email to The Washington Post, he wrote: "Shutting down this engine of growth would be like banning e-commerce in 1995 because people feared credit card fraud. Or like regulating website creation early on because some thought building websites was too complicated and didn’t understand where it would lead."
Notably, today’s intense debate over "cryptocurrency" resembles earlier arguments about how to regulate "Big Tech."
Just as San Francisco tech leaders once swore off the "dirty business" of lobbying but later entered politics, the crypto industry is increasingly recognizing that shaping policy may benefit them—especially as scrutiny and suspicion grow in Washington.
Even as crypto pushes to revise the infrastructure bill’s language, a new front in the regulatory battle has already emerged.
It began Tuesday when Gary Gensler, chairman of the Securities and Exchange Commission (SEC), said in a speech at the Aspen Security Forum that he believes most cryptocurrencies should be regulated as securities.
Gensler said: "I believe we now have a crypto market where many tokens may be unregistered securities, lacking necessary disclosures or market oversight. This makes prices susceptible to manipulation and leaves investors vulnerable to losses."
One day later, Brian Quintenz, a Republican commissioner at the Commodity Futures Trading Commission (CFTC), countered that cryptocurrencies are commodities, not securities.
Quintenz tweeted: "We all know the SEC has no authority over pure commodities or their trading venues, whether it’s wheat, gold, oil...or #cryptoassets."
The ongoing dispute over what crypto actually is underscores the depth of challenges the industry faces.
Reid Yager, former lobbyist and current communications director at blockchain marketing firm Blockhaus, said: "Every industry wants to participate in regulatory discussions, but explaining this to a 70-year-old lawmaker is a huge challenge."
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