As U.S. regulators tighten oversight of the digital asset space, crypto companies are doubling down their lobbying efforts.
Companies that engage in crypto-related businesses spent at least $4.9 million in lobbying in 2021, up 116% from 2020, according to a recent study by crypto intelligence site Crypto Head.
Crypto lobbying’s expenditures were $9.6 million from 2017 to 2021, and are expected to top $15 million by the end of 2022, according to the study.
“I think we’re going to see a lot more lobbying, especially when bills are introduced,” Christopher W. Gerold, partner at law firm Lowenstein Sandler and former chief of the New Jersey Bureau of Securities, told MarketWatch in a phone interview.
“When we see bigger, broader legislation introduced, we’re going to see money pour into the lobbying space from crypto companies, and rightfully so. If the wrong legislation passes, it could put certain companies out of business,” Gerold said. “It’s really a hyper technical area, as the regulators define different entities and protocols in the digital asset space.”
Crypto companies are pushing for a more friendly regulatory environment, with the Biden administration reportedly aiming for February to release an executive order that sets up a government-wide strategy for digital assets, Bloomberg reported last month, citing people familiar with the matter.
Meanwhile, the U.S. Securities and Exchange Commission on Tuesday, in a first-of-a-kind action, extracted a $100 million penalty from BlockFi Lending, including for failing to register its crypto lending products.
Furthermore, a $1 trillion infrastructure bill was signed into law in November. It contains a provision that would require brokers of digital assets to record and report transactions to the Internal Revenue Service starting in 2023.
Who lobbied the most?
Robinhood
HOOD,
with 30% transaction revenue coming from crypto trading in 2021, spent the most on lobbying among crypto-related companies, with $1.35 million paid during the year, according to the Crypto Head report. However, it’s hard to know how much of the total relates specifically to crypto.
A public filing from February 2021 showed that Robinhood aimed to influence Washington on matters, including Democratic bills that would introduce a financial transaction tax (FTT), as well as Republican legislation that would prohibit states from imposing a FTT on retail investors, as the brokerage added two in-house lobbyists a year ago.
Blockchain company Ripple spent $900,000 on lobbying in 2021, according to the Crypto Head report, while crypto exchange Coinbase poured in $785,000.
A lawsuit filed by the SEC against Ripple Labs Inc. toward the end of the Trump administration claimed the platform violate investor-protection laws, but it remains unresolved. The regulator said Ripple didn’t register the cryptocurrency XRP
XRPUSD,
it launched as a security offering, while the company argued the crypto is used for international payment and does not fall into the SEC’s jurisdiction.
Meanwhile, Coinbase
COIN,
dropped its proposed crypto lending product after it received a lawsuit threat by the SEC. Regulators also have been paying increasing attention to stablecoins, including USDC, which was jointly developed by Coinbase and Circle.
For its part, Binance spent $20,000 in lobbying in 2021, ranking 12th in the study by Crypto Head. The SEC is examining the relationship between the crypto exchange’s U.S. arms and two trading firms with ties to Binance’s founder Changpeng Zhao, the Wall Street Journal reported, citing people familiar with the matter.
Still, crypto companies’ overall spending on lobbying has been eclipsed by some of America’s biggest industry groups and companies. The U.S. Chamber of Commerce, the largest lobbying group in the country, spent a total of $66.4 million on lobbying in 2021, according to research organization Open Secrets.
Tech giant Amazon.com
AMZN,
poured $20.6 million into lobbying, while Meta
FB,
paid $20.1 million for such efforts.