Hello and welcome to Regulator, the Verge newsletter about the technology politics happening in our nation’s capital. I hope our snowstorm-affected readers are safe, warm, and haven’t reenacted The Shining at home yet. Do you know what prevents that? Subscribing to The Verge.
Last week, when I was tracking Coinbase’s opposition to the Clarity Act, I kept hearing the same fear from worried DC insiders: The crypto industry was running out of time to pass a bipartisan market structure bill that would actually give them a favorable outcome. The midterm elections are imminent, and Congress will switch to campaign mode in the upcoming weeks, meaning policymaking and bipartisanship will take a backseat to reelection priorities. To put it in private sector parlance, there will be guaranteed personnel turnover, and their replacements may not be quite as friendly to the crypto industry.
But to put it in political terms, the Democrats are likely to gain a lot more power, and the Republicans are about to lose it. Historical statistics almost guarantee it: In 90 percent of the midterm elections over the past 80 years, the incumbent president’s party lost seats in the House. Every president since Bill Clinton has lost both the House and Senate in the first two years of their term. Midterms are, more or less, a referendum on the president, and the less popular a president is, the more seats his party ends up losing.
Given this trend, Coinbase has taken a huge gamble: that crypto’s allies would remain in Congress, with the Republicans nudged along by President Donald Trump, and that the Democrats who are hostile to crypto, like Rep. Maxine Waters (D-CA) or Sen. Elizabeth Warren (D-MA) wouldn’t seize the policy wheel. They had two allies speaking on their behalf, too: White House AI and crypto czar David Sacks, and the president’s son, Eric Trump, who told a crowd at the World Economic Forum in Davos, Switzerland, that the banking industry was responsible for Clarity stalling.
Then ICE agents killed an ICU nurse in broad daylight during an anti-ICE protest in Minneapolis on Saturday. And as the country erupted in fury, politics took over the US Capitol, and policy was kicked to the backburner.
In response to Alex Pretti’s death and ICE’s continued presence in Minneapolis, Senate Minority Leader Chuck Schumer (D-NY) announced that the Democrats would not vote for any budget that continued to fund ICE at the Department of Homeland Security, setting up the possibility of a partial government shutdown. Crucially, several moderate Senate Dems revoked their support as well, including Sen. Patty Murray (D-WA), the top Democrat negotiator for the current funding package. Although she’d initially been urging her colleagues to vote for the bill, Murray announced on Sunday that she was reversing course. “Federal agents cannot murder people in broad daylight and face zero consequences,” she wrote on X.
Partisanship had already started leaking into the Clarity debate, said Cody Carbone, the CEO of The Digital Chamber, a major digital asset and blockchain industry trade association in Washington. Most of the opposition to the last Clarity draft came from Democrats, as well as two Republicans who represented states with large banking industries. (One of them, Sen. Thom Tillis of North Carolina, is retiring this year due to his opposition to Trump.) But Carbone raised concerns that Pretti’s death would prompt each party to become more hardline, both in the Senate and the House (which would have to review the bill again if the Senate made substantial changes). More floor time would be dedicated to deeply partisan, existential battles, from government shutdowns to hearings. And crypto was in danger of being lost in the fold, to the detriment of both parties.
“Crypto holders are super intense about crypto. They’re single-issue voters, and they vote with their wallets,” he told me, noting that while they tended to hold Democrat-leaning views, they overwhelmingly voted Republican because they perceived the party to be friendlier to the industry. “If you look at some of the political dollars that the crypto industry gave last election, and some of the enthusiasm from crypto voters, it can swing elections.”
The crypto sausage-making resumes this week when the Senate Agriculture Committee, which regulates commodities, convenes on Thursday for its own markup of the Clarity Act. (The Banking Committee, which regulates securities, seems to be in a stalemate.) Below, Carbone and I chat about what crypto lobbyists are hearing in the smoke-filled backrooms, which Senators are being wooed by the banks, and a doomsday scenario (for the industry) in which the Democrats win either the House or the Senate before Clarity is passed. “I imagine there’ll be a lot of subpoenas and they’ll want to look into the Trump family’s dealings around crypto,” he predicted. “There’s not going to be any interest in passing crypto legislation that will help in terms of adoption.”
This week at The Verge:
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