Crypto's looming spending spree

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Feb 23, 2024 View in browser   By Jasper Goodman and Zachary Warmbrodt Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. QUICK FIX An $80 million cloud of crypto campaign cash is hanging over the battle for Congress. Campaign finance filings released this week confirm that a trio of affiliated pro-crypto super PACs are poised to be among the top-spending outside groups in this election cycle. Their mission: Promote industry allies and demolish crypto critics, even if digital asset policy isn’t quite a kitchen table issue. The groups — Fairshake, Protect Progress and Defend American Jobs — are backed by major industry players including Coinbase, Ripple and Andreessen Horowitz. Defend American Jobs just spent $1.5 million backing West Virginia Gov. Jim Justice's Senate run, and Fairshake is starting to flex in California’s Senate primary. As the groups evaluate where else to make it rain, two big opportunities to challenge industry skeptics are emerging thanks to pro-crypto Republican candidates vying to unseat Sens. Elizabeth Warren in Massachusetts and Sherrod Brown in Ohio. “It’s a huge development,” Club for Growth President David McIntosh said of the crypto-friendly candidates. While it’s hard to believe digital asset policy will swing any election, the looming political spending spree underscores the desire by top crypto executives and investors to become an outsize force in U.S. politics. The groups are backing candidates on both sides of the aisle, but Republicans have been more eager to anchor their campaigns with overtures to the crypto faithful — most vividly in Ohio and Massachusetts. That could make Brown and Warren ripe targets given their calls to crack down on consumer and financial system risks posed by digital asset trading. “The reason specifically they’re so anti-crypto is because they hate individual responsibility and freedom,” Ohio GOP Senate candidate Bernie Moreno said of Brown and Warren in an interview. “We will absolutely take ’em to task on this issue.” Moreno, a former car dealer, is the frontrunner to take on Brown thanks to an endorsement from former President Donald Trump. Moreno made a name for himself in the Cleveland area in part as an evangelist for crypto technology. He plans to make crypto an issue in the general election. It’s the clearest example yet of how crypto money could potentially make a marginal difference in control of Washington, with Brown expected to face one of the toughest campaigns of his career. Trump won the state in the 2016 and 2020 elections. Club for Growth, which wields influence in the GOP thanks to well-funded super PACs, cited Moreno’s blockchain work when it endorsed him last month. McIntosh said the Club was “excited” by Moreno’s background, adding that “he knows the issues, he knows the technology intimately.” In Massachusetts, crypto attorney John Deaton launched a long-shot bid this week to take on Warren, the digital asset industry’s No. 1 Capitol Hill foe. Deaton, who isn’t expected to pose a real threat to Warren, is already drawing scrutiny over his residency and a past arrest. But he’s making a big splash in the online crypto community. Fairshake and its affiliated crypto super PACs haven’t said yet whether they will back Moreno or Deaton. California has emerged as its first big target, with Fairshake spending $6.8 million to dislodge progressive Rep. Katie Porter from the Senate race against Democratic Reps. Adam Schiff and Barbara Lee and Republican Steve Garvey. Porter, a Warren protege, is polling behind Schiff and Garvey in the open primary. The strategy for her opponents is to ensure that she fails to advance to a November general election. Porter has tried to raise money off the crypto-backed attacks. The crypto super PACs have also recently spent money to back House candidates in North Carolina and Alabama. “Fairshake is focused on supporting candidates who want to get things done and pass responsible regulation to allow the crypto economy to grow, create jobs, and generate wealth for all Americans,” said Fairshake spokesperson Josh Vlasto. “We’ll get involved in races based on the candidate and where we can have an impact.” A separate pro-crypto dark money group, the Cedar Innovation Foundation, is already spending money to attack Brown in Ohio over digital asset policy. Brown, for now, is trying to dismiss the potential threat from a Republican who wants to challenge him on crypto. “If they want to make that an issue — I don’t really understand it, but they have their crypto contributors and I think that drives what they do,” Brown told reporters recently. “Because it’s sure not that crypto has been good for our country.” Happy Friday — What crypto story are we missing? Send tips to zwarmbrodt@politico.com.   CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here.     Driving the day New sanctions — Reuters reports that the Biden administration will impose sanctions on more than 500 targets, in an action marking the second anniversary of Russia's invasion of Ukraine. The move will target Russia's military-industrial complex and companies in third countries that facilitate Russia's access to goods. The boom — Per the WSJ, soaring Nvidia shares sent the S&P 500 to a fresh record Thursday and powered stock rallies around the globe. The Nikkei stock average surpassed its 1989 high, and the Stoxx Europe 600 hit its own record. A quarterly Charles Schwab survey found that trader sentiment is at its highest level of bullishness since 2021. About half of traders think the U.S. will avoid a recession this year, up from 23 percent last quarter. Geopolitical and macroeconomic issues are their top concern, followed by the political landscape in Washington. Hope for Europe — Our Carlo Boffa reports that the eurozone showed slightly stronger signs of economic recovery this month, raising the possibility it will return to growth soon. Fed speak — Fed Governor Lisa Cook said central bank officials need “greater confidence” that price pressures are returning to pre-pandemic norms before cutting interest rates, according to MarketWatch. Philadelphia Fed President Patrick Harker said the Fed may be near a time where it can begin lowering rates, while Fed Vice Chair Philip Jefferson predicted that wouldn't happen until "later this year,” Yahoo Finance reports. Former Kansas City Fed President Tom Hoenig is out with a new proposal to narrow the leeway the Fed has on monetary policy swings. “While the Fed requires a degree of discretion to carry out its mission, unrestricted discretion has repeatedly led to significant policy errors,” he writes via the Mercatus Center. On the Hill Coming soon: Fintech votes — House Financial Services is expected to hold a markup on fintech legislation and other bills next Thursday, including a Republican-led revamp of regulation for earned-wage access services. EWA providers give consumers access to earnings before they receive a paycheck. The EWA bill by Reps. Bryan Steil and French Hill would spell out federal standards for the services while also saying they shouldn’t be regulated as loans. It’s backed by groups including the Financial Technology Association and the American Fintech Council. Consumer advocates have problems with the bill. "The CFPB has said it will issue guidance on how federal laws apply to earned-wage products and providers,” Americans for Financial Reform senior policy analyst Mark Hays told MM. “So the Steil bill is premature, at best. At worst, it would preempt the CFPB and narrow the scope of oversight. The bill's real intent is to declare that earned wage advances and other fintech cash advances are not credit — which is false — and exempting them from other federal laws." Warren presses big banks on Muslim customers — Progressive lawmakers led by Sen. Elizabeth Warren are pressing JPMorgan Chase, Bank of America, Wells Fargo and Citigroup for details on their “de-risking” practices, in response to concerns that Muslim Americans are disproportionately affected. Sen. Bernie Sanders signed on to the request with Reps. Ilhan Omar, Rashida Tlaib and Ayanna Pressley.   YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics.      Regulatory Corner Hsu on crypto — Acting Comptroller of the Currency Michael Hsu told the Financial Stability Board’s Crypto Working Group that implementation of the FSB’s global framework for crypto activities has been challenging and that “no real progress has been made on consolidated supervision.” “This is, in part, because the crypto industry continues to resist what it sees as improper or over-burdensome regulation and oversight, while jurisdictions continue to compete for crypto business,” he said in prepared remarks. “The risk with such competition is that it gives the industry leverage and forces regulators to accommodate and compromise. Fortunately, collaboration and coordination among financial regulators can serve as an effective mitigant to the risk of over-accommodation.” California warns banks on fees — California Attorney General Rob Bonta sent letters to small banks and credit unions warning that overdraft and returned deposited item fees may violate state and federal law. “The CFPB has already put a stop to the worst practices by the biggest banks and credit unions,” Bonta said in a statement. “Now it is time for everyone else to follow suit: I urge all of California’s banking institutions to comply with federal and state law by eliminating these unfair fees.” Frankfurt wins again — Our Bjarke Smith-Meyer reports that Frankfurt will be the home of the EU’s future anti-money laundering authority. It’s also the HQ of the European Central Bank.   Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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