Watchdog Warns of Crypto’s Growing Political Influence

A nonpartisan watchdog group has raised alarms about cryptocurrency companies wielding unprecedented influence over American politics and regulation, potentially threatening financial stability and government integrity.

In a comprehensive 87-page report released Monday, the Center for Political Accountability (CPA) detailed how the crypto industry spent over $134 million during the 2024 election cycle, securing favorable policy shifts across Washington. The findings come as the administration implements sweeping deregulatory actions benefiting digital asset firms.

“We’re witnessing the capture of regulatory power by a largely unregulated industry with enormous financial resources,” said Bruce Freed, president of the Center for Political Accountability. “The scale and speed of this influence campaign is unprecedented, raising serious questions about whose interests are being served by these policy changes,” he told The Guardian.

Record-Breaking Political Spending

The report meticulously tracks cryptocurrency industry political contributions, which surged to more than $134 million in the 2024 election cycle – a nearly tenfold increase from 2020 levels. This funding was strategically directed to candidates and political action committees across both major parties, with particular emphasis on races involving members of congressional financial services and banking committees. The analysis shows a clear correlation between industry contributions and politicians who later advocated for cryptocurrency-friendly policies.

“These aren’t just standard campaign contributions – they represent a sophisticated, coordinated strategy to reshape the regulatory landscape,” explained Sarah Brennan, the report’s lead researcher. “What’s particularly concerning is how quickly this relatively young industry has mastered the art of political influence,” she added, noting that crypto executives now enjoy unprecedented access to senior government officials.

In addition to direct political contributions, the report documented over $42 million in industry spending on lobbying efforts during 2024, with more than 320 registered lobbyists working on cryptocurrency issues – many of them former government officials. This revolving door between regulation and industry further complicates oversight efforts, according to the watchdog group.

Regulatory Rollbacks Raise Concerns

The CPA report highlighted several recent policy changes that followed the industry’s campaign contributions, including the administration’s decision to drop significant Securities and Exchange Commission (SEC) enforcement actions against major cryptocurrency companies. These cases, which had alleged securities law violations worth billions of dollars, were abruptly abandoned despite years of investigative work by career staff.

“The dismissal of these enforcement actions sends a troubling message about regulatory capture,” said former SEC Commissioner Robert Jackson, who was quoted in the report. “When an industry can effectively nullify enforcement through political pressure, the fundamental principle of market integrity is compromised,” Jackson stated, according to Axios.

The report also scrutinized recent executive orders limiting the SEC’s authority over digital assets and transferring significant oversight responsibilities to the Commodity Futures Trading Commission (CFTC), which has historically had fewer resources for enforcement. This jurisdictional shift had been a top priority for industry lobbyists, who argued the CFTC’s regulatory approach was better suited for innovation.

Conflicts of Interest and Ethics Concerns

Among the report’s most troubling findings were potential conflicts of interest involving senior administration officials. The CPA documented that at least seven individuals in key regulatory positions previously worked for cryptocurrency companies or investment firms with significant digital asset holdings. These connections raise questions about impartiality in policymaking that directly affects their former employers or investment interests.

“The revolving door between crypto firms and government has reached concerning levels,” said Richard Painter, former chief White House ethics lawyer during the George W. Bush administration. “When officials move seamlessly between regulating an industry and profiting from it, public trust in government is undermined,” he told Reuters.

The report specifically questioned the ethics of the recently announced U.S. Cryptocurrency Reserve, noting that several officials involved in its creation have disclosed personal cryptocurrency holdings that could appreciate significantly due to government adoption. While these holdings have been publicly disclosed in ethics filings, the report argues that disclosure alone is insufficient to address the fundamental conflict.

National Security Implications

Beyond domestic regulatory concerns, the CPA report raised national security questions about cryptocurrency deregulation. It cited assessments from former intelligence officials warning that loosening anti-money laundering requirements and know-your-customer protocols could create vulnerabilities in the financial system that hostile actors might exploit.

“The pendulum has swung too far toward accommodation of an industry that still has significant ties to illicit finance,” said Joshua Kirschenbaum, a former Treasury Department official specializing in financial crimes. “We’re potentially creating blind spots in our ability to track financial flows that could be utilized by sanctioned entities or terrorist organizations,” he explained to The Guardian.

The report noted particular concerns about reduced requirements for cryptocurrency exchanges to report suspicious transactions, a change that came after intense industry lobbying against what firms characterized as burdensome compliance costs. Law enforcement agencies have privately expressed alarm about these changes, according to internal documents cited in the report.

Industry Defends Engagement

Cryptocurrency industry representatives quickly pushed back against the report’s characterizations, arguing that their political engagement reflects legitimate advocacy for a rapidly growing sector of the economy. The Blockchain Association, a leading industry group, issued a statement defending the sector’s political activities as necessary to educate policymakers about complex technological issues.

“Our industry advocates for sensible regulation that protects consumers while enabling American innovation,” said Kristin Smith, executive director of the Blockchain Association. “Characterizing this as somehow inappropriate misunderstands both the legitimate role of industry in policymaking and the genuine need for regulatory clarity in this space,” she added in comments to Axios.

Individual cryptocurrency companies mentioned in the report also disputed its findings. Coinbase, which the report identified as the largest political donor in the sector, emphasized that its advocacy efforts focus on creating a reasonable regulatory framework rather than eliminating oversight entirely. “We support appropriate regulation that addresses genuine risks while allowing responsible innovation,” a company spokesperson stated.

Bipartisan Concerns Emerge

The report’s release has generated reactions from lawmakers on both sides of the aisle, with several expressing concern about the speed and scale of cryptocurrency deregulation. Senator Sherrod Brown (D-Ohio), ranking member of the Senate Banking Committee, called for hearings to examine potential conflicts of interest in recent policy changes.

“This report raises serious questions about whether policy is being driven by the public interest or private gain,” Brown said in a statement. “Americans deserve to know if their financial system is being reshaped to benefit campaign donors at the expense of market stability and consumer protection,” he added, according to Reuters.

More surprisingly, some Republican lawmakers have also expressed reservations about certain aspects of the administration’s approach. Representative Patrick McHenry (R-N.C.), chairman of the House Financial Services Committee, indicated support for cryptocurrency innovation but cautioned against moving too quickly. “We need to ensure proper guardrails remain in place as we modernize our regulatory framework,” McHenry stated.

Looking Forward: Policy Implications

The CPA report concludes with several policy recommendations aimed at addressing the concerns identified. These include strengthening disclosure requirements for cryptocurrency political spending, establishing cooling-off periods before industry executives can take regulatory positions, and creating an independent commission to review digital asset regulations for potential conflicts of interest.

“This isn’t about opposing cryptocurrency innovation or adoption,” explained Bruce Freed of the CPA. “It’s about ensuring that policy decisions are made with proper public oversight and accountability rather than being driven by campaign contributions and revolving-door relationships,” he told The Guardian.

The report’s findings may influence upcoming congressional deliberations on cryptocurrency legislation, with several committees expected to hold hearings in the coming weeks. Additionally, the public attention generated by the report could increase scrutiny of forthcoming regulatory actions related to digital assets, potentially altering the implementation timeline for some of the administration’s announced initiatives.