Why Ohio 2024 is crypto ground zero

From: POLITICO's Morning Money - Thursday Dec 21,2023 01:01 pm
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POLITICO Morning Money

By Jasper Goodman and Zachary Warmbrodt

Presented by

NRF Foundation

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QUICK FIX

A major crypto clash is brewing in Cleveland, and it could impact control of Congress.

Sen. Sherrod Brown, one of the digital asset industry’s biggest critics and Washington roadblocks, is facing a tough reelection campaign that could make or break Democrats’ Senate majority. Thanks to an endorsement this week by former President Donald Trump, he may well face a general election opponent who’s a major evangelist for crypto technology: GOP candidate Bernie Moreno.

As Senate Banking chair, Brown has warned for years about the risks that crypto poses to consumers and the financial system. He’s one of the toughest obstacles the crypto industry faces in advancing legislation that would help give it regulatory credibility.

Moreno, a former car dealer, has championed initiatives to turn Cleveland into a hub for startups that use blockchain, the digital ledger technology behind crypto. He’s the founder of a blockchain startup and has even paid some of his businesses' taxes in bitcoin, according to Cleveland.com.

The looming clash is a sign of just how partisan the crypto debate is becoming in the run-up to the 2024 election, with key Democrats voicing skepticism of the industry and Republicans increasingly coalescing around friendly policies that would boost crypto firms. The stakes are high for crypto executives and investors, who are poised to spend more than $78 million to influence upcoming races.

Brown and Moreno are beginning to trade barbs over the issue.

“A career politician like Sherrod Brown has absolutely no idea how digital currencies work and is the least qualified person possible to regulate the industry,” Moreno told MM in a statement. "Innovation is what built America into the greatest country on earth. Sadly, leftwing extremists like Brown want more government control to restrict the ability of Americans to invest freely in cryptocurrencies."

Brown campaign manager Rachel Petri said in a statement: “Sherrod Brown takes a back seat to no one when it comes to standing up to special interests — including crypto — to level the playing field for Ohioans and protect them from fraud.”

The crypto industry’s 2024 political push has had an early focus on Ohio. A pro-crypto dark money group, the Cedar Innovation Foundation, launched a six-figure digital ad campaign in the state aimed at pressuring Brown and SEC Chair Gary Gensler. Coinbase, the largest U.S. digital asset exchange, has hosted a pair of town halls in Ohio as part of a grassroots “Stand with Crypto” campaign. (None of the major pro-crypto groups have backed Moreno or any of Brown’s other potential opponents.)

Crypto advocates are hoping to raise their profile with voters, but some in the industry warn that a foray into Ohio comes with risk. It could anger Brown, who if reelected is likely to remain the top Democrat on the Senate Banking Committee, which would be responsible for writing digital asset rules. One crypto lobbyist granted anonymity told our Eleanor Mueller that it could make things “really painful” if Brown holds onto his seat.

Brown said last week he was unmoved by the industry’s efforts: “Bring ’em on,” he told reporters.

“They’ve had a bad six months,” he said, pointing to the fraud conviction of former FTX CEO Sam Bankman-Fried and concerns about crypto’s use in funding terrorism. “They clearly have betrayed the public interest. If they think that’s the way to attack someone politically? Pretty amazing.”

It's Thursday — One more MM to go in 2023. It's been a killer week for readers sending in tips and scoops — plus some helpful Davos pointers. Thank you. Let's go out strong. Drop a line at zwarmbrodt@politico.com.

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Driving the day

Updated third-quarter GDP is out at 8:30 a.m.

First in MM: Frustrated bankers go to BidenThe head of the American Bankers Association is urging President Joe Biden to intervene and slow a barrage of regulations pending for U.S. lenders, warning of a significant upheaval in the banking industry that could impact the economy.

ABA President and CEO Rob Nichols sent a letter to Biden this week asking him to meet with the group's board and to order an interagency review of the looming rules before they take effect. Nichols said ABA is increasingly concerned about "the cumulative impact of uncoordinated regulatory initiatives that have the potential to significantly disrupt retail and commercial banking." The request marks an escalation in the banking lobby's clash with Biden-era regulators over a host of planned safeguards.

The White House responds: “Without commenting on specific proposed regulations, President Biden supports common-sense reforms to reverse Trump-era weakening of the supervision of large regional banks in order to strengthen our banking system to avoid future crises like the collapse of Silicon Valley Bank," White House spokesperson Michael Kikukawa said. "A safe and diversified banking sector — including healthy community and regional banks — is a source of strength for our economy. As is common practice, independent regulators are currently in the process of taking comment from industry, businesses and other stakeholders on specific aspects of their proposed rules.”

Regulators have signaled in recent weeks that they're willing to reconsider aspects of a proposed hike in large bank capital requirements, one of the agencies' most contentious initiatives.

Wells Fargo workers unionize Per WSJ, Wells Fargo employees in Albuquerque have formed the first union inside a major U.S. lender since the dawn of the modern megabank. A Wells Fargo branch in Bethel, Alaska, is also expected to vote on unionization on Thursday.

Economy

Janet Yellen's upbeat outlookIn a WSJ op-ed outlining strengths of the economy, the Treasury secretary writes: "As we look to the new year, despite challenges and risks, there’s good reason to be optimistic about the path we’re on: rising real wages, declining inflation and a strong labor market. Our investments and other economic policies will continue to expand the country’s productive capacity and pay dividends for middle-class Americans."

On the Hill

Maxine Waters isn't going anywhere Eleanor reports that the California Democrat is gearing up for a possible return as chair of the House Financial Services Committee after the 2024 election. She's been the top Democrat on the panel for more than a decade but has unfinished business when it comes to housing policy.

“What she’s done as chair was cut too short because we lost the House,” said Rep. Gregory Meeks, a senior committee Democrat. “We need her back there for two more years.”

Waters’ team is planning a member retreat for early next year where Democrats will discuss their priorities for the coming months and how they can prepare, through legislation and hearings, for potentially regaining the majority.

 

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Russia

U.S. rethinks Russian oil crackdown Per the FT, American officials and international allies are tightening rules around the shipping of Russian oil to make it harder for Moscow to circumvent a G7 price cap. Companies involved in shipping Russian crude will need to prepare fresh documentation to show compliance, rather than rely on generic assurances.

Regulatory Corner

Confirmed — The Senate by unanimous consent confirmed several financial policy nominees as it left town. Among them: FDIC inspector general Jennifer Fain, National Credit Union Administration board member Tanya Otsuka and Export-Import Bank board member Spencer Bachus. The nomination of Ron Borzekowski to lead the Office of Financial Research was sent back to Biden.

Backlash over Biden veto — The Independent Community Bankers of America is urging Congress to override Biden's decision to block the rollback of a CFPB small business data collection rule. The regulation will likely continue to be a target for critics in Congress. House Small Business Chair Roger Williams (R-Texas) said he will "continue to fight to make sure our nation’s financial system is not overly burdened with excessive reporting requirements and regulations."

NCUA faces pressure over Navy Federal scandal — Public Citizen is calling on the agency to investigate Navy Federal Credit Union's use of computer modeling and artificial intelligence in credit decision-making, after CNN reported that it has the widest disparity in mortgage approval rates between white and Black borrowers of any major lender.

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