New Report Highlights Risks of Crypto Influence in American Politics

A recently published report from the Center for Political Accountability (CPA) raises alarms about the increasing political influence of cryptocurrency companies in the United States, warning of "profound risks" associated with heightened corporate political spending in this volatile sector. The report notes that these developments coincide with shifts in regulatory landscapes overseen by former President Donald Trump, who has made promises to create a "crypto strategic reserve."

Concerns Over Corporate Spending

The CPA’s report focuses on the implications of what it describes as unchecked corporate political spending within the cryptocurrency industry. The report emphasizes that the aggressive push for deregulation, coupled with opaque and unaccountable financial contributions, poses serious concerns for regulators and has contributed to eroded investor confidence in the long-term viability of crypto companies.

"These trends illustrate the profound risks that unchecked corporate political spending presents, particularly within the volatile and often unpredictable cryptocurrency industry," the report states. The CPA defines cryptocurrency, or "crypto," as a monetary technology that emerged in the early 2010s, designed to facilitate decentralized, peer-to-peer transactions without reliance on traditional financial institutions.

Record Political Contributions from Crypto Companies

In anticipation of the 2024 election, cryptocurrency firms have ramped up political contributions, reportedly spending over $134 million at both national and state levels. Notably, companies like Kraken and Coinbase contributed significant sums to the Trump Inaugural Fund after the election, a move that has drawn scrutiny given the subsequent regulatory shifts.

Following Trump’s inauguration on January 20, both Kraken and Coinbase saw legal actions against them by the Securities and Exchange Commission (SEC) dropped—an agency that had previously claimed Kraken operated as an unregistered securities exchange. The report highlights that these moves align with Trump’s promise to remove former SEC chair Gary Gensler, who had implemented strict regulations against the cryptocurrency industry.

The Political Power of Cryptocurrency

Bruce Freed, president of the CPA, expressed concern about the influence of cryptocurrency money in political campaigns and elections. He points to instances where substantial spending by crypto firms directly affected the outcomes of races. For example, during the California Senate primary, heavy crypto spending appeared to favor Adam Schiff, a crypto-advocate, over his opponent, Katie Porter, a skeptic of the technology. Similarly, in Ohio, Bernie Moreno, a crypto-friendly Republican, defeated incumbent Democrat Sherrod Brown, who had been critical of the industry.

"Crypto money played such an important role in the election," Freed noted, underscoring the rapid changes in regulatory attitudes following shifts in political power.

Trump’s Expedient Moves in Cryptocurrency Policy

As Trump maneuvers to reshape the crypto landscape, he recently signed an executive order aimed at establishing a "US Crypto Reserve." He claims that utilizing taxpayer money for this initiative will bolster the cryptocurrency industry, which he argues has endured "corrupt attacks" from the Biden administration. In a bid to position the U.S. as the "Crypto Capital of the World," Trump held a cryptocurrency summit at the White House, shortly after signing the executive order.

The CPA report also mentions Trump’s appointment of David Sacks, a prominent crypto investor, as the "crypto czar." Although Sacks has reportedly divested some of his personal crypto holdings, uncertainty remains about his continued involvement with his investment firm, raising questions about potential conflicts of interest as the administration moves to establish a cryptocurrency reserve.

Comparisons to International Crypto Scandals

The report highlights the importance of careful oversight in the cryptocurrency sector by drawing parallels to events in Argentina, where President Javier Milei became embroiled in controversy after promoting a fraudulent cryptocurrency. The ensuing fallout cost investors nearly $4.6 billion, prompting government investigations and calls for impeachment. The CPA warns that the U.S. could face similar dangers if the current trends of deregulation and corporate influence in politics continue unchecked.

Ben Schaffzin, CPA’s assistant director of research and primary report author, warned about the potential consequences, stating, "Preaching this stuff from the top… is extremely dangerous." The researchers emphasize that the intersection of cryptocurrency and politics not only raises concerns about financial stability but also threatens to undermine public trust in democratic processes.

In conclusion, the CPA’s report serves as a stark reminder of the implications of merging corporate interests with political influence in the burgeoning cryptocurrency sector, urging regulators and lawmakers to tread cautiously amid an evolving landscape.