Saturday, September 23, 2023

Coinbase, Crypto Billionaires, and the 2022 Midterm Election

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Shreya Christina
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The crypto industry is constantly trying to sell us something new. This election season is the rise of the bitcoin voter, a new political constituency that is supposedly ready to vote for all things pro-crypto.

The Crypto Council for Innovationa pro-crypto trading group representing platforms such as Fidelity and Gemini released data last Wednesday Reportedly indicating that one in seven voters “own crypto and say they are ready to vote for pro-crypto candidates.” Coinbase, a crypto trading platform with more than 100 million users around the world, has launched its own voter registration initiative and ranks candidates by their friendliness towards crypto issues. At the same time, a small but growing number of political campaigns have been launched accept bitcoin donations in an effort to showcase their crypto credentials.

All of this is in the service of the idea that one day there could be a large contingent of voters supporting pro-crypto candidates through their donations and ballots. To be clear, it’s still early. The people behind the big campaign to mobilize crypto voters told Recode that the upcoming midterm elections are essentially a practice round, although the ultimate goal is to develop a voting bloc ready to vote in the interest of the crypto -industry.

Still, it is not clear that this strategy will necessarily work as the people who own crypto are already spread across the political spectrum. Some critics also point out that the libertarian ideology behind the crypto movement does not necessarily match the prospect of major crypto companies encouraging people to participate in the traditional political process.

“To the extent that such a person exists, they are probably someone who is already deeply invested in the cryptocurrency space in one way or another,” says David Golumbia, a professor at Virginia Commonwealth University who has written about the politics of bitcoin. “The irony is that the whole space is so permeated with anti-government sentiments and anti-democratic ideas.”

The people leading this effort have an idea of ​​who these crypto voters could be. In the United States, people under 50, as well as those with higher incomes, are more likely to use crypto, according to Pew. Research published in August. Men are about 14 percent more likely to use crypto than women, and black, Hispanic and Asian Americans are slightly more likely to use crypto than white Americans. While it’s far from clear that using crypto is enough to get anyone to vote for pro-crypto causes, some strategists say enough people now own crypto that the group could have some political clout. As of now, about 16 percent of US adults have used cryptocurrency at least once.

“One of the ways you accelerate policy progress on Web3 is when candidates start polling on Web3 and see how many people have it,” said Chris Lehane, a prominent Democratic political adviser now working for Haun Ventures, who was Founded by former Andreessen-Horowitz partner Kathryn Haun. “When you get out of politics, you just don’t see cohorts of this size.”

Right now, crypto doesn’t fall along party lines like major issues like gun reform, climate change, and abortion. Republican and Democratic candidates have supported and criticized crypto, and there are members from both parties in the Congressional Blockchain Caucus, a group of lawmakers studying the technology. A Morning Consult poll late last year found that comparable shares of Democrats and Republicans in favor of fewer rules on crypto, and studies commissioned by pro-crypto companies have yielded similar findings.

Haun Ventures recently commissioned a Morning Consult survey showing that likely voters in the swing state support the ideology behind Web3, a term some use to refer to technologies such as cryptocurrencies and the blockchain, and found that “Web3 voters” in New Hampshire, Nevada, Ohio, and Pennsylvania leaned slightly democratic. GMI PACa super PAC supported by several crypto-focused venture capital and investment firms as well as the hedge fund led by the underage Trump-era character Anthony Scaramucci, also published a poll this month highlighting that many voters are now actively using or may want to use cryptocurrencies.

“You see the industry channeling tens of billions of dollars to really push their regulatory agenda up the hill,” Stephen Diehl, a prominent critic of crypto and co-founder of the Center for Emerging Technology Policy, told Recode. “It’s a pretty natural extension that they would try to get the electorate.”

While crypto users don’t seem to be at home with any party, crypto companies are still trying to get them to vote for pro-crypto candidates. After launching his voter registration initiative last summer, Coinbase established a “legislative action portal” in its app, which is mostly used to monitor crypto prices and trade various cryptocurrencies. This portal ranks politicians on their support for crypto using data collected on their public statements, legislative record, and whether or not they accept donations from crypto campaigns. The rating for Majority Leader Chuck Schumer, for example, leans negatively, while the rating for the other New York senator, Kirsten Gillibrand, is very positive.

“We’re trying to build things that are educational infrastructure that will survive this midterm, that will survive the 2024 elections, that will give people a way to participate in the process, not just in October and in an election year, but [in] March of a bad year,” said Miti Sathe, who leads community engagement at Coinbase and previously worked on the Obama campaign. “We keep the enthusiasm around the crypto issues for our community because that’s what we hear from the community. “

Right now, many of the politicians listed in Coinbase’s systems have no ratings at all, though Sathe hopes crypto policy will soon become a major enough voting issue for more officials to take a public stance. In the meantime, the app also directs Coinbase users to a website that sends a form email to politicians urging them to support “pro-crypto policies.” Brian Armstrong, CEO of Coinbase, has said that the app could eventually help politicians solicit donations and expand into elections outside the US. However, in the wake of the workers’ debate over racial justice and the murder of George Floyd in 2020, Armstrong banned internal debates on politics, saying the company would “minimally focus on matters” unrelated to its primary activities.

In addition to directly involving voters, there is the movement among some pro-crypto politicians to accept cryptocurrency donations. There isn’t much difference between someone sending a cryptocurrency campaign that they then convert into dollars that they can easily spend, and a person converting the crypto themselves before making a donation. Still, politicians can now accept crypto through a variety of platforms, including Coinbase, BitPay, and a service called Engage Raise, which focuses specifically on politics. Sixteen candidates have signed up to accept cryptocurrencies such as bitcoin, ethereum, and dogecoin donations with Engage Raise, and others are asking for crypto directly on their campaign websites.

The results are mixed. Martin Dobelle, the CEO of the company that runs Engage Raise, told Recode that they have received crypto donations from “probably about half” between 10 and 100 people. Bill Zielk, CEO of BitPay, told Recode in an email that the platform processed “more than 500 crypto donations” this year, but won’t say how many of those were specifically for political campaigns, compared to other purposes. At the same time, Blake Masters, a Trump-backed Republican venture capitalist running for the Arizona Senate, raised more than half a million dollars by Auctioning 99 NFT versions of the book he co-authored with Republican donor Peter Thiel, along with the opportunity to attend social events.

Federal Elections Commission data shared with Recode suggests that campaigns revealed at least 350 receipts for cryptocurrency transactions between early 2021 and late September this year, though that number may not include all donations made in the third quarter of 2022. are done. Still, during an election cycle, a single campaign can handle several times more revenue in traditional currency, and only a handful of campaigns represented crypto revenue the FEC data highlighted, including Masters, Senator Ron Wyden and a Democratic candidate named Matt West in Oregon. the FEC allows crypto donations but has issued recommendations for how crypto contributions should be made public.

“States are writing guidelines on this, but it’s early days,” Sarah Bryner, director of research and strategy at OpenSecrets, told Recode. “So I think candidates and political committees are a little wary of accepting or asking for this kind of money for good reason.”

However, Crypto’s greatest influence on politics is not expressed in bitcoin or ethereum. It’s all about U.S. dollars – and many of them. A series of pro-crypto PACs have appeared with cash to support pro-crypto politicians in both parties, including the Blockchain Association, Web3 Forward and Crypto Innovation. A crop of think tanks and lobbying companies have already arrived on the Beltway, eager to influence how politicians compose emerging crypto regulations. And then there’s the new crypto donor class: Sam Bankman-Fried, the billionaire founder and CEO of crypto platform FTX, has suggested he could spend as much as $1 billion on the 2024 election — though he recently ran back the idea – and belongs to the most influential individual donors this election cycle.

While the effort to mobilize voters for crypto is just one part of a broader movement to include crypto in institutional politics, the people behind the effort said they are hopeful that crypto holders can become a real force in future elections. While crypto firms are understandably excited about the idea, others are already concerned about what an influential crypto voting base could ultimately mean.

“You go to someone and you say, ‘Well, who are you voting for?’ And they say, ‘Well, which one is better for crypto?’ said Rohan Gray, a law professor at Willamette University who represents Rep. Rashida Tlaib advised on stablecoin regulation. “But when a non-trivial number of people who run for candidates don’t really believe in the electoral process or are downright fascist in their goals, a single-issue voter around crypto is particularly dangerous for democracy.”

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