Analysis: The U.S. crypto industry comes to Washington but faces an uphill struggle. A struggle over the federal budget and a Senate crackdown on the use of cryptocurrency for money laundering is expected to overshadow the efforts of cryptocurrency businesses to advance industry-friendly legislation as they arrive on Capitol Hill on Wednesday.
As part of a grassroots lobbying effort orchestrated by Coinbase (COIN.O), the largest U.S. crypto exchange, and Stand With Crypto, a non-profit it formed, dozens of executives from digital asset firms are meeting with lawmakers and their staffs on Wednesday.
Crypto advocates hope to persuade Congress to enact two significant legislation passed by the House Banking Services Committee in July that would help clarify which current banking regulations apply to the sector.
However, with politicians preoccupied with preventing a government shutdown and other competing laws, such as the Farm Bill and National Defense Authorization Act (NDAA), that must pass this year, the business may find it difficult to be heard.
The general attorney and chief compliance officer of cryptocurrency investment management Bitwise, Katherine Dowling, stated that there are “a mind-boggling number of competing areas,” but that “we need to keep pounding the table.” The organization is one of many requesting that the U.S. Securities and Exchange Commission approve a spot bitcoin exchange-traded fund.
In Washington, cryptocurrency businesses have been developing to fend off increasing regulatory scrutiny, particularly from the SEC, which claims the sector has been breaking the law. After the SEC sued Coinbase and rival Binance in June for allegedly neglecting to register tokens, allegations they deny, lobbying increased.
After spending $21.6 million in 2022, the sector spent over $13 million on federal lobbying during the first half of 2023, putting it on course for yet another record year. At $1.4 million, Coinbase was the most expensive.
According to a spokeswoman, Brian Armstrong, CEO of Coinbase, will meet with Democrats and Republicans from both chambers of Congress on Wednesday as part of the crypto delegation. It also has a representative from OpenSea, the premier non-fungible token exchange.
Kara Calvert, head of U.S. policy at Coinbase, said of the crypto industry: “Everyone wants to make sure that what they’re doing isn’t going to be erased by the government.”
A representative for OpenSea said the firm “hope(s) that a collaborative approach” to regulation would stimulate innovation and safeguard consumers.” The spokesperson added that the company is pleased that legislators are interested in NFTs.
This month, Coinbase also started a marketing campaign featuring billboards in Washington and online calls to action for cryptocurrency users to tell their representatives in Congress to enact laws regulating the industry.
According to Mark Hays, a senior policy analyst at Americans for Financial Reform and Demand Progress, the result is questionable.
“I’m not sure if the industry’s efforts to bootstrap a crypto grassroots campaign out of thin air will translate into something that’s going to have political impact,” the author writes.
“THE LAST THING WE NEED”
The July proposals would limit the power of the SEC by defining whether a cryptocurrency is a security or a commodity. A different law would establish federal regulations for stablecoins or tokens linked to established assets.
The next stage is for the measures to either be submitted to the Senate or be considered by the whole House. A House vote by the end of the year is conceivable, but the Senate, where industry-friendly crypto legislation has stalled, offers a less optimistic view.
Instead, both sides of the political spectrum are committed to limiting the use of cryptocurrencies for terrorist financing and money laundering. The Senate approved the NDAA in July with an amendment that increased oversight of anonymous cryptocurrency transactions.
Additionally, Sherrod Brown of Ohio, chair of the Senate Banking Committee, has not shown much interest in prioritizing moving the House proposals forward.
In a statement to Reuters, Brown said, “The last thing we need is for the crypto industry to write their own rulebook — too many Ohioans have been burned by fraud and scams.”
“We need a set of regulations for cryptocurrencies that safeguard our economy and the hard-earned cash of Ohioans.”
Nevertheless, Coinbase is stepping up its efforts in Ohio, where Brown is running for re-election next year, with neighborhood-level activities bringing attention to the sector’s contribution to the regional economy.
According to Ian Katz, managing director of policy research company Capital Alpha Partners, industry-backed crypto legislation in the foreseeable future is improbable without Brown’s backing. “It’s hard to see it happening if it doesn’t seem urgent and the chairman of the relevant committee isn’t that into it.”
