Crypto wants to increase influence in Washington hirings

Those who work for or advise on cryptocurrency firms or investment funds include three former Chairmen of the Securities and Exchange Commission, three former Chairmen of the Commodity Futures Trading Commission, three former US Senators, and at least one former White House Chief of Staff. , former Secretary of the Treasury and former chairman of the Federal Deposit Insurance Corporation.

The Tech Transparency Project, a watchdog group, has identified more than 200 former staffers from federal agencies, congressional offices and national political campaigners who have worked in crypto. They have gone to companies like Coinbase, Circle and FTX, venture capital funds like Andreessen Horowitz, law firms representing cryptocurrency clients, and crypto-focused trade associations.

The push comes as regulators struggle to enact rules to protect and protect investors in the cryptocurrency market from illegal activity or financial instability. President Biden signed an executive order on Wednesday that will task federal agencies with a broad assessment of cryptocurrencies.

“Normally you don’t have such new industries gathering so much hard and soft power in Washington,” said Jeff Hauser, executive director of the Revolving Door Project, a progressive group. He noted that lobbying and political spending by crypto companies increased along with the recruitment of former government officials.

The hires span a variety of roles and include alumni from both Republican and Democratic governments. Industry representatives say former government officials can help companies comply with the law and understand regulatory expectations.

Former SEC Chair Mary Jo White, Now Attorney at Debevoise & Plimpton LLP, Defends Cryptocurrency Publisher Ripple Labs Inc. against an SEC enforcement action. Ms. White ran the SEC during the Obama administration. Former Treasury Secretary Lawrence Summers advises crypto investment firm Digital Currency Group Inc. and sits on the board of Block Inc., a financial technology company that invests in cryptocurrency payment systems. Former Acting Comptroller of the Currency Brian Brooks is now chief executive officer of bitcoin mining company Bitfury Group, and briefly served as CEO of Binance.US, a US affiliate of the giant global exchange.

Total compensation packages for former cryptocurrency industry officials could reach seven figures, said a person familiar with several leases as regulators pay around $250,000. Former officials moving into cryptocurrency-focused companies or investment funds can also negotiate potentially valuable long-term incentives, such as stock options or a portion of profits known as carry interest.

Two recent events have fueled hiring pressure.

The first was a realization in the industry after the 2020 elections that cryptocurrencies were unlikely to remain unregulated forever. While the Trump administration has included some outspoken cryptocurrency advocates, most senior Biden administration officials have expressed skepticism about the asset class.

The second was a provision in last year’s bipartisan infrastructure package that required cryptocurrency brokers to file tax forms with the Internal Revenue Service. The cryptocurrency industry said the provision was too broad but failed to pull it off the bill.

“That was kind of a turning point for the realization, ‘My god, we need these people,’” said Julian Ha, a Washington-based partner at Heidrick & Struggles, an executive search firm that recruits on behalf of cryptocurrency companies, among others.

The surge in the value of digital tokens last year gave the cryptocurrency industry the money to compete for talent in Washington. According to CoinMarketCap, the total cryptocurrency market was recently estimated to be around $1.73 trillion, up from $200 billion two years ago.

Industries and their lobbying firms have long recruited former government officials to shape policy. The unique thing about cryptocurrency is that the ground rules of the road are unwritten. Existing financial regulations, if applied to crypto markets, can incur high costs for businesses that are highly profitable today. The industry, meanwhile, is pushing for new rules that are more tailored and easier to comply with.

“Often we talk about how industries spend all this money on political influence, and how they get huge returns from tweaking some minor regulation,” said Dan Auble, a lobbying expert at OpenSecrets, a group that tracks money in politics. “But this is really a situation where what the government does in the coming years can make or break the industry.”

In Washington, the industry is arguing with the SEC and is lobbying Congress to write new laws that better fit the way its technology works. A roster of veteran former regulators may, in the eyes of some policymakers, add credibility to companies that often portray traditional finance as stodgy and elitist.

Former government enforcers have become attractive collaborators for crypto firms that need assistance with regulatory or law enforcement oversight.

Former New York-based SEC attorney Dugan Bliss left the agency in May 2021 to join BlockFi, a cryptocurrency firm that allowed users to earn returns by lending their bitcoin or similar tokens. BlockFi last month agreed to pay $100 million to the SEC and several states to settle claims that its interest-bearing accounts violated investor protection laws. Mr. Bliss did not work on the BlockFi investigation when he was with the SEC, a company spokeswoman said.

Mr. Bliss had been part of a team of SEC attorneys working on his legal battle with crypto firm Ripple and two of its most senior executives. The SEC argued in a December 2020 lawsuit that Ripple raised nearly $1.4 billion by selling its digital currency, XRP, in violation of investor protection rules, while its co-founder and chief executive officer invested hundreds of millions of dollars. earned trade profits. Ripple states that XRP is used for international payments and that it is not an investment under the agency’s supervision.

Ms. White represents Ripple against the SEC. Andrew Ceresney, who was her enforcement director, is also on the defense team. In a lawsuit in April, the SEC alleged that Ms. White and Mr. Ceresney’s legal strategy involved an attempt to “intimidate” the SEC with requests for evidence that the two plaintiffs knew were irrelevant because they had worked at the SEC. . in January, Ripple and its executives said they were entitled to some SEC records, but the agency was able to keep most of them secret.

Christopher Giancarlo, who stepped down as CFTC chairman in 2019, argued in a June 2020 article that XRP should not be supervised by the SEC. His law firm had represented Ripple and Mr. Giancarlo relied on information from Ripple to write the article. In an interview, he declined to say whether he knew Ripple was under SEC investigation at the time the article was published.

Giancarlo led the CFTC when the agency approved bitcoin futures contracts, a move he says brought cryptocurrency “into the regulated sphere.”

“So my grind is out,” he said. “I advise companies on how to stay on the right side of the law, but also how I think the law will evolve.”

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