April 18, 2024

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As Bitcoin rises, cryptocurrency companies are pouring money into elections

As Bitcoin rises, cryptocurrency companies are pouring money into elections

Hello Quartz members!

As did the value of Bitcoin It has rebounded over the past yearAfter surpassing $73,000 last week, another entity has found new wind in its sails: the Cryptocurrency Political Action Committee.

And it's not just one political action committee, or a political action committee. The cryptocurrency industry includes a number of them, with a total fund of at least $85 million. One of the largest political action committees, Fairshake, defines its mission On its sparse website Therefore: supporting candidates who will provide “blockchain innovators with the ability to develop their networks within a clearer regulatory and legal framework.” In other words, crypto skeptics won't see a red cent from this money.

Political action committees already influence American elections. On Super Tuesday, earlier this month, Rep. Katie Porter finished third in California's Senate race, after three political action committees spent $10 million campaigning against her. She was one of the legislators who I signed a letter (pdf) Asks about the energy use and environmental impact of Bitcoin mining operations. (You may have read Quartz's classic explanation, “How much energy does Bitcoin use??) Among the backers of the three anti-Porter political action committees was Coinbase, the cryptocurrency exchange that, of course, relies heavily on Bitcoin to ignore lawmakers who want to restrict its mining on environmental grounds. As Bitcoin rises, so does Coinbase stock – And its ability to pay to political action committees. The company has contributed at least $23 million to crypto political action committees.

Other candidates received a crypto boost instead of a crypto pumpkin. Crypto PACs spent $1.7 million to support Shomari Figures, who ran in the Alabama House primary, and $1 million to support Julie Johnson, who ran in a primary to represent Texas in Congress. They both came out on top. Both are also crypto champions.

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Porter didn't necessarily lose Just Because crypto political action committees attacked her; On the one hand, fellow Democrat Adam Schiff, who ran ahead of her, was better known and outspent her. But she seemed to view the rise of these political action committees as a malignant new force in American politics — even “dark money” and “fraud.” American politics already has many old, malevolent forces to confront. Is Porter Right About Crypto Political Action Committees?


a plan

Graph: Samanth Subramanian


Quoted

“Forged” means to be manipulated by dishonest means. A few billionaires spent more than $10 million on attack ads against me, including one that was rated “false” by an independent fact-checker. This is a dishonest way to manipulate the result. You said “rigged by billionaires” and our politics are – in fact – being manipulated by big dark money. Defending democracy means advocating for it.

– Rep. Katie Porter, D-V Statement published on X


What does encryption want?

The list is listed on Julie Johnson's campaign website Its political priorities. They include creating “clear rules of the road for the cryptocurrency industry to build technology that benefits everyday Americans, while protecting consumers and ensuring fair outcomes for all.” Broadly speaking, this is what the industry wants as a policy outcome: regulation. As Kara Calvert, head of US policy at Coinbase, told the New York Times, policymakers “have to make some decisions: Do they want clear rules and consumer protections?” or not?

This is certainly an unusual ambition for political financiers; Industries usually push for this less Organization, or at least a different organization. But cryptocurrencies are an unusual industry. It seeks greater legitimacy in the eyes of government agencies. More regulation would give it that legitimacy, but it could also preempt similar officials Senator Sherrod Brown Or SEC Chairman Gary Gensler from imposing tougher restrictions on an industry they view with caution.

To be sure, crypto PACs will also need a certain type of organization to suit their needs. But in campaigning to fund such rules, they are no different from hundreds of other companies and industry bodies doing the same. (Supporters of the super PAC system contend that it is transparent under the law, although there are ways to hide the source of the money: by routing it through “Nonprofit organizations” are militarist namesfor one.)

Porter's argument that her election was “rigged” is weak. Virtually every major US election is influenced by donations from entities eager to lure potential lawmakers and officials to their side. It is an inescapable fact today that running for election requires millions, tens of millions, or hundreds of millions of dollars—depending on the prestige of the office sought—to conduct. The cryptocurrency industry is only joining the trend.


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Critics of crypto political action committees point to Sam Bankman-Fried as the most obvious cause for concern. Last year, an SBF indictment charged the disgraced founder of cryptocurrency exchange FTX with crimes Using stolen customer funds to donate more than $100 million to 2022 midterm election campaigns. (SBF was convicted last November of seven counts, including fraud and conspiracy, and prosecutors said the second trial in Campaign finance violations It may not be necessary.) But this is a stronger argument for reform everyone Political Action Committees Instead of cracking down on crypto PACs in particular.

The SBF gave much of the money directly to political action committees, and these donations were made public. But through his business Alameda Research, he has also donated millions of dollars to his brother's nonprofit Guarding Against Pandemics, but does not have to disclose SBF or other donors. certainly Her 2021 tax filing (pdf) He did not mention them. If FTX had not folded, these contributions may never have come to light.

The problem was not simply that the alleged source of the funds was stolen money. It was also how the PAC system made it easier to hide the source of funds, a bigger problem than with cryptocurrencies.


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Wishing you a prosperous weekend like Bitcoin,

-Samanth Subramanian, Weekend Brief Editor