Most people think of the collapse of the cryptocurrency exchange FTX as a symbol of the 21st century, complete with confusing financial and technological jargon. But it also highlights something that feels very retro: a partisan Beltway scandal, according to Washington good-government activists following the political consequences this month.
Overall, the Washington aspect has to do with how quickly the cryptocurrency sector was able to establish itself at the centre of the political spectrum’s money and power while the government was still trying to figure out how to regulate this bewildering new industry.
It involves a letter that eight members of Congress wrote to Gary Gensler, the chair of the Securities and Exchange Commission, in March, in which they severely criticised the organization’s ongoing probe into blockchain and cryptocurrency companies. The lawmakers, the majority of whom had received sizable contributions from cryptocurrency players, basically urged the federal government to back off.
The letter, written when the likes of Sam Bankman-Fried were riding high, somehow didn’t suggest that keeping an eye out for fraud or protecting the broader financial system might also be worthwhile endeavours. “Federal agencies must be good stewards of the public’s time, and not overwhelm them with unnecessary or duplicate requests for information,” the letter scolded, warning against bureaucratic buttinskis who might “stifle innovation.”
They were called the “Blockchain Eight” by The American Prospect, which covered the missive in the spring and followed it up last month with an article mentioning that one of the companies the senators were defending was FTX.
It’s a clever use of populist terminology. The Blockchain Eight are famous for having four Democrats and four Republicans among them. The group is nonpartisan, much like the Keating Five at the centre of the historic 1989 savings and loan scandal: Republicans Tom Emmer, Warren Davidson, Byron Donalds, and Ted Budd, as well as Democrats Darren Soto, Jake Auchincloss, Josh Gottheimer, and Ritchie Torres, signed the letter.
It crosses ideological lines, according to Aaron Scherb, who monitors Congress for Common Cause, an organisation that promotes good governance. “Numerous cryptocurrency players donate to both conservative and progressive causes.”
According to Robert Maguire, the research director for Citizens for Responsibility and Ethics in Washington, which yesterday filed a campaign-finance complaint against Bankman-Fried, “there’s a big bipartisan element there, which certainly can’t be said” of most other recent legislative controversies.
No one is charging the eight with breaking the law, to be clear. Instead, they are facing criticism for supporting dubious government policies that aid a wealthy industry whose public image has just taken a turn for the worst. Grossness, not criminality, is the focus. (They’ve denied trying to persuade the government to back off.)
