New Astroturf Crypto campaign appears on social media

This past week, a new advertising campaign from an organization called Digital Innovation for America (DIFA) was launched on Twitter and Facebook. I encountered it over and over in my social media feeds. Such pop-up campaigns from mysterious front groups are common, but shedding a little more light on them can illustrate how these campaigns work and how they gain power.

Digital Innovation for America’s Twitter page was created in March 2023, together with his Facebook page. On LinkedIn, they appeared about one week ago. DIFA website, which was registered anonymously, does not show any connections to individuals. It’s quite strange for a group to not have a spokesperson when apparently goal to “unleash a new era of prosperity” for those who have been “kept outside our traditional banking system”.

On Twitter, DIFA calls itself “the voice of every American seeking to harness the promise of blockchain and digital assets for a more empowered future,” ending with an American flag emoji. Curiously, DIFA claims that crypto companies leaving the US would somehow offshore “the next generation of American jobs.” Crypto is seen as many things, but a job creator would be a new one. That foreign crypto companies would be beyond the reach of US regulators and law enforcement, another dark warning from industry supporters, would be news to those who have lived at the FTX facility in the Bahamas.

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Coinciding with DIFA’s warning about crypto flight, Coinbase CEO Brian Armstrong threatened to take his company away USA due to lack of regulatory clarity. Coinbase has notice received from the SEC that it is in the process of suing the company for securities violations.

Meanwhile, the industry’s reputational damage from the sweeping series of collapses of exchanges like FTX and other companies last year is clear, as the trade groups and affiliates have ditched “crypto” for the more business-friendly “digital assets.” In accordance Pew Research pollnearly 90 percent of Americans had heard of crypto, and among them, 75 percent saw it as an unreliable and unsafe investment vehicle.

On Monday night, DIFA popped up on my radar because of a promoted tweet in my Twitter feed. It featured an Instagram-like infographic of Securities and Exchange Commission Chairman Gary Gensler, with a simple message: “No clarity Gary. Destroying digital innovation.” The tweet suggested that Gensler was in cahoots with big banks, using his power at the SEC to crush “financial freedom for Americans.” The final call to action asked readers to “join the new voice of the digital asset community and protect the economy.”

This broad message that a lack of guidance from the SEC is the cause of crypto’s downfall has been repeated elsewhere. CoinDesk, the Bitcoin and cryptocurrency news website, published a message from one of its executive editors on why the SEC’s current operations were push directly the industry out of the United States That history is linked to DIFA’s website.

The ad appeared the night before Gensler was scheduled to testify before the House Financial Services Committee, at a hearing called “Oversight by the Securities and Exchange Commission.” Gensler has become a key target for both Republicans and the financial industry in recent months. Semafor reported last month how President Biden’s Wall Street supporters grew frustrated with Gensler, and would consider hold back financial support. And late last year, Rep. Tom Emmer (R-MN), one of the key lawmakers who tried stops The SEC’s investigation into the collapse of FTX, told Politico“Gary Gensler might as well bring a crib because he’s going to be spending a lot of time up front [House Financial Services Committee].”

Ahead of the hearing, House Financial Services Republicans published a letter which mirrored DIFA’s broad topics of conversation.

Essentially, the Republican and DIFA argument is that crypto platforms are not minting and trading in securities, and should thus be exempt from the regulations that Gensler has pushed for. This message is inconsistent with the fact that everyone who buys crypto does so in hopes of future gains. This is how such tokens are marketed from the start.

Industry players have sought to position crypto as not just a digital currency for illicit use, but a new digital channel for investment. Still, the regulatory framework advocated by industry and crypto-friendly politicians is clear – a hands-off, cut-and-dried approach that exempts cryptocurrency and its intermediaries from existing laws covering other forms of investment.

Another point of contention is that crypto firms don’t know how to register their products as securities, when the real problem is that they don’t want to.

Still, the DIFA release was well timed. Next week, the House Financial Services Committee will host “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure.” At the time of writing, there is no witness list.

That hearing is scheduled to coincide with another major crypto event taking place in Austin, Texas. The Consensus 2023 conference, held the day after the Financial Services Committee hearing, will be hosted by committee chairman Rep. Patrick McHenry (R-NC) and “crypto hero” Sen. Cynthia Lummis (R-WY), for one legislature town hall “on the process of writing crypto legislation and the plausible outcomes for 2023 and beyond.”

Some of that legislation has already been written. On April 15, the committee issued a 73-page “discussion draft” bill for the regulation of stablecoins. Almost all the major stablecoin firms are under federal investigation. The bill was meant to emerge from bipartisan discussions, but the committee’s ranking of Democrat Maxine Waters (D-CA) blew it up and said the entire legislation would have to start from scratch. Still, it’s a deliverable that Republicans can bring to the Consensus 2023 conference.

Despite the reputational blunder for the cryptocurrency industry last year, it seems that groups like DIFA will not be taking it easy. And that calculation on their part seems wise, as lawmakers still find it acceptable to appear at industry-friendly conferences. In other words, crypto’s presence in Washington isn’t going away anytime soon.