(Bloomberg) -- Facing a crackdown from regulators in Washington, the crypto industry is turning to New York Senator Kirsten Gillibrand for help.
At first blush, the Democratic lawmaker known on Wall Street for efforts to thwart insider trading in the stock market, isn’t an obvious choice to play crypto’s savior on Capitol Hill. But since she announced in March that she was working on legislation to overhaul rules for the market, her star has risen.
Industry executives sought to woo Gillibrand during a recent trip to San Francisco as she shuttled between a meeting with them at the St. Regis Hotel and breakfast with venture capitalists. Closer to home, a digital-asset lobbyist is planning a Manhattan fundraiser later this month for her re-election.
The fixation on Gillibrand offers a glimpse into how the fast-growing sector is preparing to throw its weight -- and money -- around American politics. It also shows how lawmakers, including those who aren’t known for being staunchly pro-crypto, are poised to benefit from the industry’s largesse.
Gillibrand is crafting the bill with Cynthia Lummis -- a Wyoming Republican who personally invests in Bitcoin. The duo’s legislation is seen as having a better chance of becoming law than many other crypto bills that have been introduced.
Yet despite the involvement of the pro-crypto Lummis, the effort is making some coin enthusiasts nervous.
Many worry that the legislation may be so broad it’ll cause unanticipated problems for firms down the road, according to people familiar with the matter. Others thought early drafts of the bill would give too much power to Securities and Exchange Commission Chair Gary Gensler, who says many digital assets are securities and subject to his agency’s tough investor protection standards.
The whole episode is emblematic of crypto’s growing pains in Washington where there’s no shortage of ideas for regulation. Progressive Democrats, including Elizabeth Warren are keen to crack down. The Senate Banking Committee’s top Republican Pat Toomey wants to rein in stablecoins.
Lobbyists are waging a fierce campaign to make sure that small word choices by Lummis or Gillibrand don’t negatively impact the industry -- even unintentionally.
Gillibrand’s spokesman Evan Lukaske said that the New York senator has been holding meetings with crypto firms, regulators and consumer advocates as she works on the legislation. “Senator Gillibrand is interested in hearing from key stakeholders in order to best develop a framework that promotes innovation,” he said in a statement.
A recent version of the legislation reviewed by Bloomberg News would give the Commodity Futures Trading Commission a bigger role in overseeing the asset class. Still, it’s unclear if the plan will assuage crypto die-hards, who want the CFTC to have more power than the SEC because they believe the derivatives regulator will take a lighter touch.
“If the industry doesn’t already realize it, it will come to understand that in legislation you don’t always get what you want,” said Ian Katz, a managing director at Capital Alpha Partners. “You have to be willing to compromise and sometimes that means accepting aspects of a bill you might not like.”
The measure would leave the SEC with some jurisdiction, said Abegail Cave, a spokeswoman for Lummis. “It is highly unlikely that a digital asset bill will pass Congress without the SEC having a role,” she added in a statement. “It is a broad bill because there are critical areas in many parts of the law that need to be addressed.”
Lummis and Gillibrand also aren’t the only two senators being courted. Cory Booker, a New Jersey Democrat, joined Gillibrand at one of the events last month in San Francisco, people familiar with the matter said. Meanwhile, Coinbase Global Inc., the U.S.’s biggest exchange, held a fundraiser for Chuck Schumer earlier this year. Representatives for Booker and Schumer didn’t respond to requests for comment.
The uptick in events is a sign that lawmakers are poised to receive a windfall in donations from the crypto industry as their prep for re-election bids accelerates in the coming months and years. However, federal election filings are yet to paint a clear picture of their haul, in part because there’s a lag in reporting.
Lummis is next up for re-election in 2026 and Gillibrand in 2024.
The Manhattan fundraiser being planned for Gillibrand is a May 31 cocktail party organized by Kristin Smith, executive director of the Blockchain Association. Guests will be notified of the location after they R.S.V.P., according to an invitation seen by Bloomberg.
©2022 Bloomberg L.P.