The bear market barely dents the crypto lobby

Despite a season of layoffs and budget cuts, the crypto industry’s DC spending stubbornly remains near all-time highs. In other words, the crypto lobby is going nowhere.

An analysis of disclosure data shows a collective industry spend of just $7 million in the most recent quarter. Although down slightly from a peak of just over $7.4 million in the second quarter of 2022, and down slightly from the third quarter, the findings reflect a remarkably consistent level of spending even in the midst of one of the worst crypto bear markets in years.

Source: Senate lobbying; Analysis of Fortune

In total, the industry spent more than $27.5 million in 2022. To put that in context, the crypto industry’s outlay is less than 10% of the $372 million spent by the pharmaceutical lobby — the single largest spender — last year, according to data from OpenSecrets . But this $27.5 million is almost half of what commercial banks spent on lobbying, and more than twice what both hotel and restaurant lobbies spent.

FortuneThe analysis included a list of strictly crypto firms and groups, what they spent on external contracts and internal lobbyists. In addition, the analysis included crypto-oriented fintech firms such as PayPal and Block, whose current lobbying activities are heavily focused on Web3 issues. Total spending by Meta, formerly Facebook, was not included, but specific contracts between Meta and outside firms were.

In the most recent quarter, this analysis gathered 53 firms or groups and 124 contracts or internal lobbying shops.

‘Ground zero’

The Lobbying Act imposes reporting on a narrow range of activities as “lobbying” and does not require persons who spend less than 20% of their time on lobbying to register. Consequently, these figures do not represent total public relations expenditure.

“We are at ground zero when it comes to the legal framework. So the industry is looking at it and saying, “If we’re not active in DC, we’re not going to be there to structure how the industry grows up,” says Adam Minehardt, who lobbies for the Stellar Development Foundation.

Despite the libertarian, anti-government ethos of early Bitcoin adopters, crypto firms have been spending on lobbying since late 2014. But in recent years, that spending has skyrocketed as the industry tries to influence legislation, such as the Infrastructure Act of 2021 as well as proposals from 2022 to give the Commodity Futures Trading Commission jurisdiction over key crypto markets.

FTX was the most visible player in the latter push until the bankruptcy, when lobbying went from a third-quarter peak of $330,000 to nothing. Almost immediately after declaring bankruptcy in early November, FTX’s in-house government relations shop disappeared, sending no disclosures for the latest quarter. Its external contracts were terminated.

The firm’s collapse and the prosecution of former Golden Boy founder Sam Bankman-Fried have soured many in Washington on crypto, and some firms are pulling back amid the hostility.

Coinbase has for years run the crypto industry’s biggest lobbying machine, although the money it has spent has saved it from ongoing disputes with the Securities and Exchange Commission. The largest US crypto exchange nearly halved its reported expenses last quarter, from $1,040,000 to $590,000.

“Important to take this step”

Digital Currency Group, whose subsidiary Genesis is currently navigating bankruptcy proceedings, also noticeably scaled back its government relations work.

But while some of the big players are spending less on lobbying, the government’s recent focus on the crypto sector has also drawn a number of new players into the game.

In the last quarter, several big name companies have registered internal lobbying activities for the first time. These include VC fund Andreessen Horowitz, futures exchange Bakkt, the Web3.0 Foundation – which develops and curates the Polkadot and Kusama networks – and Bitcoin miner Riot Platforms. These registrations are only weeks old and no expenses have been reported yet.

“With crypto legislation now at the forefront of policymakers’ minds, we felt it was important to take this step,” an Andreessen Horowitz spokesperson said by email.

The Filecoin Foundation has long been a fixture in Washington, and also registered for the first time in December. The foundation reported $150,000 in expenses in the fourth quarter. Crypto exchange Kraken, meanwhile, filed its first filing in late November, ultimately reporting $240,000 in Q4 spending.

The main trade associations — the Blockchain Association, the Chamber of Digital Commerce, the Crypto Council for Innovation and the Association for Digital Asset Markets — which represent swarms of crypto firms in Washington and coordinate those firms’ leverage operations, saw a combined Q3-to-Q4 increase of $834,000 to $1 010,000.

Kristin Smith, CEO of the Blockchain Association, which reported $490,000 at its most recent disclosure, told Fortune that lobbyists are scrambling to keep up with the fallout of FTX and a new Congress.

“[At least] we’ve got Sam Bankman-Fried and FTX out of the way,” she added.

Kollen Post is a freelance journalist based in Washington, DC, who has reported for outlets including The block.