Crypto shifts the political playing field

How the next wave of technology is upending the global economy and its power structures

Aug 01, 2024 View in browser   By Derek Robertson Donald Trump speaks at a cryptocurrency conference in Nashville. | Jon Cherry/Getty Images Cryptocurrency appears to be the star of a political bidding war that's roiling the Democratic Party while top Republicans embrace it. Crypto-friendly Democrats are cautioning Vice President Kamala Harris against ceding the still-growing technology to the GOP, as consumer protection-minded progressive Democrats say the crypto industry is tantamount to institutionalized snake oil. Sen. Debbie Stabenow (D-Mich.) is chair of the Agriculture Committee, which will soon consider a bill to transfer more crypto authority to the Commodity Futures Trading Commission, a move largely seen as friendly to the industry. She told POLITICO’s Jasper Goodman and Eleanor Mueller she feels “very good” about Harris on crypto after a conversation with the vice president. Rep. Wiley Nickel (D-N.C.) said “it’s important to reset” Democrats’ relationship with the crypto industry, and that “the initial steps or initial indications we have are good.” Meanwhile, Rep. Brad Sherman (D-Calif.), an outspoken critic of crypto, made a plea for Harris to take a skeptical stance that he said was in line with other Democratic positions. “If she listens on the issue of enforcing our income tax laws, our sanctions laws, our human trafficking laws, she’ll continue to reach the same conclusion that the Biden-Harris administration has made,” he said. This tension in the Democratic party comes as the Republican nominee, former President Donald Trump, who once trashed crypto, attended the world’s largest Bitcoin conference last week in Nashville. Both parties are now trying to keep pace with the industry’s massive growth in recent years, a remarkable comeback from the epic collapse of FTX. One way crypto has tried to burnish its status as a financial-industry player is by flooding Washington with cash. POLITICO’s Caitlin Oprysko reports that crypto companies and trade associations have spent $13 million on lobbying in the first half of this year. The number is all the more striking because it doesn’t include any spending from Binance, which stopped lobbying this year after former CEO Changpeng Zhao was sentenced to prison for failing to prevent money laundering on his platform. The biggest spenders on direct lobbying have been the firm Coinbase, the trade group the Blockchain Association, and Riot Platforms, a bitcoin miner. Crypto firms have also poured money into a network of industry super PACs that have been spending millions on electing crypto-friendly politicians. Major funders include Coinbase, Ripple, venture capital firm Andreessen Horowitz and investors Cameron and Tyler Winklevoss, among others. Crypto-friendly legislation has backers from both parties. In addition to Stabenow’s legislation that is waiting for a committee vote, the House passed a bill co-sponsored by House Financial Services Chair Patrick McHenry (R-N.C.) to overhaul the crypto regulatory regime that critics panned as too industry-friendly. On Wednesday, crypto-friendly Sen. Cynthia Lummis (R-Wyo.) introduced legislation that would create a “strategic bitcoin reserve” for the United States, echoing a promise Trump made in Nashville. In light of all the spending and legislative action this campaign season, it’s perhaps not surprising that the industry is optimistic no matter who occupies the next White House. Harris is “neutral, and we need to provide education to the campaign to understand why this is a critical issue,” Sheila Warren, CEO of the Crypto Council for Innovation, told Jasper and Eleanor.   Live briefings, policy trackers, and procedural, industry, and people intelligence from POLITICO Pro Analysis gives you the insights you need to focus your policy strategy this election cycle. Secure your seat.      a (potential) shrug on tech Will the upcoming presidential election affect tech policy at all? That’s the provocative question POLITICO’s Mark Scott posed in today’s Digital Bridge newsletter, pointing out that when it comes to tech, Republicans and Democrats tend to converge on one topic: national security, particularly in opposition to China. “For years, both Republicans and Democrats have stood together in their allegiance to supporting American tech firms’ global ascendency, to pushing back when other governments seek to hobble these firms’ power, and to asserting Washington’s dominance over emerging technologies that could be used for national security purposes,” Mark writes. In particular, he pointed to former President Donald Trump’s push back against Chinese telecom firm Huawei and imposition of export controls on chips to China — both policies President Joe Biden’s administration has continued, if not accelerated. Mark also argues that both a President Kamala Harris and a President Trump 2.0 would likely be skeptical of European Union governing bodies, although he acknowledges the major differences the two would likely have on how to regulate AI (the GOP’s official 2024 platform pledges to repeal Biden’s AI executive order). The overlap he sees would be good news for the tech industry, as Democrats and Republicans, he writes, sing from the same “hymn sheet”: “promoting U.S. firms overseas, hobbling China, wherever possible, and reminding allies they shouldn’t go too far in policing Silicon Valley.” ai act in effect After a long, occasionally tortured journey to passage, the European Union’s AI Act finally enters into force today. But… it’s more of a gradual rollout than a launch. POLITICO’s Morning Tech Europe covered today the series of deadlines and milestones EU governments and tech companies will face. First to take effect in February 2025 are rules on prohibited uses of AI like criminal risk assessment or emotion detection. Then in August of that year, rules about general-purpose AI models and governance will kick in, as well as penalties for violation of the Act; the rest will take hold in August of 2026. The European Commission’s AI Office is working on a “code of practice” that will help developers comply with the law. And governments are preparing their own agencies to comply, as well, with Spain and Italy leading the way in designating national authorities to oversee the law’s rollout. TWEET OF THE DAY The Future in 5 links Deepfake porn derailed the career of a rising star in Florida politics. Like other tech giants, Meta’s costs for AI development are surging. Suspected Chinese attackers hacked a Taiwanese computing research center. OpenAI promised the U.S. AI Safety Institute early access to its next model. Living forever (as a chatbot) might not be that appealing. Stay in touch with the whole team: Derek Robertson (drobertson@politico.com); Mohar Chatterjee (mchatterjee@politico.com); Steve Heuser (sheuser@politico.com); Nate Robson (nrobson@politico.com); Daniella Cheslow (dcheslow@politico.com); and Christine Mui (cmui@politico.com). If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.       Follow us on Twitter Daniella Cheslow @DaniellaCheslow Steve Heuser @sfheuser Christine Mui @MuiChristine Derek Robertson @afternoondelete   Follow us

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