Cryptocurrency Political Spending Raises Concerns in U.S. Politics, New Report Warns
A comprehensive report from the Center for Political Accountability (CPA) warns of significant dangers posed by the increasing political funding from cryptocurrency companies in the United States. As these companies escalate their political contributions and with former President Donald Trump leading a retreat in regulatory measures while promising to establish a “crypto strategic reserve,” the landscape of American politics appears increasingly complex and precarious.
Report Highlights Unchecked Spending Risks
According to the CPA’s report, the rising political spending from cryptocurrency firms exemplifies “profound risks” stemming from unchecked corporate political expenditure, particularly within the unpredictable cryptocurrency sector. The CPA, a non-profit organization focused on advocating for corporate political transparency, states that the drive for deregulation, paired with indiscriminate political donations, is raising alarm bells among regulators. It has contributed to a decline in investor confidence and a deterioration of public trust in the future viability of these businesses.
The definition provided by CPA describes cryptocurrency—often referred to as "crypto"—as a financial technology developed in the early 2010s. It enables decentralized, peer-to-peer transactions that bypass traditional banking institutions, all recorded in heavily encrypted digital books.
Substantial Spending During the Election Cycle
The report reveals that cryptocurrency firms have significantly increased their political contributions, with expenditures exceeding $134 million during the upcoming 2024 election cycle alone. Companies like Kraken and Coinbase made headlines by each donating $1 million to the Trump Inaugural Fund following the election. As Trump took office, the Securities and Exchange Commission (SEC) rescinded lawsuits against Kraken, which had been accused of operating as an “unregistered securities exchange,” and Coinbase.
These regulatory shifts came after Trump’s inauguration, during which he had pledged to remove Gary Gensler from his leadership position at the SEC. Gensler, confirmed as SEC chair under the previous Biden administration, was seen as unfavorable by crypto advocates.
Influence of Political Spending
Bruce Freed, the president of CPA, emphasized the significant influence of cryptocurrency spending on election outcomes. He pointed to the defeat of progressive representative Katie Porter—a skeptic of cryptocurrency—against more crypto-friendly candidates like Adam Schiff in California’s Senate primary. Additionally, in Ohio, incumbent Democrat Sherrod Brown, who had served as the chair of the Senate banking committee and voiced skepticism toward cryptocurrency, lost to Republican Bernie Moreno, which Freed attributed to heavy spending from the crypto industry.
Freed remarked, “Crypto money played such an important role in the election,” underscoring the immediate impact of substantial crypto contributions on the political landscape.
Growing Concern Over Regulation
Ben Schaffzin, assistant director of research at CPA and main author of the report, noted that cryptocurrency companies have far surpassed other industries in terms of external spending for the election cycle. He expressed concern over the rapid movements by the current administration, particularly in establishing a “crypto strategic reserve,” a concept Trump ardently supports. The former president has framed the creation of a U.S. Crypto Reserve as a means to protect and propel the crypto industry following years of regulatory scrutiny under the Biden administration.
Following the signing of an executive order to establish the reserve, Trump held a “cryptocurrency summit” at the White House, which included a reception hosted by Coinbase.
The Role of Appointments and Possible Conflicts of Interest
The CPA report also highlights the appointment of David Sacks, a South African entrepreneur and crypto investor, as “crypto czar.” While Sacks has reportedly divested his personal crypto assets, there remain questions about potential conflicts of interest due to his connections to an investment firm that could benefit financially from the government’s large-scale crypto purchases.
Jeanne Hanna, CPA vice-president of research and co-author of the report, commented that the prevalent bipartisan nature of cryptocurrency spending complicates the outlook on regulatory actions, suggesting the overall environment may not have significantly shifted had Vice President Kamala Harris assumed the presidency.
Historical Context and Global Implications
The report references recent events in Argentina where a rightwing populist, Javier Milei, promoted a cryptocurrency known as $Libra, which rapidly lost considerable value, leading to nearly $4.6 billion in losses. This prompted a series of fraud complaints against Milei’s administration, underscoring the systemic risks illustrated by the CPA report.
Emphasizing the urgency of these challenges, Schaffzin argued that the current administration should heed these warning signs, asserting that the promotion of cryptocurrency by leaders lacking an understanding of its risks could prove dangerous for consumers unfamiliar with the inherent pitfalls.
Conclusion
As cryptocurrency spending continues to shape the political landscape, the implications for both regulation and investor confidence remain uncertain. The CPA calls for greater transparency and oversight to safeguard the interests of both the public and the financial sector in navigating this increasingly volatile environment.
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