The collapse of cryptocurrency exchange FTX has sent shockwaves through Washington, exposing the industry's cozy relationships with regulators and prompting a lobbying scramble.
Who were the key players cosying up to officials? How far did FTX's influence reach before its dramatic implosion? And how are crypto advocates adjusting their strategy in the aftermath? This article details the wild ride cryptocurrency lobbyists have experienced in D.C., from height of access to urgent damage control.
The downfall of FTX and upcoming fraud trial of its disgraced founder Sam Bankman-Fried have changed the tone but not diminished the intensity of cryptocurrency lobbying this week. Industry players are pouring millions into advocacy efforts, albeit with a new air of caution in the halls of power. Some congressional offices are reluctant to engage, and crypto representatives are straining to distance themselves from FTX's toxicity.
This report will cover the key developments, expert opinions, Bitcoin commentary, historical parallels, and insights into two pressing questions - how deep did FTX's influence run, and what comes next for crypto lobbying?
FTX leveraged its clout during the exchange's glory days in early 2022, when founder Sam Bankman-Fried was lauded as an eccentric genius. Emails reveal FTX officials secured private meetings for Bankman-Fried with Federal Reserve Chair Jerome Powell and other top regulators. The collapse of FTX and fraud charges against Bankman-Fried have prompted skepticism from Democrats and tougher scrutiny from agencies.
"Regulators were more hesitant to embrace crypto firms even in 2022. It was unusual that FTX directly landed a meeting with the Fed chair," said the reporter. Powell's calendar shows the February 1, 2022 meeting took place as arranged by FTX lobbyist Mark Wetjen, a former regulator himself. Powell's other private sector meetings that month were mostly with major bank CEOs.
While Powell has engaged with financial tech firms, the access granted to FTX is seen as atypical. Dennis Kelleher of Better Markets said, "FTX had exercised an extensive web of influence in broader regulatory circles, partly through Mr. Wetjen’s connections.” The reporter believes FTX's use of lobbyist connections and hefty political donations explain its rapid ascent in D.C.
In this reporter's opinion, the FTX debacle warrants tighter oversight of cryptocurrency lobbying. Companies should not be able to buy access or sidstep transparency. Officials also need to exercise diligence in evaluating the ethics and stability of industry players before granting legitimacy.
Greater decentralization and disintermediation through blockchain technologies like Bitcoin could potentially counteract some of the central point of failure risks exposed by FTX's concentration of power. However, prudent regulation is still needed to protect consumers without stifling innovation.
The reporter predicts intensified scrutiny from lawmakers will persist in the near-term following FTX's spectacular collapse. Crypto lobbyists will likely struggle to regain the warm reception they enjoyed early last year. However, the massive revenue potential of web3 means advocates will continue pushing for favorable policies, albeit with an added dose of discretion.
This boom to bust story echoes past episodes like the 2008 financial crisis and the dot-com bubble. Innovative industries often outpace oversight until scandal forces a regulatory reckoning. Cryptocurrency is experiencing this pattern on an accelerated timeframe compared to more entrenched sectors.
How Deep Did FTX's Influence Run in Washington?
Emails reveal FTX founder Sam Bankman-Fried met privately with Federal Reserve Chair Jerome Powell and other top officials in 2022. FTX also engaged with the White House National Economic Council and FDIC based on public records. The access was enabled by lobbyist Mark Wetjen's regulator connections and aggressive outreach campaign. This level of high-level access for a young firm shows the power of influence peddling in D.C.
What's Next for Crypto Lobbying After FTX?
The FTX collapse will make lawmakers more skeptical of crypto, slowing lobbying progress. However, industry advocacy groups like Stand With Crypto and the Crypto Council will recalibrate by distinguishing themselves from FTX. Massive revenue potential means lobbying will remain robust long-term. But expect a period of diminished receptivity in D.C. following the FTX revelations.