In my Tuesday column, I wrote about the industry’s push for the lightest possible regulation. Crypto’s insidious influence is even worse than I thought.
One large crypto donor, Sam Bankman-Fried, has been spending tens of millions in Democratic primaries, either to favor corporate Democrats friendly to weak crypto regulation—or worse, to corrupt progressives. His super PAC, Protect Our Future, supported several corporate Democrats, but also spent millions on ads promoting some progressives, including Jonathan Jackson, who won the June Democratic primary in Chicago’s heavily Black First Congressional District.
Bankman-Fried uses his alliance with progressives to sanitize himself. Then they owe him. How many of Jackson’s low-income constituents care whether he takes a dive on crypto regulation?
In Oregon’s Sixth District Democratic primary, Bankman-Fried spent an outlandish $14 million to promote unknown candidate Carrick Flynn (who lost). Worse, he used the leverage of his millions in donations to national party committees to persuade the House Majority PAC, closely associated with Speaker Nancy Pelosi (and which has no business meddling in primaries), to spend another million on Flynn.
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Bankman-Fried, who is barely 30, is worth $20 billion. He made most of that operating one of the largest offshore crypto exchanges, FTX, based in the Bahamas.
The big winners in the crypto game are insiders, not small users. But a story told by crypto boosters is that crypto can help Black people denied access to credit and capital, as well as the unbanked and the young. I’m skeptical. Those who have lost a trillion dollars in the 2022 crypto collapse are also disproportionately Black, young, and naïve about complex finance. The continuing disgrace of racism in credit needs to be remedied in its own terms, not by inflating badly regulated crypto.
Absent industry-backed legislation moving crypto regulation to the weaker Commodity Futures Trading Commission, most regulation would stay with the more effective Securities and Exchange Commission. The crypto industry has been promoting a whispering campaign against SEC Chair Gary Gensler, that Gensler “just doesn’t get tech.” This is nonsense. Gensler spent years at MIT studying crypto, and taught courses on it. Gensler gets crypto better than most regulators and legislators—well enough to appreciate the immense risks. That’s why he’s being demonized.
One telling emblem of the industry’s success is Rep. Ro Khanna (D-CA), one of the most admired progressive leaders in the House. Khanna, who represents Silicon Valley, walks a fine line by being tough on platform monopolies but being a genuine enthusiast of tech. Khanna has been won over to the premise that crypto represents important innovation. He is even the House lead sponsor of a light-touch bill to move much crypto regulation to the CFTC, with two Republican co-sponsors and one Democrat.
Khanna doesn’t take crypto campaign money. He told me the crypto industry should stay out of Democratic primaries. This leading House progressive backs weak crypto regulation, not because he’s corrupt but because he drinks the Kool-Aid—which is maybe worse.
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