In early 2022, cryptocurrency lobbyists were in a strong position, even to the point where an FTX executive felt confident enough to email Jerome H. Powell, the chair of the Federal Reserve, to request a meeting with Sam Bankman-Fried, the soon-to-be-disgraced founder of the cryptocurrency exchange.
Surprisingly, the request was successful.
After an email exchange between Mark Wetjen, an FTX policy official and former commissioner at the Commodity Futures Trading Commission, and Mr. Powell, the meeting was scheduled for February 1. This meeting took place, and FTX policy papers were subsequently sent to the Fed chair by Mr. Wetjen, according to obtained emails.
Despite Mr. Powell’s cautious approach to the digital currency industry, he was open to learning more. FTX took advantage of this by gaining access to various federal officials, as revealed by recently released records. In October 2021, Mr. Bankman-Fried had a virtual meeting with Lael Brainard, who is now the director of the White House National Economic Council. He also met with Martin Gruenberg, the head of the Federal Deposit Insurance Corporation.
However, the crypto industry now faces a more challenging environment in Washington after the collapse of FTX and the subsequent arrest of Mr. Bankman-Fried on fraud charges. The industry has also experienced a government crackdown, leading some crypto entrepreneurs to seek friendlier jurisdictions abroad.
The surviving crypto companies continue to invest heavily in lobbying, but they are finding it more difficult to gain access to influential figures. Some congressional offices are hesitant to meet with industry representatives, and crypto lobbyists are appearing less frequently on the public calendars of key officials. To overcome these challenges, companies are adjusting their strategies to distinguish themselves from FTX.
As the trial of Mr. Bankman-Fried approaches, the crypto industry is trying to shift the focus away from FTX. Stand With Crypto, a nonprofit supported by Coinbase, is organizing a “fly-in” event to connect industry players with lawmakers.
The overall sentiment in Congress has become less favorable towards the industry since FTX’s collapse. Many lawmakers now argue for stricter oversight of the crypto industry.
Regulators were already cautious about embracing crypto firms, and it was unusual for FTX to secure a meeting with the Fed chair. Other private-sector meetings listed on Mr. Powell’s calendar in February 2022 include prominent figures from financial institutions and organizations.
During the meeting with Mr. Bankman-Fried, discussions revolved around stablecoins and central bank digital currencies. Mr. Wetjen’s previous policy role in Washington helped him establish connections with agency officials, which facilitated FTX’s influence in regulatory circles.
FTX’s demise has strengthened the arguments of regulators advocating for careful approaches to crypto firms. The Securities and Exchange Commission has filed lawsuits against Coinbase and Binance, FTX’s main competitors, as part of a broader government crackdown. Other financial technology companies are now investing significant amounts of money to ensure favorable regulatory oversight in the future.
Despite the challenges, the industry still maintains its presence in Washington due to its financial influence.