The cryptocurrency sector is gaining momentum in Washington, and it’s not solely attributed to Donald Trump’s influence. A significant ally has emerged within the Democratic Party, and the industry has recently demonstrated its political clout by overcoming a long-standing opponent through substantial campaign contributions. Legislation that supports crypto-friendly stablecoins is on the verge of passing in the Senate after years of stagnation for the industry’s agenda on Capitol Hill. Additionally, the outlook for other key priorities is becoming more favorable.
New York Democratic Senator Kirsten Gillibrand, a consistent advocate for the crypto sector, has ascended in her party’s leadership to take on the role of head of election fundraising. She is leveraging her increasing influence to push for the repeal of a tax reporting regulation concerning digital assets and to advance a stablecoin regulatory bill that is favorable to the industry. Cynthia Lummis, a Republican Senator from Wyoming and a leading proponent of cryptocurrency among Senate Republicans, highlighted the importance of Gillibrand’s support, stating that her backing is crucial for the success of such legislation.
Despite being in the minority, Democrats can still obstruct legislation in the Senate, where a minimum of 60 votes is required for most bills. Lummis emphasized that without Gillibrand’s involvement, progress would be unlikely, attributing her credibility on financial matters to her representation of Wall Street’s home state and underscoring the necessity for bipartisan cooperation in the Senate. Gillibrand’s relationships with Republican Banking Committee Chairman Tim Scott, another supporter of crypto who has been appointed by his party to lead fundraising for the upcoming elections, further illustrate her ability to bridge party lines. The two share a personal friendship and engage in a weekly prayer luncheon, reinforcing their collaborative efforts.
In 2022, Gillibrand and Lummis even established a joint fundraising committee focused on cryptocurrency. Gillibrand asserts that the nation should nurture the burgeoning crypto industry rather than drive it abroad through excessive regulatory pressures, like those advocated by progressive Senator Elizabeth Warren. Nonetheless, she acknowledges that some regulation is necessary. “If we do nothing, and this industry is left to its own devices, we’ll have more collapses, we’ll have more Sam Bankman-Fried frauds,” Gillibrand stated in an interview at her Senate office, referring to the infamous crypto exchange founder.
During Trump’s administration, which saw a more favorable stance towards cryptocurrency—including his own memecoin venture—federal regulators have shown restraint in pursuing cases against crypto firms. However, such leniency hinges on Trump remaining in the presidential office. Last week, the growing influence of the crypto sector was evident as five Senate Democrats on the Banking Committee chose to support legislation regulating privately issued stablecoins linked to the US dollar, despite dire warnings from Warren, the committee’s leading Democrat. This marked a significant shift from previous years when crypto skeptic Sherrod Brown, the former Democratic chairman of the Banking Committee, obstructed industry-friendly proposals put forth by Gillibrand.
Brown had also previously hindered efforts supported by Bankman-Fried, who had made substantial campaign contributions. Meanwhile, major players in the crypto industry have invested heavily into an unprecedented coalition of corporate political action committees, known as Fairshake PAC and its affiliates, dedicating $40 million to unseat Brown in the upcoming November elections and replace him with Republican Bernie Moreno, a pro-blockchain entrepreneur. The industry’s PAC has also allocated significant resources to support several Democratic senators, such as Ruben Gallego of Arizona, who are more amenable to crypto interests, based on data from OpenSecrets.
As the new Congress commenced, the financial influence of the crypto sector for the forthcoming midterm elections was apparent. In January, Fairshake revealed that it and its affiliates had already gathered an astonishing $116 million in campaign funds, an impressive sum well ahead of election day. Both Moreno and Gallego, currently serving on the Banking Committee, played instrumental roles in advancing the stablecoin bill to the Senate floor, where it is anticipated to secure the necessary 60 votes, bolstered by Gillibrand’s support.
Consumer advocates caution that the financial power wielded by the crypto sector may undermine protections for digital asset users against fraud and shield the financial system from potential failures. “Money is talking very loudly,” remarked Jeff Hauser, executive director of the progressive watchdog group Revolving Door Project, which has taken a critical stance on Gillibrand’s backing of the crypto industry. He noted that Democrats have been unsettled since the influx of cryptocurrency funds into political campaigns last year. In response, Gillibrand refutes the notion that political contributions from crypto advocates sway senators’ decisions. “No one should care, you know, which industries are for or against them because of their political giving,” she stated in an interview in her Senate office. “I don’t think senators respond well to being threatened.”
Warren and other critics have called for more robust safeguards to protect consumers and the financial system against the collapse of a significant stablecoin. Conversely, Gillibrand contends that her proposed legislation aims to ensure that stablecoins maintain stability by requiring one-to-one reserves and oversight from state or federal authorities, with the Federal Reserve also playing a role. These reserves must be held in highly liquid assets such as short-term government securities to avert a potential run on a stablecoin. Major companies like Visa, PayPal, and Stripe are investing in initiatives related to stablecoins. Gillibrand, with 15 years of experience as a securities attorney, likens stablecoins to traveler’s checks that tourists would carry abroad, or to department store gift cards. “It’s not meant to be a bank account. It’s not meant to have FDIC insurance,” she explained. “It’s a payment system.”
