This week, a chapter closed on one of the more outlandish crypto crimes we’ve seen (which is saying a lot for crypto): a couple of internet influencers pulled off a massive crypto heist that fueled their lavish lifestyle, leading to the Department of Justice’s largest asset seizure in history.
“Almost all of the money that was spent in the elections came from a handful of wealthy donors from Silicon Valley,” said [Mark] Hays, [senior policy analyst] with American for Financial Reform. “They did not come from rank-and-file voters.”
“It means that people are going to be more vulnerable to an industry that is rife with fraud, abuse, market manipulation and cyber-breaches,” said Patrick Woodall, the managing director for policy at Americans for Financial Reform, which advocates for stronger financial regulations. “This is an industry that is extremely volatile, where people take big losses, where market manipulation by insiders is very prevalent.”
Crypto tycoons are storming into U.S. politics and attempting to reshape how we choose our elected officials. And the industry remains mostly controlled by a small group of very wealthy people even though fewer than one-sixth of people have ever owned any cryptocurrency. But crypto tycoons are pouring money into politics, aiming to bypass regulatory oversight, consolidate their power, and restructure American politics for their own benefit.
Cryptocurrency promises a high-tech opportunity to make buckets of money, but like most get-rich-quick schemes, rip-offs are ubiquitous. The crypto industry is rife with scams, hustles akin to stock swindles, cyberbreaches, and other crimes that can easily separate investors and consumers from their money.
The Senate Agriculture Committee is developing legislation aimed at closing the regulatory oversight gap that the cryptocurrency lobby insists is a problem. True, the crypto industry is highly volatile and riddled with scams that expose those that buy cryptocurrencies and tokens to substantial financial losses. But that’s a problem of enforcing existing rules, not regulation. The proposed bill purports to provide regulatory guardrails to this crypto Wild West, but ultimately would give a federal imprimatur to the crypto industry while only offering the patina of the necessary investor and market safeguards needed to protect vulnerable investors.
“Despite the industry’s rhetoric around this, the shift in position from policymakers in Congress and other parts of Washington is not based on the substance of the industry’s policy arguments,” said Mark Hays, senior policy analyst at Americans for Financial Reform, a nonprofit advocating for financial reform, and Demand Progress, a nonprofit progressive advocacy group. “The industry likes to say that this is true proof that there’s a so-called crypto voter, that crypto is a major election outcome or a major election issue. But I just feel like it’s sort of the same old pay-to-play Washington politics,” Hays added.
The cryptocurrency industry’s lobbying efforts and hundreds of millions in campaign spending failed to generate enough congressional support to override President Biden’s veto of the Republican House’s effort to roll back Securities and Exchange Commission guidance designed to reduce the risks crypto assets can pose to investors and the market. Consumer protection advocates welcomed the vote as a good outcome for investor protection.
The cryptocurrency bill passed by dozens of House Democrats and most Republicans at the behest of a free-spending industry lobby lacks effective protections for consumers, establishes weak rules for this fraud-ridden industry and contains loopholes that could undermine regulatory safeguards for all investors and consumers. The influx of crypto political spending this election year – notably millions in negative ads in California’s Senate primary – loomed large in this vote. Crypto super PACs, largely financed by a handful of wealthy Silicon Valley tech donors, have pledged to spend tens or even hundreds of millions of dollars this election cycle.
As the House meets this Wednesday to vote on a bill that would create a new federal framework for crypto regulation, labor unions, consumer and investor protection organizations and experts are raising the alarm about the bill’s potential to cause serious consumer and investor harm. Americans for Financial Reform and Demand Progress joined more than 30 national and state organizations and academic scholars and thought leaders with financial regulatory expertise in sending a letter to Congress expressing opposition to H.R. 4763, The Financial Innovation and Technology for the 21st Century Act (“FIT” Act).