As the fight over regulating digital currencies intensifies, the crypto industry turns to “K Street”

As the fight over how to regulate digital currencies intensifies, companies that use them are turning to “K Street,” scrambling to hire well-connected lobbyists, lawyers and consultants, The New York Times reported.

K Street is a major thoroughfare in Washington, D.C., running east-west. It is known as the center of many think tanks, lobbying groups, and advocacy groups. In political discourse, "K Street" has become a metonym for Washington's lobbying industry.

Late last year, federal regulators charged Ripple Labs, one of the world’s most popular cryptocurrency platforms, with illegally selling $1.38 billion worth of digital currency to investors, marking a pivotal moment in the crackdown on the fast-growing market.

Ripple has enlisted lobbyists, lawyers and other well-connected advocates to take its case to the U.S. Securities and Exchange Commission and others in one of the first big legal battles over what limits and requirements the government should set on the trading and use of digital currencies.

Ripple hired a consulting firm whose staff includes former aides to Hillary Clinton and former U.S. President Trump to help it develop its strategy in Washington. To protect itself from the SEC, the company also hired Mary Jo White, who served as SEC chair during the Obama administration.

The article points out that as the Biden administration begins to formulate policies, it may shape the course of a potentially revolutionary industry. The encryption industry is rapidly entering the mainstream and attracting increasing attention from financial regulators, law enforcement agencies and lawmakers. Ripple is just one of many cryptocurrency companies scrambling for influence in Washington.

“There’s a tectonic shift happening. If we don’t start planning and taking action soon, we risk everything,” Perianne Bull, president of the cryptocurrency lobbying group Chamber of Digital Commerce, told a gathering of other industry lobbyists, executives and two House members at a conference last month.

Cryptocurrency has so far been a volatile investment, but it has begun to change the way individuals, companies and even some central banks do business. Companies such as Ripple operate cryptocurrency platforms that allow customers to make nearly instant global payments through a system that operates mostly outside of government currency networks.

Globally, the value of all outstanding cryptocurrencies has jumped to about $2.4 trillion from about $200 billion two years ago.

As the stakes increase, so too does the recognition of the industry’s future, which has prompted a scramble to recruit well-connected advocates.

The Chamber of Digital Commerce’s advisory board is filled with former federal regulators, including former congressman and incoming Commodity Futures Trading Commission Chairman J. Christopher Giancarlo, who was appointed to the board of BlockFi, a financial services company that is trying to bridge cryptocurrencies with traditional wealth managers.

Democrats Max Baucus, a former chairman of the Senate Finance Committee, and Jim Messina, a former senior adviser to President Obama, have recently held senior positions in the industry.

Data shows that as of early 2021, there are at least 65 contracts involving digital currency, cryptocurrency or blockchain, up from about 20 in 2019. Some of the biggest spenders on lobbying include Ripple, Coinbase, the largest U.S. cryptocurrency exchange, and trade groups such as the Blockchain Association.

Jay Clayton, who served as SEC chairman until December last year, is now a paid advisor to hedge fund One River Digital Asset Management.

Binance.US this month hired Brian P. Brooks as chief executive, having served as acting director of the Office of the Comptroller of the Currency until January.

Ripple’s new lobbying firms include one recently founded by Republican K. Michael Conaway, who until this year served as a House member from Texas and helped push pro-cryptocurrency legislation last year.

Other companies working for Ripple include Teneo, led by former Clinton aide Declan Kelly, which has assigned Tony Sayegh, a senior Treasury official during the Trump administration, to help develop Ripple’s communications strategy in Washington.

The cryptocurrency industry has a long list of lobbying targets, detailed in an eight-page letter to Biden in March, which called on the administration to finalize a clear set of policies and take a "light-handed regulatory approach."

The article notes that regulatory issues relate to at least two key parts of the cryptocurrency industry: the so-called tokens, which are the currencies themselves, such as Bitcoin; and the platforms, such as Ripple, that allow quick transfers in these cryptocurrencies, or the buying and selling of them, such as Coinbase.

Industry leaders have some hope that the Biden administration will gain more support than the Trump administration, as new SEC Chairman Gary Gensler once taught a course on blockchain technology at the Massachusetts Institute of Technology.

At a hearing in March, Gensler said cryptocurrencies bring new thinking to the areas of payments and financial inclusion. However, he said a balance will need to be struck between encouraging new financial technologies to flourish and protecting investors.

Treasury Secretary Janet L. Yellen expressed deep concerns about Bitcoin: "It's a highly speculative asset, and I think people should be careful. It can be very volatile."

The U.S. House of Representatives this month passed legislation backed by industry lobbyists to create a working group of federal regulators, industry executives, investor protection groups and others to study a possible framework for a regulatory system.