After two elections Democratic Sen. Sherrod Brown, who bucked Ohio's rightward trend, is clinging to the narrowest poll lead. If he loses to unpopular car salesman Bernie Moreno next month, cryptocurrencies could be blamed.
Cryptocurrency companies are pouring tens of millions of dollars into the race through super PACs in response to Brown's scathing criticism of the industry as chairman of the Senate Banking Committee.
Their leading role in the race shows how much money speaks, regardless of “coin”.
Cryptocurrencies have been in the political doghouse since the debacle of the Sam Bankman Fried FTX scam two years ago, but in May this year they poured money into Congressional elections and became a top legislative priority. It attracted broad bipartisan support.
“Really, the only way they can continue their fraud here is to get enough politicians to change the law.”
If cryptocurrencies can defeat Brown next month, critics say agendas such as neutralizing the Securities and Exchange Commission and opening the door to more traditional banks holding cryptocurrencies could be even more successful. I'm warning you.
“They're losing in the courts, they're losing in the court of public opinion, so really the only way they can continue their fraud is to get enough politicians to change the law.” said Dennis Kelleher, CEO of Financial Reform. Better Market, a nonprofit. “The key is to eliminate those who oppose us.”
mad money
The cryptocurrency industry, which operates through a cluster of blandly named super PACs, accounted for nearly half of corporate donations in this year's elections as of August. Fairshake, a single pro-crypto super PAC, raised more than $200 million and spent more than $132 million this cycle.
Fairshake and its affiliates have spent millions of dollars supporting Democratic Senate candidates Ruben Gallego of Arizona and Elissa Slotkin of Michigan, as well as House candidates on both sides of the aisle. I've spent it.
Nowhere is the impact of cryptocurrencies more evident than in Ohio. Last election cycle, a super PAC funded by Bankman Fried received support from the current congressman. Ohio Democrat Shontel Brown defeats progressive Nina Turner.
This year, the influx of cryptocurrencies into the state has become even more intense. A recent Washington Post analysis found that FairShake affiliate Defend American Jobs spent more than $38 million on ads promoting Mr. Moreno and criticizing Mr. Brown.
A spokesperson for FairShake did not respond to a request for comment, but the reason for the attack ad is abundantly clear. Long before Bankman Fried was ousted, Brown had been a vocal critic of cryptocurrencies.
“Stablecoins and crypto markets are not really a replacement for our banking system,” he said in December 2021. “They are mirrors of the same broken system, with even less accountability and no rules at all.”
Super PAC spending on races that could hand control of the Senate to Republicans has displeased some Democratic industry leaders. A spokesperson for cryptocurrency exchange Coinbase, one of the PAC's biggest donors, said the PAC's spending decisions are made independently and has invested billions of dollars in the crypto industry. Venture capital firm Andreessen Horowitz made similar claims.
Coinbase CEO Brian Armstrong said in a blog post that the company is making the donation to gain “regulatory clarity.”
“Unless candidates send a clear message that anti-crypto is bad politics, they will not be taken seriously by crypto voters,” Armstrong said in June.
Taming the SEC
But it's not just clarity that Armstrong and other industry players are looking for. They also want specific laws. “Introducing the wrong kind of regulation is worse than not introducing it at all,” Armstrong said last month.
At the top of the list is a bill called the 21st Century Financial Innovation and Technology Act (FIT 21), which would reclassify many types of cryptocurrencies as commodities rather than securities.
This vague-sounding change has far-reaching implications. Observers generally believe that the rules for commodities (such as corn and wheat) are weaker than those for securities such as stocks and bonds.
“The CFTC was created to regulate corn futures.”
Equally important, cryptocurrency commentators say, will be a corresponding change in oversight. Under Congress' legislation, virtual currencies would be transferred from the SEC to the Commodity Futures Trading Commission, an organization with fewer resources and a leaner regulatory staff.
“The CFTC was created to regulate corn futures,” said Mark Hayes, senior policy analyst for Americans for Financial Reform and Demand Progress. “They're looking at sophisticated hedge funds and agricultural traders, and they're not designed to protect your cousin or your grandma who's logged into her phone.”
SEC Chairman Gary Gensler, who has emerged as a figurehead for the crypto industry, warned of the impact of the bill in a statement after it passed the House with bipartisan support in May. He said scammers may call themselves cryptocurrency companies to avoid government oversight.
“The crypto industry's record of failure, fraud, and bankruptcy is not because there are no rules or the rules are unclear,” Gensler said. That's because many players in the cryptocurrency industry don't follow the rules. ”
open the bank
So far, the cryptocurrency industry's favorite bill has not been considered in the Senate, but Majority Leader Chuck Schumer (D.N.Y.) recently made supportive comments.
Gensler also warned of the potential for further contamination of U.S. capital markets. The issue arose in 2022, when SEC officials sought to limit the risk with guidance advising banks and other financial institutions to treat cryptocurrencies as liabilities rather than assets on their balance sheets.
The SEC's belief was that cryptocurrencies were too vulnerable to theft, fraud, and loss of wallet keys, but the crypto industry and bankers voiced their condemnation.
Industry advocacy group Stand With Crypto said the guidance would “disincentivize banks from offering digital asset custody services at scale and limit banks' ability to develop secure and innovative use cases for blockchain technology.” said.
The guidance was not binding, but for banks that decided to follow it, it meant they needed to increase their other holdings in order to hold cryptocurrencies for their customers.
Congress passed a bill to override the guidance, but President Joe Biden vetoed it in June. For now, this guidance continues to apply. However, the crypto industry still has big ambitions to make it easier for traditional financial institutions to own cryptocurrencies.
“They also want some of the other non-bank entities that provide crypto custody services to go green,” said Hayes, a policy analyst with Americans for Financial Reform. .
“Stable” coin
Sometimes forgotten in the aftermath of the Bankman and Fried saga is the story of an earlier crash involving TerraUSD, a so-called stablecoin that was supposed to maintain a 1:1 peg to the dollar.
In short, it wasn't. Investors looking to get into cryptocurrencies in the safest way possible had their savings wiped out.
“A stablecoin is really a crypto money market fund with all the risks and dangers of a money market fund.”
TerraUSD is an “algorithmic” stablecoin, meaning it is not backed by real assets. One of the industry's biggest hopes in Congress is passing legislation authorizing stablecoins backed by tangible assets.
Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee and frequent cryptocurrency skeptic, last month floated the idea of reaching a “big deal” with Republicans during a post-election lame duck session. surfaced.
Stablecoins appear to have more legislative legs than other crypto proposals, but skeptics like Better Markets' Kelleher are cautious. He compared them to money market funds that had to be saved from collapse by the Federal Reserve in 2008 and 2020.
“A stablecoin is really just a crypto money market fund with all the risks and dangers of a money market fund,” he said. “However, it has so much more to it, as it is a crypto product that is not only unregulated but also opaque.”
Editor's note: In September 2022, The Intercept received $500,000 from Sam Bankman Fried's Foundation Building a Stronger Future as part of a $4 million grant to fund pandemic prevention and biosafety coverage. I received the dollar. That subsidy has been stopped. In accordance with our general practice, The Intercept disclosed the funds in subsequent reporting on Bankman Fried's political activities.
