The 2022 elections will test whether the cryptocurrency industry, now more than five times its value in late 2020 and fired up by a tax provision enacted in November, will boost spending on political campaigns.
Growing congressional and regulatory scrutiny of cryptocurrencies along with the sector’s exploding wealth have set the stage for greater involvement, but it remains to be seen whether political giving will keep pace. CQ Roll Call’s analysis of campaign donations found the spending across 12 organizations with industry ties is up from this point last cycle, though below the total ultimately spent in the 2020 election.
Democrats, who narrowly control the House and the evenly split Senate, have benefited more than Republicans from the industry’s largesse in the past. But some crypto advocates blame the party for a tax reporting provision in the infrastructure law that riled the industry.
“It's a truism in American politics that when an industry grows to the point where it starts to get more political scrutiny, its political spending also tends to balloon. It would be rare to find an example where that didn't happen,” said Daniel Weiner, director of the Brennan Center’s Elections and Government Program.
CQ Roll Call analyzed Federal Election Commission campaign filings for political donations from individuals at 12 organizations with industry ties, including cryptocurrency platforms, investment funds and advocacy groups, and found they donated about 12 times more in 2021 than they did in 2019, the same point in the last election cycle.
Individuals at the 12 companies donated at least $1.7 million last year, up from $143,000 in 2019, according to FEC filings available Feb. 2. Individuals at those companies spent about $6.4 million during the whole 2020 cycle.
“Two common ingredients to see a major uptick in political spending are greater regulatory scrutiny, and increasing wealth and the increasing size of the industry,” Weiner said in an interview. “I would be surprised if you didn't see more spending from crypto.”
Cryptocurrencies collectively reached a market capitalization high of $3 trillion in November but have since fallen to about $2.1 trillion on Feb. 7, according to CoinGecko, an organization that collects data on the market. It put the market cap just above $400 billion in early November 2020.
‘Money where their mouth is’
Tyler Whirty, founder of the blockchain-focused HODLpac, said he’s noticed an uptick in interest and donations from the industry. The PAC brought in about $96,000 last year, compared with $29,000 raised during the whole 2020 cycle, according to FEC filings.
Kristin Smith, executive director of Blockchain Association, a crypto advocacy group, said she’s noticed a big change in industry interest since the Senate passed the infrastructure bill in August. President Joe Biden signed the bill in November.
“I've attempted to host fundraisers on a couple of occasions, and it was like pulling teeth to get anyone in the crypto industry to show up,” Smith said. “But after the infrastructure situation back in August, where everyone became fully aware of how quickly things can get out of control, there has been a huge interest among the crypto community and in putting their money where their mouth is.”
Crypto advocates say the law’s broad definition of “broker” could leave industry sectors, such as miners and app developers, on the hook for collecting and reporting investor information they don’t have.
‘PACs create votes’
The industry rewarded at least three senators — Democrats Ron Wyden of Oregon and Kyrsten Sinema of Arizona and Republican Cynthia Lummis of Wyoming — for efforts to amend the infrastructure bill’s cryptocurrency provisions, according to FEC filings. Sinema and Lummis, members of the Senate Banking Committee, helped launch the Senate Financial Innovation Caucus last year.
Wyden, who chairs the Senate Finance Committee and is up for reelection this year, received at least $63,000 in 2021 from individuals with ties to the cryptocurrency industry. About $29,000 of Wyden’s donations were made in cryptocurrencies, with some of that coming from individuals also working in the industry.
Sinema, who is up for reelection in 2024, has received at least $67,000 from individuals with ties to the industry. About half came from individuals at investment funds supporting the sector and the other half from individuals at companies servicing the ecosystem, including the blockchain company Paxos Trust Co. and the cryptocurrency exchange Bittrex.
Lummis, a longtime crypto advocate next up for election in 2026, received at least $34,000. Lummis also owns between $150,000 and $350,000 in Bitcoin, according to her personal financial disclosures. Her campaign accepts Bitcoin donations, though none were recorded in FEC filings as of Feb. 2.
Membership in congressional caucuses, such as the Senate Financial Innovation Caucus and the Congressional Blockchain Caucus, is another way for lawmakers to attract interest from the crypto community.
“Those are sitting members of Congress who have expressed their willingness to put their reputations on the line for the industry,” said HODLpac’s Whirty.
Rep. Ro Khanna, a Democrat from Silicon Valley, leads the Blockchain Caucus with $50,000 from individuals at Paxos, Ripple Labs, CoinFlip, Blockchain Capital and the Blockchain Association’s Smith. Rep. Darren Soto, D-Fla., received at least $11,400 from individuals with industry ties, of which $5,900 was donated in Bitcoin.
Rep. Warren Davidson, R-Ohio, received at least $10,000 from Smith and individuals at CMT Digital and Blockchain Capital. Rep. Bill Foster, D-Ill., got at least $5,800 from Bennet Yee, a software engineer at Oasis Labs in San Francisco.
Todd White, founder of the American Blockchain PAC, said his group aims to hold lawmakers to whom it donates accountable. The PAC has raised about $7,000 since it launched in December, according to its FEC filings.
"You'll have one member that will send out in a tweet, 'It's Satoshi Nakamoto's birthday,' and it's a dog whistle for ensnaring a campaign contribution to their candidate committee,” White said, referring to the pseudonym used by Bitcoin’s developer. “But invariably, they're not going to support crypto because they're beholden to other legacy supports."
"Naive people that are in some of the startups believe that you throw them a campaign contribution and that will be a turnkey to a vote, and it just doesn't work that way,” he said. "PACs create votes.”
In past elections and especially in 2020, industry donations leaned heavily progressive and individuals from the sector aided Democrats in competitive races.
However, high-profile members of the party, such as Massachusetts Sen. Elizabeth Warren, have since grown louder about digital currencies and the risk they could pose to consumers, financial stability and the environment. Democratic Rep. Brad Sherman of California, a member of the House Financial Services Committee, has criticized cryptocurrencies as useful only to criminals and tax evaders.
Blockchain Association’s Smith said that could impact campaign donations from an industry that increasingly wants to prioritize its political interests.
“A lot of people have talked about this idea that we need to be single-issue voters on crypto,” Smith said. “We don't care if they're Republican, we don't care if they're Democrat, if they're with crypto, we're with them. That is an idea that is really gaining traction within the community.”
Smith gave almost $40,000 in political donations to both Democrats and Republicans last year, including Wyden, Khanna, Davidson and others, according to FEC filings.
The American Blockchain PAC’s White said that dynamic will shift industry donations from Democrats to Republicans, though he noted the PAC was nonpartisan and would support pro-blockchain candidates from either party.
"I don't think Democrat incumbents in the House or the Senate are willing to back off,” White said of the cryptocurrency provisions in the infrastructure bill. “That's going to be a challenge for them to put distance from because they voted for this piece of legislation."
There’s some evidence that crypto donors are giving more to Republicans than in the past, though most have also maintained support for Democrats, CQ Roll Call’s analysis of donations from nine wealthy donors with ties to the industry found.
HODLpac’s Whirty said even with Democrats’ increasingly hostile rhetoric, members of the crypto community will likely still want to support the party.
“Despite some more negative rhetoric about crypto coming from Democrats, a lot of people within the crypto industry consider themselves Democrats, and they'd rather focus their efforts on bringing people over to our side,” Whirty said.