A bill currently before Congress would move some federal oversight of crypto from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC), a culmination of an intense lobbying campaign by the industry, The Washington Post reported.
The industry has spent more than $60 million to shape federal policy since the start of 2021, according to filings analyzed by the Post and data from OpenSecrets and Public Citizen, two money-in-politics watchdogs. Industry executives, investors and workers, along with their companies’ official political operations, have also contributed nearly $90 million to campaigns and other groups over the last two elections, according to the analysis.
Last week, the House of Representatives voted to advance the Financial Innovation and Technology for the 21st Century Act, known as FIT21, the first major piece of legislation on cryptocurrency to clear either chamber of Congress. Crypto companies Coinbase and Ripple, along with lobbying groups such as the Blockchain Association and the Crypto Council for Innovation, helped House Republicans devise the legislative approach, then lobbied for its passage.
The SEC is considered to be a more aggressive regulator, and the CFTC is seen by critics to be weaker, friendlier to industry and underfunded, the Post reported.
“The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear,” SEC Chair Gary Gensler said in a statement. “It’s because many players in the crypto industry don’t play by the rules.”
The Senate has not said if it plans to consider the legislation this year. In a statement, the White House said it opposed the proposal.
After the collapse of crypto exhcange FTX, the number of registered industry lobbyists in Washington quadrupled from 58 in 2020 to more than 270 by the end of last year, federal data showed.
“There needs to be an organized, concerted effort to engage with Washington,” said Kristin Smith, chief executive of the Blockchain Association, which represents many of the largest crypto platforms and investors, in an interview with the Post. She added that it “was very clear in the post-FTX collapse that the crypto industry was in the penalty box.”
“U.S. regulators have taken sporadic and ambiguous enforcement actions based on decades-old rules designed for a system that looks more and more like the past,” Paul Grewal, the chief legal officer for Coinbase, told lawmakers at a hearing in March 2023, expressing concern that the patchwork U.S. legal system had allowed for the rise of unregulated foreign competitors, the Post reported.
FIT21 would create a pathway for cryptocurrency companies to be regulated primarily by the CFTC, but it would not increase the body’s budget, and would also relax some of the financial disclosures that crypto firms must provide customers while limiting when investors could sue for abuse, according to the Post.
The bill passed on a bipartisan 279-136 vote. But some Democrats recalled the 2008 financial crisis, when Washington failed to prevent the country’s largest banks from underwriting risky mortgages. Roughly6 million people lost their homes in the resulting financial crisis and recession, and the government spent trillions to recover.
“Before the 2008 crash, when I talked about how inadequate our oversight of the banks was, I kept saying, it all looks okay today, but this will end badly,” Sen. Elizabeth Warren (D-Mass.) said in a recent interview. “I feel that way today. It may look okay out there right now, but inviting crypto deeper into our economy without putting adequate regulations in place will end badly.”
In response, crypto companies argued that members of Congress simply do not understand the new, fast-paced industry.