Bitcoin fans are suddenly a political force6 min read . Updated: 16 Aug 2021, 06:45 PM IST
- A tax provision in the infrastructure bill brought the usually fractious cryptocurrency coalition together
A clash over tax rules for digital currencies like bitcoin turned into a political coming-of-age moment for the cryptocurrency industry, galvanizing a usually fractious coalition of investors, exchanges, financiers and social-media influencers.
In public, Ashton Kutcher, Elon Musk and Square Inc. Chief Executive Jack Dorsey brought the Twitter heat over a provision in the $1 trillion infrastructure bill seeking to expand and strengthen tax enforcement of crypto transactions. That helped prompt tens of thousands of followers to call members of Congress.
Behind the scenes, lobbyists, trade-group officials and executives at crypto companies hopped on Google Meet every few hours to coordinate Congressional outreach and tracked legislative contacts in a shared spreadsheet.
The group enlisted the help of Sens. Ron Wyden (D., Ore.), Pat Toomey (R., Pa.) and Cynthia Lummis (R., Wyo.), who pushed for a more industry-friendly approach. It even convinced the author of the original cryptocurrency language in the bill, Sen. Rob Portman (R., Ohio), to narrow the scope of who is considered a broker of digital assets. But that campaign failed when a single senator blocked a change over an unrelated matter.
While the crypto industry wasn’t able to change the Senate legislation, the unified effort vividly illustrated the young industry’s growing influence in Washington and finance—and gave enthusiasts a playbook for future fights.
“The crypto community has really kind of come out as a powerful constituent," Brian Armstrong, chief executive of cryptocurrency exchange Coinbase Global Inc., said on an earnings call last Tuesday. “They’re now actually becoming a vocal participant in the policy efforts around the U.S."
Crypto lobbyists say they may yet prevail when the House takes up the infrastructure legislation next month, or when the Internal Revenue Service implements the new rules afterward. Several lawmakers also have discussed stand-alone legislation that defines cryptocurrency brokers more narrowly than the provision in the infrastructure bill.
As Securities and Exchange Commission Chairman Gary Gensler made clear when he recently compared cryptocurrency to the “Wild West," more U.S. regulation looms. But those pushing for a government crackdown on crypto now know their opponents are able to mobilize in a way they hadn’t in earlier years.
“The infrastructure fight shows that crypto now has a voice in D.C.," said Andrew Park, a senior policy analyst at Americans for Financial Reform, which advocates for tighter regulations and more tax liability in cryptocurrency. “It’s still very nascent. They don’t have the relationships that more established industries have. But they made their voice heard."
To amplify that voice, cryptocurrency lobbying is escalating rapidly, public records show.
Crypto companies and organizations spent roughly $2.3 million in the six-month period that ended June 30—about double what they spent a year ago.
In the past year, five cryptocurrency companies and organizations have hired federal lobbyists for the first time, the records show. And the companies and groups have begun hiring advisers with relationships in Washington.
Faryar Shirzad, a former national security, commerce and trade official in Republican and Democratic administrations, became chief policy officer of Coinbase in June, after 15 years in the government-affairs division of Goldman Sachs Group Inc. Julie Stitzel, a former official at the U.S. Chamber of Commerce, joined Square this spring as the bitcoin policy lead for its Cash App digital wallet.
“If there’s one thing that explains what’s different now and the last seven years, a lot of firms, after a lot of false starts, have hired people in D.C.," said Jerry Brito, executive director of Coin Center, a nonprofit cryptocurrency policy group founded in 2014. “We now have counterparts that we can coordinate with."
The community around bitcoin, the original and best-known cryptocurrency, first made tentative steps into Washington a little less than a decade ago. Back then, if lawmakers thought of bitcoin and its ilk at all, it was almost entirely as vehicles for illicit transactions such as sex and weapons trafficking. The policy shop founded in 2012, Bitcoin Foundation, struggled to gain traction amid internal scandals and frequent personnel changes.
In those early years, Todd White, a lobbyist with the firm Rulon & White Governance Strategies, said he couldn’t convince cryptocurrency companies they needed help in Washington.
“The industry itself did not understand the power of lobbying. They just woke up in the last couple of weeks, and now there’s an opportunity to really morph," said Mr. White, who now represents a new group called Government Blockchain Association.
Rep. Mike Conaway, an eight-term Texas Republican who didn’t seek re-election last year, is now registered to lobby for Ripple Labs Inc., a cryptocurrency startup. Howard Schweitzer, former general counsel of the Export-Import Bank and chief operating officer of the government’s TARP program, lobbies for Bitcoin Association for BSV, an industry group that says it supports an offshoot of bitcoin.
Like the decentralized currencies it embraces, the industry doesn’t have a singular voice in Washington. And the libertarian roots of the bitcoin movement made many of its adherents wary and disdainful of anything involving the government, even as its underlying technology caught on in Silicon Valley, Wall Street and corporate America.
Some of the lobbyists conceded those dynamics have been problematic.
The Chamber of Digital Commerce, an industry group started in 2014, rankled many of its members when it invited banks, consulting firms and tech companies that had only marginal attachments to cryptocurrencies to join its ranks. In 2020, Coinbase, the largest crypto exchange in the U.S., left the Blockchain Association, a separate industry group the company helped found two years earlier. The schism occurred after the association granted membership to a Coinbase rival, Binance.US, whose affiliates ran into a host of regulatory issues abroad.
That fragmentation and a lack of resources helped explain why many in the industry were unaware of and unprepared for the infrastructure-bill provision introduced by Mr. Portman. Some groups, including the Chamber of Digital Commerce, spoke frequently with members of Mr. Portman’s staff as the provision was being crafted, while others, including Coin Center, didn’t.
Still, there were clues something like the measure was in the offing. In May, the Treasury Department said in a report that it hoped to raise additional revenue in the following fiscal year by expanding the information that cryptocurrency brokerages have to report to the government to crack down on tax evasion.
Once Mr. Portman’s provision was made public in late July, though, the disparate crypto groups joined together. A joint statement calling the provision’s requirements “unworkable" attracted five signatories, including Coinbase and the Blockchain Association, which reconciled.
Coinbase also reached out to, and found a sympathetic ear in, Mr. Wyden, who had a record of defending emerging technology and individual privacy. Mr. Wyden filed an amendment to the infrastructure bill clarifying the definition of crypto broker along with Mr. Toomey and Ms. Lummis.
Those senators have more than just a passing interest in crypto. In June, Mr. Toomey had invested between $2,000 and $30,000 in bitcoin and ethereum trusts. Ms. Lummis hails from a state that changed laws to make it hospitable to digital-asset businesses and has disclosed between $100,000 and $250,000 worth of bitcoin holdings.
Meanwhile, cryptocurrency fans on social media heeded a call from Fight for the Future, a nonprofit advocating for a more open internet, to contact members of Congress over the bill. The #DontKillCrypto campaign, amplified by Messrs. Dorsey and Kutcher, prompted more than 40,000 calls to legislators.
“The results blew us away," said Lia Holland, Fight for the Future’s communications director. “If we’d driven 5,000 calls, we definitely would have called that a success."
This story has been published from a wire agency feed without modifications to the text
Never miss a story! Stay connected and informed with Mint. Download our App Now!!