Cryptocurrency is used by a fraction of the American electorate. But it’s starting to have an outsize impact on U.S. politics and policy.
The crypto industry won several eye-catching victories this month that showcased its growing influence on the levers of power in Washington — something that’s poised to expand as it prepares to spend more than $80 million on the 2024 elections. The wins come as the Federal Reserve said this week that only 7 percent of adults held or used crypto last year, a decline of 5 percentage points from 2021.
Crypto-friendly legislation moving through Congress in the last two weeks drew a surprising level of bipartisan support, surfacing household names such as Senate Majority Leader Chuck Schumer and former House Speaker Nancy Pelosi as unexpected allies, while suggesting that crypto skeptics like Sen. Elizabeth Warren may soon be isolated on the issue. Amid the rift, the Biden administration signaled a new willingness to work on policy that the industry has long sought. Meanwhile, the industry’s super PACs have made progress in boosting allies — including by helping crypto-friendly Democrats win primaries.
Republicans who were already aligning themselves with the crypto world are leaning into the embrace even further. Former President Donald Trump is increasingly pledging to support the interests of digital asset traders, and he’s starting to accept campaign contributions in crypto.
“It’s a huge moment for the crypto industry in the United States,” said David McIntosh, a former Republican lawmaker who leads the crypto-friendly conservative group Club for Growth.
The sudden burst of support for an industry with a relatively small base of users is the culmination of a yearslong effort to win legitimacy — and lighter-touch regulatory treatment — in Washington. The push, which is now backed by tens of millions of dollars in political spending funded by crypto executives and investors, is proving to be resilient in the face of major scandals that have sent industry leaders to prison and highlighted risks in what critics deride as the “Wild West” of finance.
It’s all starting to scramble U.S. politics, especially for Democrats.
“I feel like I did this before the 2008 crash,” Warren said in an interview. “I kept saying that failure to regulate a multibillion-dollar industry will not end well. I still feel that way.”
Crypto’s week in Washington illustrated a true “high watermark,” as House Financial Services Chair Patrick McHenry (R-N.C.), an industry ally, repeatedly dubbed it.
The House on Wednesday passed legislation in a 279-136 vote that would create a regulatory regime tailored for crypto, the first time either chamber of Congress has taken such a step. A stunning 71 Democrats supported the GOP-led legislation, including Pelosi, Democratic Caucus Chair Pete Aguilar and House Minority Whip Katherine Clark.
The House passed the bill just days after Schumer and 10 other Senate Democrats ignored a White House veto threat and helped pass a resolution that would repeal Securities and Exchange Commission crypto guidance that had drawn strong opposition from the industry.
The White House took a more diplomatic stance before Wednesday’s crypto bill vote. The administration said it opposed the legislation, which would restrict the SEC’s digital assets authority and empower the smaller Commodity Futures Trading Commission, but it stopped short of a veto threat. Instead, the White House said it was “eager to work with Congress” on the issue.
“Last week was just a flash of light,” House Majority Whip Tom Emmer said. “Is it possible the administration is pulling back a little bit from Elizabeth Warren?”
The new posture pleased allies of President Joe Biden who want him to embrace crypto. Mark Cuban, who has publicly lobbied Biden and his regulators to take a more industry-friendly approach, said “the administration is making strides to understand that the [U.S.] is the home of technological innovation and we need to continue that path with crypto.” Democratic Rep. Marc Veasey of Texas said Cuban’s pitch helped him decide to back pro-crypto policy this month.
The moves echo the positive crypto vibes emerging on the campaign trail. Trump recently became the first major party presidential candidate to accept crypto donations after previously calling on digital asset supporters to vote for him. His campaign attacked Biden and Warren in a statement, saying “MAGA supporters … will build a crypto army moving the campaign to victory” in the fall.
“We cannot hand this issue to Republicans,” said Rep. Wiley Nickel of North Carolina, a Democrat who privately lobbied the White House to not oppose Wednesday’s bill.
The crypto fight could endanger Democrats’ narrow Senate majority. Industry-backed super PACs that entered the year with more than $80 million are threatening to spend in the pivotal Senate races in Ohio and Montana, where Sens. Sherrod Brown and Jon Tester — both crypto skeptics — are facing tough reelection contests.
The super PACs have already shaken up an array of races. Fairshake, Defend American Jobs and Protect Progress have succeeded in boosting allies, including in House races in Maryland, New York, Texas and Alabama, and in Senate contests in California, Indiana and West Virginia.
The groups have shown a willingness to change course when candidates move in crypto’s direction. They initially threatened to spend in the Maryland Senate primary, but stayed out of the race after the leading candidates revealed to POLITICO that they were pro-crypto.
The super PAC network is closely watching the signals that Brown, Tester and Schumer are sending.
Schumer and other New York Democrats have also been lobbied by home-state interests, including New York State Department of Financial Services Superintendent Adrienne Harris and New York City-based firms. The top Senate Democrat said in a statement after backing the SEC regulation rollback that “New York State already has a strong law on the books, and they weren’t consulted on this regulation.”
Some major Democratic donors in Silicon Valley have helped crypto’s lobbying. Venture capitalist Ron Conway, a top contributor to Democratic causes whose firm has invested in crypto startups, has advocated for industry-friendly regulatory changes. Conway, who did not respond to a request for comment, has previously met with lawmakers including Pelosi alongside crypto executives and is seen by crypto lobbyists as a key conduit with top Democrats.
The crypto PACs are funded by companies that have pushed hard for the legislation Congress advanced in recent weeks, including the digital asset firms Coinbase and Ripple and the venture capital firm Andreessen Horowitz.
“This is really the first time — this year — that we’ve had a full policy and political operation as an industry here in Washington,” said Kristin Smith, CEO of the Blockchain Association, a top industry trade group. “That means having strong trade associations, having grassroots organizations, having large companies that have internal policy teams.”
Crypto advocates “have done what these special interest groups do: They lobby, and they convince people, and that’s what’s happened,” said Rep. Maxine Waters (D-Calif.), the top Democrat on the Financial Services Committee, who was left to rally opposition to Wednesday’s bill on her own after leadership said they would not whip against it.
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