The rise of bitcoin and other crypto-assets over the past decade has led to the growth of a new industry, and where there’s a new industry there’s a new special interest seeking to influence policy in Washington. It’s ironic, since an anti-statist libertarian spirit propelled many individuals’ support for crypto speculation in the first place — an individualistic framework pervades the industry so thoroughly that one lobbyist told the Washington Post “Building a hierarchy to negotiate with government is antithetical to why most of these guys got into this in the first place.” Yet major crypto firms and their incipient trade associations have decided the best path forward would be to develop a lobbying machine in the nation’s capital. This partly reflects both newfound regulator interest in the industry, and the entry of more established and less ideological players, like venture capital funds.
The industry has recently ballooned in value to $3 trillion. All indications point to continued growth, making the current absence of clarity around how to enforce financial law with digital assets untenable for the long term. Recently, the Securities and Exchange Commission, the Office of the Comptroller of Currency, and the Commodity Futures Trading Commission have made moves to increase their role in regulating digital assets. With an industry that has recently committed to multimillion dollar lobbying efforts and federal agencies eager to stake claims as a primary regulator, the fight over rulemaking for crypto is only just beginning.
The first salvo of crypto lobbying has already come and gone. Earlier this fall, the industry aggressively pursued favorable tax policies in the recently passed bipartisan infrastructure law. While those efforts ultimately fell flat, they demonstrate the industry’s rising zeal for influencing public policy. Firms such as Andreessen Horowitz have built up political shops to bombard congressional offices with proposals on how best to regulate the industry, and fearing enforcement from SEC Chair Gary Gensler, other firms like Coinbase are pushing for the creation of a new (read: lenient) regulatory body primarily focused on digital assets. To try and gain an edge, firms are hiring many former regulators to try and leverage their experience and connections to their advantage. More and more, former government officials are taking roles leading industry compliance or lobbying teams.
As part of RDP’s ongoing efforts to document the flow of federal government officials into industries that they used to regulate, we have started a list to track financial regulators who now work in the crypto industry, which can be seen here. So far, we have identified 43 people who worked for the government who now hold senior roles at crypto companies. While we are mostly interested in those who worked in the federal executive branch, there are notable examples from other parts of government; we identified two former Nancy Pelosi staffers and a former Senator, as well as high ranking former officials from the New York Department of Financial Supervision. The executive branch revolvers’ government tenures span a wide variety of roles and agencies.
Of particular note is the high number of former leaders from the CFTC who have gone on to work in crypto. Five former commissioners (and six total former officials) have gone on to work in the industry, considerably more than from any other federal agency. The SEC, IRS, CIA, and DOJ all had more than one crypto revolver. Of the five former CFTC commissioners, two were chairmen and two others were acting chairmen. One — Chris Giancarlo — was nominated by both Obama and Trump. All except one are registered Republicans. Of the five CFTC commissioners in crypto now, Sheila Bair is the most prominent; she also held high-profile positions in the Bush Treasury Department prior to working at CFTC. However, she is best known for running the FDIC during the Great Recession.
The ongoing movement of top officials with knowledge of the inner workings of government is concerning. The potential access these officials could offer to an energy-sucking crypto industry that is seeking to significantly expand is worrisome. Even beyond influencing public policy and regulation, these revolving door figures provide another much sought after benefit to the industry: legitimacy. Legitimacy from former regulators is a vital currency for an industry that designs many of its products to skirt regulatory scrutiny. Government officials should consider the impact of providing this aura of legitimacy before championing crypto assets and products.
This blog will be continuously updated to track individuals’ movements.
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