The Blockchain Association declared its existence on September 11, 2018. Like other cryptocurrency lobbying groups, it claims to “serve as the unified voice of the blockchain ecosystem” and promises to “be a liaison to policymakers.” That same day, the Blockchain Association officially registered as a lobbyist with the US Senate and the US House of Representatives.
“We know the industry doesn’t agree 100 percent of the time,” the organization’s announcement acknowledged, “but we do share many core beliefs and principles.”
But do they really? The Blockchain Association’s founding members include US crypto exchanges Coinbase and Circle; blockchain projects Blockstack, Filecoin developer Protocol Labs and Interstellar; venture capital firm Hangar and token listing platform Coinlist. That’s certainly a cross-section of the crypto eco-system. Yet, all of these organizations have businesses that rely on integration with the traditional fiat system as much as they rely on disrupting that system’s establishment.
The Blockchain Association is not the only crypto organization lobbying the Washington establishment. Groups like Coin Center and the Bitcoin Foundation try to influence crypto-related laws and regulation right alongside Wall Street firms and other long-standing players in DC.
But who are these cryptocurrency lobby groups and what are their agendas? We’ll help you understand the role lobbying plays in shaping America’s blockchain future.
Lobbying, Advocacy, Legislation and Regulation
Lobbying is a specific activity that the US government regulates to control influence-peddling and corruption at the federal level. Writing a letter to your Congressperson or donating money to a Senatorial campaign are activities that aren’t considered lobbying. Organizations paying for campaign ads or funding political action committees aren’t lobbyists.
The Center for Public Integrity describes lobbying as any communication an organization has with politicians, staffers or high-level government officials regarding specific legislation. A lobbyist could be the organization’s employee or an outside firm paid to act on the organization’s behalf.
The Blockchain Association, for example, lobbies Congress directly. Its in-house lobbyist, Kristin McKenzie Smith, has alternated between careers as a legislative assistant on Capitol Hill and gigs in the DC lobbying industry. Coin Center, on the other hand, works through professional lobbyists like the Sternhell Group and RWC, Inc.
Regulating lobbyists’ activities in Washington is the job of both the House of Representatives and the Senate. If that sounds to you like the fox is guarding the henhouse, you’d be right. Clean-governance advocates like the Center for Public Integrity and the Center for Responsive Governance have long-standing issues with the effectiveness of political Washington’s self-regulation.
Work the system or get worked by the system
Yet, lobbying serves a function in the US political system. Neither lawmakers nor regulators are omniscient. Raising awareness about the impact of legislation on business or society makes the law-making process better.
Lobbying becomes even more important in the fast-moving world of technology innovation. Few politicians have a tech background and most don’t have time to keep up with emerging technologies. Unfortunately, most people who have the expertise would rather spend their time innovating than talking with clueless politicians.
Microsoft serves as a good example. The company was so focused on its business that it didn’t realize what ignoring the DC establishment would cost. Washington Examiner columnist Timothy Carney spoke with a Microsoft lobbyist who said:
“At some point, you get too big, and you can’t just ignore Washington. You can sit there and say, ‘We despise Washington and we don’t want to have anything to do with them,’ But guess what? We’re going to have hearings about the [stuff] you do.”
Microsoft’s inattention to Washington led to Congressional hearings, Department of Justice investigations and 21 years of anti-trust lawsuits and oversight.
Now the cryptocurrency and blockchain communities face the same scenario. Bitcoin, distributed apps and distributed ledger technologies have gotten too big for regulators or politicians to ignore, even if they don’t really understand how the technology works. The question is: who will they learn from?
Wall Street’s Already There
America’s financial industry, unsurprisingly, dominates Washington’s lobbying landscape. The Center for Responsive Politics estimates that the finance, insurance and real estate lobbyists spent more than $264 million in the first 8 months of 2018. According to Americans for Financial Reform, that’s just a fraction of the $719 million Americans the financial industry spent on lobbying and campaigns in 2017.
The traditional players from Wall Street employ more than 2,100 lobbyists (the CRP’s best guess) to influence legislation. Meetings between lobbyists, politicians and staffers happen every day. While the cryptocurrencies and blockchain technologies are only a small part of the larger conversation, the establishment already has a powerful voice on the Hill.
Establishment players influencing crypto laws
NACHA is the industry association that oversees the Automated Clearing House (ACH) network, the system banks around the world use to transfer money. Every quarterly disclosure report NACHA filed with the House of Representatives since early 2016 included blockchain as a lobbying topic.
Other representatives of the financial establishment that have discussed blockchain policy with legislators include:
- American Land Title Association.
- US Chamber of Commerce.
- Square, Inc.
- Council of Institutional Investors.
- The Depository Trust & Clearing Corporation.
- Council of Credit Investors.
Even the Community Bankers Association of Illinois included crypto and blockchain when lobbying on fintech’s impact on community banks. If the Bank of Bluffs’ representatives in Washington are influencing crypto regulation, then there’s nothing surprising about the crypto industry being there too.
Blockchain Lobbying in 2018
CoinIQ’s review of this year’s House and Senate filings found 37 cryptocurrency lobbying groups trying to sway legislative discussions. In addition to the financial players listed above, industry associations, crypto-based financial firms and blockchain projects are all hoping to sway regulation in their favor.
Blockchain industry groups
Represented by Pierre Ciric, the Bitcoin Foundation is the original crypto lobbying group. Founded in 2012, the organization has suffered declining memberships and challenging financials. Still, the group found enough resources to lobby against proposed anti-money-laundering legislation.
Discussed earlier, the Blockchain Association lobbies Congress directly while claiming to be the unified voice of the crypto industry. The Bitcoinist headline “KYC-Friendly Companies Establish ‘Blockchain Association’ Lobbying Group in DC” indicates why not everyone in crypto will agree.
Blockchain Token Association
Represented by Venable LLP, the Blockchain Token Alliance aims to “promote a sustainable responsible environment for blockchain tokens and the businesses they support” by developing best practices for token offerings. Chinese wealth-management platform Bankorus and Overstock’s blockchain subsidiary tZero are among the founding members.
Chamber of Digital Commerce
A direct-lobbyist, the Chamber of Digital Commerce works to create “an environment that fosters innovation, jobs and investment” by working with legislators and regulators. Anti-money-laundering, token offerings and smart contracts are among the policy issues it discusses. The Chamber also retained North South Government Strategies to lobby on its behalf.
Represented by RWC, Inc and Sternhell Group, Coin Center is a think tank and crypto advocacy group with broad-based support from the cryptocurrency and blockchain industries. Most recently, Coin Center released a framework for the proper regulation of token-based securities.
Digital Asset Affairs LLC
Founded by former Congressional staffer Michelle L. Staton, Digital Asset Affairs lobbies on a wide range of crypto-related topics from distributed app technologies to crypto-based exchange-traded funds. Staton also founded CrystalClarity, a pre-beta startup that promises to be ”the largest & most complete source of U.S. cryptocurrency regulation.”
The Digital Assets Coalition of America
Represented by McCarthy Advanced Consulting LLC, The Digital Assets Coalition of America advocates for a hands-off approach to crypto regulation. In its Congressional filings, McCarthy Advanced Consulting indicated that it also represented the far-right Coalition for a Strong America during its crypto lobbying activity.
As an influential government contractor and a former subject of anti-trust investigations, IBM’s presence in Washington is no surprise. The tech giant also develops enterprise blockchain solutions and shares its views on regulations with legislators. Most recently, IBM tried to influence blockchain-related legislation in the Senate.
Represented by Cypress Advocacy, LLC, ConsenSys is the leading developer for the Ethereum blockchain. Ethereum co-founder Joseph Lubin leads the “venture studio” which supports the development of Ethereum-based distributed applications. Naturally, ConsenSys’ lobbying focused on token offerings.
Represented by Michael Best Strategies, United Solutions is the prime contractor developing a blockchain-based app for the General Services Administration. The million-dollar proof of concept could lead to wider deployment across the US government. That’s plenty of reason to talk to Congress.
Represented by Daly Consulting Group, Harbor uses the open source R Token standard to offer compliance services to token-based securities. The Securities and Exchange Commission has yet to formally regulate security token offerings, so there’s still a chance for lobbyists to sway any future legislation.
Represented by Copper Hill Strategies, Sweetbridge is a blockchain-based discount program. Besides talking to Senators and members of Congress, the decentralized commerce company tasked its lobbyists with discussing regulations with the Consumer Financial Protection Bureau, the Commodity Futures Trading Commission, the Securities & Exchange Commission and the Department of Treasury. CoinDesk interviewed Sweetbridge CEO Scott Nelson about his experience discussing Sweetbridge’s initial coin offering with the SEC.
ShipChain is a blockchain-based logistics system for the maritime cargo industry. Its lobbyist, Mercury Public Affairs, recently registered ShipChain as a new client. With this new relationship, ShipChain’s take on blockchain regulation and the use of blockchain technologies by transportation industries will get a voice in Congress.
The largest American company to accept bitcoin payments, Overstock is a strong advocate for cryptocurrency adoption. It is also the founder of the tZero token platform. Thompson Coburn LLP and Venable LLP represent Overstock’s interests in Washington. Venable has also contracted with Scrivner Leon Group LLC to lobby for Overstock.
Neema is an Israeli crypto payments startup. The Republic of the Marshall Islands hired Neema to launch its planned crypto replacement for its national currency, the US dollar. In a warning first spotted by CoinDesk, the International Monetary Fund said that doing so would risk the island nation’s isolation from the global financial system. Under its free association compact with the Marshall Islands, the United States provides the nation financial assistance and administrative services from the Federal Aviation Administration and other government agencies. Tusk Ventures LLC registered the Israeli company as a client to encourage politicians’ support for the US dollar’s replacement.
Crypto financial industry
Inveniam Capital Partners
Represented by Hogan Lovells, Inveniam Capital Partners is a strategic and financial consultancy developing a blockchain-based marketplace for private debt. Once the platform launches, it would be subject to regulations that protect investors and support America’s global anti-money-laundering activities — natural subjects for the firm’s lobbying efforts.
National Venture Capital Association
The National Venture Capital Association lobbies the government directly on topics related to its customers’ investments. That broad mandate spans politically-charged issues like immigration and healthcare as well as the nuts-and-bolts of taxation and patent policy. In between all of that, the group’s in-house lobbyists talk blockchain.
Represented by North Star Strategies, LLC, ICO Pathfinder promotes the “reverse ICO” approach to going public. The company claims that reverse ICOs are fully compliant and that the resulting tokens will be tradable on certified secondary exchanges. Given the SEC’s total lack of clarity on ICO regulation, it’s easy to see which direction ICO Pathfinder would want to nudge the regulator.
Stokens promotes itself as the “place for the public and accredited investors to buy and sell compliant digital, commodity, and security cryptocurrencies.” Similar to ICO Pathfinder, getting the SEC to bless token-based securities ought to be high on Stokens’ agenda. The startup’s lobbyist, Paul Hastings, LLP, includes its work for Goodbit, PBC, in its filings.
Represented by The Joseph Group LLC, AngelList is the portal for startups and the people who want to work for them. The company’s lobbying efforts focus on educating Congress on the startup industry and its role in American business. Crowdfunding, cryptocurrencies and the blockchain are standard parts of those discussions.
CryptoSecurities Exchange LLC
“You can basically create a stock exchange that’s blockchain-based.” That insight on January 2, 2018, led CryptoSecurities Exchange’s co-founders to begin development of its “fully transparent, code-regulated, blockchain-based securities exchange.” Represented by Castro & Co., where co-founder John Castro is a managing partner, CryptoSecurities Exchange hopes to get Congress to modernize America’s system of securities trading.
NEX Services North America
Represented by McCarty Financial, LLC, NEX Services is a fintech company that develops technology platforms for the financial industry. Its NEX Exchange uses distributed ledger technology to process trades. NEX lobbies Congress on an array of fintech issues, including blockchain regulation.
S&P Global Inc
Financial information services company S&P Global includes blockchain-related topics in its conversations with lawmakers.
Ernst & Young
Big Four accounting firm Ernst & Young’s lobbying arm incorporates the topic of crypto-assets in its activities.
Represented by Monument Policy Group, LLC, Workday develops cloud-based human resources and financial management software systems for Fortune 500 companies. The company has a venture fund that invests in blockchain-based startups. Workday has also joined the Sovrin Foundation to support the development of digital identity systems.
Represented by Paul Hastings, LLP, which also represents Stokens, Goodbit is a public benefits corporation. The company has almost no presence on the web beyond Hastings’ lobbying reports and a Bloomberg profile.
Other cryptocurrency lobbying groups
American Association for Justice
The American Association for Justice represents the country’s trial lawyers. As it counters efforts at tort reform, the association’s in-house lobbyists also discuss the subjects of blockchain and cryptocurrency.
Association of National Advertisers
Represented by the Law Offices of Kevin G. Curtin, this is the trade group for America’s advertising industry. The subjects of cryptocurrency, blockchain and tokens come up while discussing truth-in-advertising regulations.
Rulon & White Governance Strategies represented International Outdoor before the Senate and the Securities and Exchange Commission in conversations about initial coin offerings and token-based securities. No information on the lobbyist’s client is available.
The growing role of lobbyists representing the crypto industry shows that, no matter how decentralized and disruptive the blockchain may be, power and money flows through Washington, DC. The cryptocurrency community is no longer dominated by cypherpunks and bitcoin enthusiasts.
The venture capitalists and Wall Street firms investing in today’s blockchain-based innovations expect their startups to be part of the American economy and the larger global business system.
Money gets you access and influence. If the crypto industry doesn’t play the game, it will suffer much like Microsoft and IBM did in years past.
One thing you did not see in this review of cryptocurrency lobby groups was anyone truly representing the interests of early crypto enthusiasts whose steadfast faith in Satoshi Nakamoto’s vision saw the blockchain through its early trials.
The little guy is left standing outside the door. Who’d have guessed?