Just in the past two weeks, a bipartisan group of senators unveiled a proposal to hand over oversight of spot cryptocurrency markets to the Commodity Futures Trading Association, the third bipartisan bill since April that would codify a leading role for the industry’s preferred regulator.
Sens. Patrick J. Toomey (R-Pa.) and Kyrsten Sinema (D-Ariz.) have teamed up to introduce an exemption for crypto used for everyday purchases, like buying a sandwich, from capital gains taxes.
And that pair, along with Sens. Mark R. Warner (D-Va.) and Cynthia M. Loomis (R-Wyo.), have proposed limiting the scope of a provision signed into law last year that tightens tax reporting requirements for crypto transactions. In announcing the bill, the senators included praise from eight industry representatives.
“The growing stack of legislative proposals is a signal that Washington is taking crypto seriously, and that’s a good thing for all parties,” said Sheila Warren, CEO of the Crypto Council for Innovation, an industry trade group.
Taken together, the wave of crypto-friendly legislation represents a dramatic reversal from what the industry faced on the Hill a year ago.
Last August, the provision mandating stricter tax enforcement caught cryptocurrency interests off guard when it emerged as a source of revenue in a trillion-dollar infrastructure package. The industry, which spent $2 million on lobbying in 2020 even as the digital asset market quadrupled to more than $750 billion, is mobilizing Washington to soften the requirement.
Crypto lobbyists temporarily halted progress on the package, arguing that the language applied to the industry was too broad and would stifle innovation. They lost anyway.
Defeat turned out to be exciting. In the year since, crypto interests have unleashed a flood of spending to hastily assemble a political influence machine.
“The industry woke up a year ago after this fight and decided they really needed to engage and educate policymakers, and now we’re seeing the results of that broad effort,” said Aaron Cutler, a partner at the law firm Hogan Lovells and a former Republican leadership aide. in the House of Representatives.
The crypto industry scores a major victory during 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 a new analysis by the Center for Responsive Politics. The sector currently has 191 lobbyists in its ranks, up from 50 two years ago, the analysis shows.
Cryptocurrency executives are splashing even bigger sums on campaign contributions.
So far this election cycle, they have given federal candidates more than $61 million, the center’s analysis found. Of that amount, 97 percent came from the leaders of a single company, Bahamas-based crypto exchange FTX. Sam Bankman-Fried, the company’s 30-year-old CEO, donated $38.9 million, making him the fourth-largest donor in the country. Ryan Salame, co-CEO of subsidiary FTX Digital Markets, and his wife gave another $15 million, making them the top 10 donors nationally. FTX did not respond to a request for comment.
“There are a handful of people in this industry who right now wield incredible influence through almost unlimited contributions,” said Daniel Auble, senior research fellow at the Center for Responsive Politics.
The crypto industry is diving into the midterms, raising millions to woo Democrats
FTX, like much of the industry, has focused its lobbying efforts on ensuring that the CFTC takes the lead in overseeing digital asset markets, as opposed to the Securities and Exchange Commission.
The latest bill to entrench the CFTC’s role, proposed last week by Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) and the panel’s top Republican, Sen. John Boozman (Arkansas), would hand the agency authority over bitcoin and ethereum , which together make up roughly two-thirds of the cryptocurrency market.
And online exchanges trading digital tokens, such as Coinbase, will have to register with the agency. The platforms
Stabenow said the debate over which agency, the CFTC or the SEC, takes the lead in crypto oversight “isn’t really the point, because we need both.”
The bill has received broad support from crypto interests, a fact Boozman noted in a call with reporters, saying it will give the measure a boost in the Senate. “It makes it a lot easier for members when you don’t have friends who are all over the place,” he said.
Tyler Gelash, executive director of the investment trade group Healthy Markets Association, said there is an urgent need for the sector to establish the CFTC as its best watchdog. “Getting as much out of the SEC as possible should be the number one priority for the industry because the SEC has dozens of rules built up over decades to protect investors,” he said. “If SEC rules apply to crypto, many of the industry’s practices become illegal and much of the profits disappear.”
But crypto insiders and observers agree that lawmakers have only just begun what is likely to be a drawn-out process to write a rulebook for the industry.
“Right now, the SEC seems to be lagging behind on this and their input on this is not being heard in the legislation,” said Ian Katz, managing director of Capital Alpha Partners, a policy analysis firm in Washington. “But there’s a lot of this game to be played and it’s not over.”
Christine Smith, executive director of the Blockchain Association, said a new Congress would have to work out the details. So far, she said her group is excited that the industry can point to three bipartisan bills each in favor of the CFTC, and crypto interests are shaping the debate. “It’s definitely progress,” she said, “and I don’t think it’s going to slow down.”