How Cryptocurrency’s Financial Power and Influential Backers Shape US Elections

Cryptocurrency lobbying groups are warning U.S. political candidates that they could face defeat in elections if they do not support the industry. The recent loss of Democratic representative Katie Porter in California’s Senate primary is an example of this. To prevent Porter from being elected as a senator, wealthy participants from the cryptocurrency industry spent $10 million on advertising and campaigning, which paved the way for her Democratic colleague Adam Schiff, who is seen as more crypto-friendly, to take office in November. Cryptocurrency billionaires are providing significant support and funding for the U.S. elections. The pro-cryptocurrency Political Action Committee (PAC) Fairshake has accumulated a total of approximately $75 million for the elections, with supporters including Coinbase CEO Brian Armstrong, Gemini founders Cameron and Tyler Winklevoss, and a16z co-founder Marc Andreessen. While cryptocurrency supporters acknowledge that the possibility of bringing down one of the industry’s harshest critics, senior federal senator Elizabeth Warren, is unlikely as she is running for re-election with a relatively safe seat, they plan to use Porter’s defeat as an example to put pressure on her more vulnerable allies among Democratic senators. Kristin Smith, CEO of the cryptocurrency trade organization Blockchain Association, stated in an interview that working with Warren would make elections more difficult for candidates. Smith’s team has identified Senator Sherrod Brown, an Ohio Democrat and chairman of the Senate Banking Committee, as one of the candidates they are watching closely. The new legislation being focused on by the cryptocurrency industry aims to combat illicit finance. There are two main bills, one supported by Warren and Republican senator Roger Marshall, and another proposed by senators Mark Warner, Jack Reed, Mitt Romney, and Mike Rounds, which aims to apply the current anti-money laundering rules applicable to banks and other financial institutions to cryptocurrency companies. Criminal networks use cryptocurrency to transfer illegal funds and make transactions more anonymous. Organizations such as the Blockchain Association and the Chamber of Digital Commerce argue that the current bills will propose impractical requirements and stifle cryptocurrency innovation. The day before Super Tuesday, a participant in a “Support Cryptocurrency” rally in Los Angeles made these strong political statements. This represents a significant shift from a year ago when a series of scandals and business failures caused a reputational crisis for the cryptocurrency industry, including the conviction of prominent figure Sam Bankman-Fried (SBF) on criminal charges. After facing scrutiny from regulators and struggling to implement the technology for practical use, the other optimistic factors surrounding cryptocurrency seem to have become illusions, as regulators continue to crack down on the industry from all sides. Democratic Representative Brad Sherman of the House Financial Services Committee often questions the practicality of cryptocurrency and states that the industry’s impact on elections may be exaggerated, but its ability to invest millions of dollars in campaigns will not escape the attention of lawmakers. He stated in an interview, “Whether they actually have a decisive impact may be less significant than shooting 430-plus members of Congress, which they haven’t been involved in.” Super Tuesday was the first major test for the Fairshake PAC. Spokesperson Josh Vlasto stated that the key races they may participate in next are the Democratic Senate primaries in Michigan and Maryland, currently held by retiring Debbie Stabenow and Ben Cardin, as well as Senator Jon Tester’s race in Montana. The cryptocurrency market is rebounding largely due to the approval of a Bitcoin futures ETF by the U.S. regulatory agency SEC in January 2022, which has added legitimacy to the cryptocurrency industry. A series of business failures in 2022 ultimately led to the bankruptcy of one of the industry’s most notable companies, FTX. It will not be easy for the company to fully recover from the impact of this scandal, as its co-founder SBF was convicted of defrauding customers and is currently awaiting sentencing. As lawmakers weigh a series of bills to regulate the market, including measures to combat illicit finance and control stablecoins and cryptocurrencies tied to assets such as the U.S. dollar, other participants in the cryptocurrency industry can only rebuild relationships on Capitol Hill, and if the bills are adopted, the new rules may change how businesses operate. Meanwhile, the industry is waiting to see if the SEC will approve an ETF tracking Ethereum, the world’s second-largest cryptocurrency. Critics still remain skeptical of the industry’s ability to influence elections. They point out that some of the TV ads paid for by cryptocurrency-related PACs before Super Tuesday deliberately did not mention cryptocurrencies, but instead focused on hot-button issues like abortion and gun safety in support of Democrats, or promoted lower taxes and inflation for Republican candidates. Dennis Kelleher, President and CEO of Better Markets, an organization pushing for stronger market regulation, said, “They know the public’s view of cryptocurrency is like fool’s gold. It just turns off more voters than it turns on. But you can bet that no matter where the cryptocurrency industry is or how much money they spent, they will claim they influenced the election result and expect a victory in return.”