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.
A major crypto donor, Sam Bankman-Fried, has spent tens of millions in Democratic primaries, either to favor corporate Democrats friendly to lax crypto regulations — or worse, to corrupt progressives. His super PAC, Protect Our Future, backed 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 is using her alliance with progressives to purge herself. Then they owe him. How many of Jackson’s low-income constituents care if he takes a dive on crypto regulation?
In Oregon’s 6th District Democratic primary, Bankman-Fried spent $14 million promoting unknown candidate Carrick Flynn (who lost). Even worse, he used the leverage of his millions in donations to national party committees to persuade the House Majority PAC, closely tied to Speaker Nancy Pelosi (and who has no business meddling in primaries), to spend another million on Flynn .
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Bankman-Fried, who is barely 30 years old, is worth $20 billion. He did most of what runs 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 one story told by crypto boosters is that crypto can help black people who are denied access to credit and capital, as well as the unbanked and the young. I am skeptical. Those who have lost a trillion dollars in the 2022 crypto collapse are also disproportionately black, young and naive when it comes to complex finance. The persistent shame of racism in credit needs to be remedied on its own terms, not by inflating poorly regulated crypto.
Absent industry-backed legislation moving crypto regulation to the weaker Commodity Futures Trading Commission, most regulation would remain with the more efficient Securities and Exchange Commission. The crypto industry has promoted a whispering campaign against SEC Chairman Gary Gensler, that Gensler “just doesn’t get technology”. This is bullshit. Gensler spent years at MIT studying crypto, teaching courses on it. Gensler gets crypto better than most regulators and lawmakers — well enough to appreciate the enormous risks. That is why he is demonized.
A telling symbol of the industry’s success is rep. Ro Khanna (D-CA), one of the most admired progressive leaders in the House. Representing Silicon Valley, Khanna walks a fine line by being tough on platform monopolies but being a genuine enthusiast of technology. Khanna has been won over to the premise that crypto represents important innovation. He’s even the lead House sponsor of a light-touch bill to move much crypto regulation to the CFTC, with two Republican co-sponsors and one Democrat.
Khanna does not take money from crypto campaign. He told me that the crypto industry should stay out of Democratic primaries. This leading House progressive supports lax crypto regulation not because he’s corrupt, but because he’s drinking the Kool-Aid — which might be worse.
