Crypto Lobby Courting to the State House Level
Coinbase CEO Brian Armstrong’s announcement last week that he’s putting a political target card on the top US crypto exchange’s app is a pretty good indication of how much attention the politics of crypto regulation has been getting lately.
The scorecard, which assigns letter grades to US senators and representatives “will help our 103 million verified users become educated about the crypto positions held by political leaders where they live,” Armstrong tweeted. “Over time, we want to help pro-crypto candidates solicit donations from the crypto community (in crypto).”
It also shows how campaign cash the crypto industry is pouring into the midterm elections, led by FTX exchange CEO Sam Bankman-Fried, who has pledged at least $100 million in the 2024 election cycle and is responsible for “most” of the $31.2 million crypto . -affiliated Super PACs had spent on the 2022 midterm primary races in mid-June, Roll Call reported.
But it’s not just Washington, DC, where crypto legislation is happening and where crypto dollars (and bitcoins) are being used to make it the industry’s way.
A localized focus
That same month, a summary of 2022 cryptocurrency legislation by the National Conference of State Legislators noted that 37 states have passed or are working on bills covering digital assets, ranging from the minor — Washington and West Virginia added virtual currencies to their unclaimed property laws — to the rather dramatic .
Wyoming, among the first states to seriously focus on cryptocurrency (and the first to make attracting the industry a major focus), passed legislation affecting the regulation of the decentralized autonomous organizations (DAOs) that govern decentralized finance (DeFi) projects.
Not everyone should be taken too seriously. A 136-word Arizona bill filed by a state senator sought to define bitcoin as legal tender in the state.
But many states are far friendlier.
On May 12, Florida Gov. Ron DeSantis, a Republican, signed into law a bill that a pair of lawyers from the blockchain and digital asset practice of Greenberg Traurig, one of the top 10 law firms in the United States, said: “loosens Florida’s position on licensing requirements for virtual currency activity by clarifying that a money transmitter license is only required for persons acting as intermediaries between two parties if the intermediary has a unilateral ability to execute or prevent a transaction.”
Anyone involved in bilateral principal-to-principal transactions does not require a money services license (MSB), it added.
It came two months after another Florida law was highlighted as part of the state’s “warm embrace of the cryptocurrency agenda” by The New York Times in a story about the crypto industry’s influence in state capitals. The bill, it said, made it easier to buy and sell cryptocurrency, eliminating a threat from a law intended to curb money laundering.
See also: As states scramble for crypto industry dollars, regulatory race to the bottom begins
Pushback on both coasts
On the other hand, the crypto industry is running into brick walls in some major states, especially California and New York.
In California, the Digital Financial Assets Law – a key piece of legislation requiring crypto-financial services businesses to obtain a license similar to New York’s highly unpopular BitLicense – awaits Democratic Governor Gavin Newsom’s signature or veto.
The Blockchain Association, one of the industry’s leading lobbying groups, called it “short-sighted and unhelpful” and warned that it “would hamper the ability of crypto-innovators to operate and push many out of state.”
And in New York, the crypto industry tried hard and failed to stop the legislature from passing a ban on crypto mining that now awaits the signature or veto of Governor Kathy Hochul – who is being just as hard lobbied.
It is also the first state where the Blockchain Association set up a lobby in the capital. The executive, John Olsen, told Coindesk in March that the moratorium “actually gained more momentum than it should have because there is no one from the industry who is really advocating the merits of both blockchain and crypto.”
And it will likely make some progress, said Jacqueline Jamin Drohan, a partner at Drohan Lee, who chairs the New York State Bar Association’s Task Force on Emerging Digital Finance and Currency.
In an interview on 6 September on the association’s website, she said that “at the state level, the regulation is clumsy”.
While the BitLicense is “the standard among states, perhaps even globally… it may be unwieldy for many early-stage startups… The state needs to find a happy medium as it seeks to grow its digital currency footprint and attract businesses – especially in New York York City — and get them to the headquarters here.”
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