Crypto companies could spend a record amount on lobbying this year

The year 2023 has been quite challenging for the crypto industry. Major crypto companies have been hit by federal lawsuits – SEC is suing the cryptocurrency exchange Kraken, claiming it failed to register and mixed client funds. FTX founder Sam Bankman-Fried has been found guilty on all counts in one of the largest financial frauds in U.S. history. Binance CEO Changpeng Zhao, accused of money laundering, has agreed to step down as part of a $4.3 billion settlement with the U.S. Department of Justice.

Despite the grim environment, everyone has assured that crypto is not going anywhere, that it is here to stay, and that U.S. lawmakers are on the verge of adopting much-needed regulations to govern cryptocurrencies.

Record Lobbying

According to a new report from Reuters, this opinion is backed by record spending by the crypto community on lobbying. Data from the nonprofit research group OpenSecrets shows that crypto companies spent $19 million on lobbying in the first three quarters of this year, compared to $16.1 million in the same period in 2022, when a total of about $22 million was spent. During 2023, most lobbying efforts were directed at influencing stablecoin regulations.

However, the data from last year includes investments from the now-defunct FTX. Bankman-Fried reportedly donated millions of dollars to politicians, and as CoinDesk revealed, more than one in three members of Congress received his campaign support.

Lawmakers quickly rushed to distance themselves from the disgraced founder and his company and organized hearings to assess the fallout from the scandal. A bipartisan bill, which seemed possible in various committees, both in the House of Representatives and the Senate, soon stalled, with Democrats particularly appealing to slow down any new legislation. Campaign donations also became a central part of the criminal case against Bankman-Fried. Although the U.S. Department of Justice dismissed allegations regarding purported illegal political contributions due to complications surrounding the extradition agreement with the Bahamas, it remained a key argument in the court case, adding further discomfort for politicians associated with Bankman-Fried.

Regulating Stablecoins

Republicans continue to advocate for legislation to regulate stablecoins and create a market structure framework for the digital asset industry, with limited support from Democrats, although it seems that all efforts have stalled until 2024. A stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, a commodity traded on an exchange, or another cryptocurrency.

However, this slowdown has not hindered crypto companies’ spending on lobbying. Reuters revealed that Coinbase, the largest U.S. crypto exchange, leads with $2.16 million, followed by the operating company for Crypto.com, Blockchain Association, and Binance.

After Bankman-Fried’s downfall, Coinbase CEO Brian Armstrong became one of the most visible figures in DC, with Coinbase leading a political campaign called Stand With Crypto, aimed at convincing politicians to support the crypto industry. Coinbase is also embroiled in a lawsuit against the Securities and Exchange Commission, which could jeopardize its business model.

Not All Is Gloomy

Nevertheless, the end of 2023 marked a resurgence in the price of Bitcoin, the world’s largest cryptocurrency, which currently stands at just over $43,000. The approval of a spot Bitcoin ETF is also under scrutiny, expected soon in early January 2024.