Sen. Kirsten Gillibrand Wants to Save Crypto — But Trump Windfall Is a Political Obstacle

Donald Trump is cleaning up on crypto, disclosing a $1.4 billion windfall last week. Yet cryptocurrencies like Bitcoin have, after a year of flying high in the wake of Trump’s election, plummeted.

The crypto industry is putting hopes for its revival in a long-awaited bill, under debate in the Senate, called the Clarity Act, which could open the doors to Wall Street investments.

But there is one thing ironically standing in its way: Trump’s giant crypto haul.

The naked self-enrichment has turned crypto into a prime example of presidential corruption.

The result is that even crypto’s most staunch Democratic allies will find it hard to back a crypto wishlist like the Clarity Act, which will need support from at least seven Senate Democrats to overcome a filibuster.

Take crypto stalwarts like centrist Sen. Kirsten Gillibrand, D-N.Y., the chair of the Democratic Senate Campaign Committee, who issued a statement demanding that any crypto bill include ethics provisions to stop Trump’s crypto profiteering.

With the industry poised to spend tens of millions more on the midterm elections, however, Gillibrand and other centrist Democrats may yet be tempted to sign off on window dressing instead of a crackdown, said crypto critics.

Related

This Commission That Regulates Crypto Could Be Just One Guy: An Industry Lawyer

“Sen. Gillibrand and too many of her colleagues prioritize and spend enormous time pushing crypto’s special interest agenda, which is to get legitimized by the weakest possible law and regulated by the smallest, most underfunded, least capable, and most capture-able financial regulator,” Dennis Kelleher, the CEO of the nonprofit Better Markets, said in a statement last Monday. “That is presumably because the crypto industry has spent hundreds of millions of dollars in campaigns to buy friends and attempt to get crypto’s special interest agenda enacted.”

Gillibrand has dismissed those criticisms. In a statement of her own last week, she expressed her desire to both advance the bill and crack down on Trump.

“We cannot let self-dealing destroy an opportunity to strengthen consumer protections, crack down on illicit finance, and expand economic opportunity for the millions of Americans our financial system has left behind,” Gillibrand said. “The time to act is now — and that must include ethics reforms that prohibit members of Congress, the president, and their spouses from cashing in on their office.”

Declining Sector Hangs Hopes on Clarity Act

For crypto, the numbers are sobering. Bitcoin soared from roughly $60,000 just before Trump’s election to about twice that by October of last year. Since then, it and other digital assets have cratered. Bitcoin now trades back around $63,000 a token.

Related

Trump Is Rewriting History to Justify His Sketchy Pardon of a Crypto King

The market’s gyrations did not stop Trump and his family members from profiting handsomely off the $TRUMP meme coin and other ventures. His roughly $1.4 billion of crypto profits last year meant that he cleared more than the largest publicly traded company in the industry, Coinbase, according to crypto commentator Scott Melker. The White House has defended Trump’s crypto windfall as legal, a point even his critics concede is likely true.

Crypto’s fortunes now appear to hinge largely on whether Congress passes the Clarity Act, which is intended to create an overall regulatory framework for the industry.

“If the bill passed, you would probably see a bump for the industry,” said Mark Hays, the associate director for cryptocurrency and financial technology at Americans for Financial Reform and Demand Progress. “So much of crypto rides on sentiment, and if the bill were passed and signed into law, you would likely see an increase in prices just based on that sentiment alone.”

One sign of how much of the industry is placing its bets on Congress came in a recent quarterly earnings call held by Coinbase. Analysts asked the company’s executives several times how the Clarity Act would affect their bottom line. The company’s executives said that it could mean that Wall Street, which has been reluctant to dive headlong into the industry, will finally start to spend on crypto.

Passing the law, Coinbase CEO Brian Armstrong said, would “just unlock a lot of institutional capital that’ll flow into the space broadly.”

That is one of the outcomes that crypto skeptics fear most. If crypto becomes integrated with the economy rather than a speculative sideshow, they say, it risks taking down the entire system in a crash.

Democrats Holding the Keys

The only thing standing between crypto and its top priority are Senate Democrats. The House of Representatives, where crypto needs only a bare majority, already overwhelmingly passed last year a version of the Clarity Act with Democratic support. In the Senate, however, there are enough Democrats to block passage of the law with a filibuster. The question is whether they will.

Crypto needs to win over seven Democrats to beat a filibuster, or eight if Sen. Mitch McConnell, R-Ky., remains absent due to illness.

Progressives such as Sen. Elizabeth Warren, D-Mass., have expressed broad concerns that the law could lead to the next financial crash. Centrists like Gillibrand, meanwhile, have voiced narrower concerns. One of their biggest hang-ups with the legislation, they say, is the question of whether it will rein in Trump’s crypto ventures.

Gillibrand occupies a powerful position in the party: She serves as the caucus’s top fundraiser as chair of the Democratic Senatorial Campaign Committee. And she has positioned herself as a leader in Clarity Act negotiations, despite not serving on the relevant committees.

Asked last month about the negotiations over the bill at the Aspen Ideas Festival — a cozy gathering of politicos and business executives in the Colorado mountain town — Gillibrand said she was working hard to overcome the ethics obstacle.

“We’re working hand in glove with Republicans,” Gillibrand said. “We’re negotiating with staff from the White House so that everyone is clear about what the bill is going to say, and we’re going to do our best to land that plane.”

Gillibrand’s public statements have repeatedly telegraphed her desire to see some version of the legislation passed. Gillibrand says it is urgent to get consumer protections on the books. Observers say the urgency may also be motivated by the industry’s massive campaign war chest.

Related

AIPAC, AI, Crypto, and Gambling Are Hiding Their Big Election Spends

Over one-third of the corporate money spent on this year’s elections so far has come from the crypto industry, according to a recent report from the nonprofit watchdog group Public Citizen. That amounts to $189 million, including $82 million routed through a single industry super PAC called Fairshake, which is backed by Coinbase.

Rick Claypool, the research director for Public Citizen’s president’s office, said that as chair of the DSCC, Gillibrand is keenly aware of crypto’s campaign spending potential.

“I’m sure it’s top of mind,” Claypool told The Intercept. “Part of the whole goal of the corporate crypto spending is to make sure that lawmakers in general, but also in particular those who are in fundraising, leadership positions, think of the industry before they think of voters.”

Other Democrats tipped as maybes on the bill include Sen. Angela Alsobrooks of Maryland and Ruben Gallego of Arizona, who last month nudged other Democrats on the banking committee to vote for a draft of the bill, along with a swath of the caucus’s more centrist members.

What Ethics?

It’s unclear what sort of ethics restrictions Republicans and Democrats have been working on behind closed doors.

The final text of the bill has yet to drop, despite a promise from Bitcoin evangelist Sen. Cynthia Lummis, R-Wy., that it would be released over the July 4 weekend. The industry’s deadlines for passing the law keep slipping. Its best chance may be to secure passage before the Senate leaves August 10 for an extended period of work in their home states.

Hays said senators should ignore the industry’s artificial deadlines. His group recently released a poll suggesting that most voters are concerned about the crypto industry’s influence in Washington.

“Yes, Democrats are looking over their shoulder, but I think they should be reading the room and saying, ‘Wait a second, is this really a priority?’” Hays said. “Or, is this the kind of pay-to-play politics that have gotten so many voters frustrated in the first place?”

The post Sen. Kirsten Gillibrand Wants to Save Crypto — But Trump Windfall Is a Political Obstacle appeared first on The Intercept.