Crypto comes to Washington. Will the millions buy influence?

FILE - In this April 3, 2013 photo, Mike Caldwell, a 35-year-old software engineer, holds a 25 Bitcoin token at his shop in Sandy, Utah. (AP Photo/Rick Bowmer)

WASHINGTON, D.C. — Erin Houchin braced for the worst when a mysterious group started buying television ads last month in her highly competitive southern Indiana congressional race. 

Houchin assumed she would face a negative blitz, like the one that crushed her in 2016 when she ran for the same seat. But, in fact, the opposite happened. 

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American Dream Federal Action, a super political action committee financed by a cryptocurrency CEO, saturated the district with ads promoting Houchin as a “Trump Tough” conservative who would “stop the socialists in Washington.” That push helped secure her victory last week in a Republican primary. 

“All you can do is hold your breath,” Houchin’s longtime consultant, Cam Savage, said of when they learned about the ad buy. “It could help you, but the fear is it will end you.” 

The impact of the unsolicited helps shows how cryptocurrency tycoons are emerging as the new political power players. They are pouring millions of dollars into primary elections as they try to gain influence over members of Congress and other government officials who are crafting regulations. 

This year, for the first time, industry executives have spent nearly $20 million so far, according to records and interviews. 

It’s a delicate but deliberate march by companies that make money based in part on evading government attention. 

More than $100 million also has been spent lobbying since 2018 by crypto companies, as well as those who potentially stand to lose if the industry goes mainstream, records show. 

The push comes as the Biden administration and Congress consider new regulations and set funding levels for agencies that will oversee crypto. 

“What do they want? They want no regulation, or they want to help write the regulation. What else is new?” asked Sen. Sherrod Brown, D-Ohio, an industry critic. 

Cryptocurrencies are a digital asset that can be traded over the internet without relying on the global banking system. They’ve been promoted as a way for that those with limited means to build wealth by investing in the next big thing. 

But they’re also highly speculative and often lack transparency, which substantially increases risk.  

There are signs that crypto is going mainstream. Fidelity Investments, one of the nation’s largest providers of retirement accounts, announced earlier this month it will start allowing investors to put Bitcoin in their 401(k) accounts. 

And there are indications that the government is increasing scrutiny. 

The Securities and Exchange Commission unveiled a plan last week that would nearly double the size of its staff focused on cryptocurrency oversight. Days later, the Justice Department indicted the CEO of a cryptocurrency platform and mining operation, alleging he orchestrated a “$62 million global investment fraud scheme.” 

Meanwhile, members of Congress and the administration have raised concerns that Russian oligarchs could turn to cryptocurrency to evade U.S. sanctions put in place when Russia invaded Ukraine. 

Cryptocurrency advocates in Congress acknowledge problems but argue the roughly $2 trillion industry has matured. 

“I’m confident that bitcoin protects consumers,” said Sen. Cynthia Lummis, R-Wyo., who has invested in the currency. “I’m not confident that all cryptocurrencies protect consumers. In fact, I’m willing to bet that the majority of those are fraudulent.” 

Many cryptocurrency proponents vehemently opposed regulation. But lobbyists say that’s now a settled debate and their aim is to convince skeptics not to have too heavy a regulatory hand. 

Perianne Boring, founder of the Chamber of Digital Commerce, makes the case for developing accounting standards for the industry to help crypto firms become publicly traded companies. 

“Because there are no standards, many businesses are hesitant to touch cryptocurrency,” said Boring, whose group has spent nearly $2 million lobbying the federal government. 

Some lobbyists are hoping that a wave of campaign spending could help, much of it directed to Democratic primary races. 

“Folks in crypto are, all of a sudden, happy to go to political fundraisers,” said Kristin Smith, the executive director of the Blockchain Association. Smith, whose group has spent about $4 million on lobbying since 2018. She added, “The government could actually come in and really mess it up if we aren’t constructively engaging.”