Crypto’s DC clout imperiled as market melts down

That could be said for the entire digital asset market, which has seen more than two-thirds of its value evaporate since peaking at $3 trillion last fall. As the Federal Reserve cranks up its campaign to rein in inflation, investors are dumping risky assets in anticipation of rising interest rates. Startups that soared during the two stimulus-fueled pandemic years have started to fall to earth.

The market’s plunge is likely to temper expectations around a two-year lobbying campaign that has made digital assets one of the most visible industries on Capitol Hill. Crypto’s shrinking footprint could weaken a bid by top exchanges and developers to push for new laws and light regulations that they argue would allow blockchain-based businesses to thrive. And it could damage any trust the industry has accrued in Washington – particularly amid growing scandals on popular lending platforms where customer accounts have been frozen or wiped out.

“When everything’s going up, it hides a lot,” Commodity Futures Trading Commissioner Caroline Pham said in an interview. “From a regulator’s perspective, it really just underscores that we just need to be doing something.”

Top exchanges and industry associations pumped $9 million into Washington lobbying efforts in 2021, more than tripling their spending from the previous year, according to a report by the watchdog group Public Citizen. That drive accelerated through early 2022 and was amplified by tens of millions in campaign contributions from powerbrokers like FTX founder Sam Bankman-Fried.

But the battle to shape legislation and influence agency decisions to tighten supervision of the industry is just beginning, and Caitlin Long, the founder and CEO of a Wyoming-based crypto bank, said some digital asset firms have themselves to blame for growing heat from regulators. The representations that the companies make to Washington policymakers often amount to “regulatory theater,” she said.

“They know they…


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