In the past two weeks alone, a bipartisan group of senators unveiled a proposal to hand oversight of cryptocurrency spot markets to the Commodity Futures Trading Association, the third bipartisan bill since April that would codify a role leading for the industry’s preferred regulator.
The senses. Patrick J. Toomey (R-Pa.) and Kyrsten Sinema (D-Arizona) teamed up to propose exempting crypto used for everyday purchases, like buying a sandwich, from capital gains taxes .
And this pair, with Sens. Mark R. Warner (D-Va.) and Cynthia M. Lummis (R-Wyo.), have proposed limiting the scope of a provision enacted last year that tightened tax reporting requirements on crypto transactions. . In announcing the bill, the senators included praise from eight industry representatives.
“The growing pile 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 .
Overall, the wave of crypto-friendly laws represents a dramatic turnaround from what the industry faced on the Hill a year ago.
Last August, the tougher tax enforcement provision caught crypto interests off guard when it emerged as a source of revenue in a trillion-dollar infrastructure package. The industry, which had spent $2 million on lobbying in 2020 even as the digital asset market roughly quadrupled to more than $750 billion, rallied forces from Washington to ease the requirement.
Crypto lobbyists temporarily halted progress on the package, arguing that the language that applied to the industry was too broad and would stifle innovation. They lost anyway.
The defeat proved to be galvanizing. In the year since, crypto interests have unleashed a flood of spending to quickly assemble a political influence machine.
“The industry woke up a year ago after that fight and decided it really needed to engage and educate policy makers, and now we are seeing the results of those broad efforts,” said said Aaron Cutler, a partner at the Hogan Lovells law firm and a former House Republican aide to the leadership.
Crypto Industry Scores Big Victory in Long-Awaited Senate Bill
The industry spent $8.9 million on lobbying in the first half of this year, surpassing the $7.7 million spent throughout last year, according to new analysis from the Center for Responsive Politics. The sector now has 191 lobbyists in its ranks, up from 50 two years ago, according to the analysis.
Crypto executives are spending even larger sums on campaign contributions.
So far this election cycle, they have given federal candidates more than $61 million, according to the center’s analysis. Of this sum, 97% comes from the executives of a single company, the FTX crypto exchange, which is headquartered in the Bahamas. Sam Bankman-Fried, the company’s 30-year-old chief executive, donated $38.9 million, making him the fourth largest donor in the country. Ryan Salame, co-CEO of FTX subsidiary Digital Markets, and his wife donated an additional $15 million, making him the 10th largest donor nationally. FTX did not respond to a request for comment.
“There are a handful of people in this industry who are currently wielding incredible influence via nearly limitless contributions,” said Daniel Auble, senior fellow at the Center for Responsive Politics.
Crypto Industry Plunges in Mid-Range, Raising Millions to Court Democrats
FTX, like much of the industry, has focused its lobbying efforts on ensuring that the CFTC takes a lead role in overseeing digital asset markets, as opposed to the Securities and Exchange Commission.
The latest bill enshrining the CFTC’s role, proposed last week by Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) and the panel’s top Republican, Sen. John Boozman (Ark.) , would give the agency authority over bitcoin and ethereum, which together make up about two-thirds of the cryptocurrency market.
And online exchanges for trading digital tokens, such as Coinbase, would need to register with the agency. Platforms
Stabenow said the debate over which agency, the CFTC or the SEC, takes the lead in crypto oversight is “really not the issue, because we need both.”
The bill has been widely endorsed by crypto interests, a fact Boozman noted on a call with reporters, saying it would give the measure momentum in the Senate. “It makes it a lot easier for members when you don’t have friends everywhere,” he said.
Tyler Gellasch, executive director of the trade investor group Healthy Markets Association, said there was an urgent need for the industry to establish the CFTC as its primary watchdog. “Getting away from the SEC as much as possible should be the industry’s number one priority, because the SEC has dozens of rules developed over decades to protect investors,” he said. “If SEC rules applied to crypto, many industry practices would become illegal and much of the profits would disappear.”
But crypto insiders and watchers agree that lawmakers have only just begun what will likely be a lengthy process to write an industry rulebook.
“Right now it feels like the SEC is falling behind on this, and their perspective on this is not being heard in the legislation,” said Ian Katz, managing director of Capital Alpha Partners, a Washington policy analysis firm. “But there’s a lot of this game that needs to be played, and it’s not over.”
Kristin Smith, executive director of the Blockchain Association, said a new Congress will have to work out the details. For now, she said her group is excited the industry can point to three bipartisan bills, each favoring the CFTC, and crypto interests shaping the debate. “It’s definitely progress,” she said, “and I don’t think it’s going to stop.”