Top cryptocurrency groups have doled out millions of dollars on lobbying in 2022 as Congress weighs regulations aimed at cracking down on the industry, especially in the wake of FTX’s collapse, according to disclosures reviewed by the Washington Examiner.
Eight major players in the cryptocurrency world have shelled out over $10.4 million combined to lobby during the first three quarters of 2022, disclosures show. The spending haul by the organizations comes after 2021 lobbying expenditures for the industry as a whole clocked in at just over $9 million, according to a March analysis of disclosures by Public Citizen, a liberal think tank.
The cryptocurrency industry has been embattled over the past year as federal inquiries expand and members of Congress throw their support behind laws they say would protect consumers from an unregulated market experiencing significant volatility. Since the November collapse of FTX, a Bahamas-based exchange, the prices of cryptocurrency coins such as Bitcoin have tumbled dramatically, and there have been renewed calls by lawmakers for a stricter regulatory environment.
“As I’ve said for years, clear rules of the road for the digital asset ecosystem are the best way to protect consumers and investors in this space,” Rep. Patrick McHenry (R-NC), who is poised to lead the House Financial Services Committee next Congress, told the Washington Examiner.
“The recent events surrounding the collapse of FTX show us now, more than ever, how important comprehensive market structure legislation that brings clarity to the treatment of digital assets is to the survival of this ecosystem in the U.S.,” said McHenry, who has vowed that he will make regulating cryptocurrency a priority.
Coinbase, a publicly traded company that boasted a revenue of over $7.84 billion in 2021 and runs an exchange platform, has spent $3.7 million on lobbying in 2022, records show. The company has disclosed $2.8 million in expenditures, and five firms have disclosed $900,000 lobbying on its behalf.
Coinbase has lobbied in connection to several bills, including the Responsible Financial Innovation Act, a measure sponsored by Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), which aims to “create a complete regulatory framework for digital assets,” according to a press release.
The company also lobbied on issues related to the ENABLERS Act, which aims to close domestic money laundering loopholes and is sponsored by Rep. Tom Malinowski (D-NJ).
The Securities and Exchange Commission notably subpoenaed Coinbase in August to obtain records on its classification of asset and yield-generating products. Just one month before this subpoena, the SEC unveiled insider trading charges against a former Coinbase employee and his family members.
“The cryptocurrency industry strives to be as unregulated as possible,” Craig Holman, a government affairs lobbyist for Public Citizen, told the Washington Examiner.
“Without much oversight, cryptocurrency is a favored Avenue for money laundering, oftentimes to mask illegal activities, and as we have recently witnessed, cryptocurrency can easily be transformed into little more than a Ponzi scheme posing significant dangers to investors,” said Holman.
The Blockchain Association, which backs market decentralization and counts major cryptocurrency groups as members, has spent over $1.7 million lobbying in 2022, records show. Crypto.com, an exchange based in Singapore that employs at least 4,000 people, has spent over $1.4 million, according to disclosures.
Trailing Crypto.com with $1 million disclosed in expenditures is FTX, whose former CEO Sam Bankman-Fried is facing up to 115 years in prison after the Justice Department charged him with eight counts of fraud, money laundering, campaign finance violations, and conspiracy.
The Chamber of Digital Commerce, which touts itself as “the world’s leading blockchain trade association,” has also spent $1 million lobbying on issues related to several bills. One such measure is the Financial Freedom Act, which was introduced by Sen. Tommy Tuberville (R-GA) and aims to block the Labor Department from restricting investments people can choose through brokerage accounts.
“Yes, over that past year, we have seen volatility in the crypto marketplace in a similar way that the broader financial markets have seen volatility in the midst of global economic uncertainty,” Perianne Boring, the CEO of the Chamber of Digital Commerce, told the Washington Examiner.
“But to be clear, the FTX scandal has little to do with traditional market volatility, and much to do with manipulation, lack of transparency, haphazard or non-existent compliance, the list of allegations grows by the day,” said Boring. “This is precisely why the Chamber of Digital Commerce’s engagement with policymakers on Capitol Hill is important. Our industry has a global market capitalization of almost $1 trillion. It is not insubstantial, and crypto and blockchain technologies are increasingly important to the day-to-day economics of business around the globe.”
Ripple, a software company, has spent $810,000 lobbying in 2022, records show. Its policy head, Susan Friedman, told the Washington Examiner that Ripple “has always engaged with policymakers” and aims to continue to do so as the cryptocurrency industry grows.
“Continued education is key — it is critical that policymakers understand the industry to ensure financial regulations are successfully adapted to new technologies,” said Friedman. “FTX appears to be the result of no corporate governance, fraud, or both — not a failure of crypto. What we need are rational regulatory frameworks globally to guard against this in the future.”
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The other groups included in the Washington Examiner’s analysis were Atlas Power Holdings, a private equity firm that has spent $310,000 lobbying, and Stellar Development Foundation. The foundation has spent $430,000 lobbying in 2022, records show.
Heading into 2023, congressional investigations into FTX’s $32 billion meltdown are expected to ramp up. Bankman-Fried faces up to 115 years’ imprisonment after being charged by the Justice Department with money laundering, various types of fraud, and conspiracy.
Lawmakers who have long been skeptical of cryptocurrency have used the FTX situation as further ammunition to harp on their view that the industry must be swiftly regulated in the new year. On Dec. 14, Sen. Elizabeth Warren (D-MA) and Sen. Roger Marshall (R-KS) put forth a bill called the Digital Asset Anti-Money Laundering Act that would impose further bank regulations in connection to digital assets and purports to crackdown on money laundering and terrorism financing.
