Contending with crypto
By Jeremy B. White, Lara Korte, and Sakura Cannestra
THE BUZZ: There’s no blocking cryptocurrency from pervading California politics.
California campaigns could soon start accepting Bitcoin and the like after the Fair Political Practices Commission voted yesterday to reverse a four-year ban on the practice, making California one of 13 states (plus D.C.) to explicitly allow the novel donation source. Crypto contributions should be cleared by mid-September, just in time for Dogecoin to fund some advertising in the critical final weeks of campaign season. Boringly conventional cash generated by crypto investing has already filtered into California campaigns, although a pandemic detection measure largely funded bySamuel Bankman-Fried’s firm missed the 2022 ballot.
Just as roughly 90 percent of conversations in San Francisco now feature the words “blockchain” or “cryptocurrency,” Sacramento is examining digital money on multiple fronts. Gov. Gavin Newsom issued an executive order in May to regulate the burgeoning blockchain marketplace, with the tech-tied governor saying California was “getting ahead of the curve” in an effort to nurture innovation while protecting consumers. That came not long after the White House waded in.
State agencies, unlike campaigns, won’t be accepting Ethereum any time soon. A pair of bills to permit the practice stalled earlier this year, with State Controller Betty Yee warning it would be “fiscally irresponsible for the state to venture into the cryptocurrency space at this time,” citing fluctuating valuation and the trickiness of adapting old-school accounting practices to a new currency paradigm. But a crypto regulation bill is moving after Assembly Banking and Finance Chair Tim Grayson caught players by surprise by gutting and amending legislation to create a permitting framework.
Any policy push inevitably spurs parallel action in the Third House of lobbyists and consultants. So it goes with blockchain. Among the California firms counseling clients on the emerging field is one run by former Assembly Majority Leader Ian Calderon, who carried crypto bills in the Legislature. A recently launched crypto-focused firm that supported the state agency payments bill is led by Nate Bradley, who was best known in Sacramento for his lobbying around cannabis, another industry that rapidly scaled up in California. The Blockchain Advocacy Coalition recorded its first lobbying expenditure in 2020 and opposes Grayson’s bill.
Crypto’s tumultuous financial ride has reshaped the landscape as market capitalization plunged. As the most recent committee summary of Grayson’s bill put it: “Six months ago, this analysis would have read very differently,” with crypto investors going from “riding high” to seeing $2 trillion in assets vanish. While cryptocurrencies could rebound, the analysis warned the plunge demonstrated that “extreme volatility” was not an aberration but an ingrained feature. That’s the type of conclusion that will surely influence policymakers’ views of how to regulate this industry.