WASHINGTON — As major cryptocurrencies nosedived over the summer and scores of Americans suffered huge losses, federal legislators and regulators faced mounting pressure to rein in the growing digital currency market.
Starting in the spring, the value of Bitcoin, Ethereum, and other top cryptocurrencies cratered in value from last year’s all-time highs, wiping out $2 trillion and sending several crypto firms into bankruptcy, with one facing allegations of rampant fraud.
But despite the turmoil, Rep. Tom Emmer, a powerful House Republican from Minnesota, has been steadfast in his support for the industry. While some in Congress approach the unstable crypto market with caution and concern, Emmer has promoted it as an opportunity for Americans to achieve financial freedom.
“It’s related to capital formation. For me, what’s supposed to make this country better than everywhere else is — I don’t have to know someone to be someone,” Emmer told Axios in August.
“Are we going to create an environment where people make their investment right here in the United States, and they grow these opportunities here, or are we going to play the I’m-afraid-of-what-I-don’t-understand? game,” he said.
Emmer, who serves as head of the House GOP’s campaign arm, is among the most powerful legislators in Washington to champion the digital currencies, as well as the blockchain technology that supports them. As fourth in line to the House Republican leadership and a top member of the panel that oversees the financial services industry, his support is likely to be vital to the crypto market as it gains both positive and negative attention.
Crypto evangelists say digital currencies promise a way to exchange money for goods and services without the overweening intrusion of government and central banks. Developers also say the underlying blockchain technology — a digital ledger that can store information — offers the possibility of a more decentralized internet, free of the interference of tech titans like Facebook and Google.
Crypto skeptics say it’s an old-fashioned pump-and-dump scheme dressed up in techno-utopian language, luring in everyday investors with the promise of profits — with the recent collapse offering plenty of evidence that cryptocurrency is neither a stable investment nor a legitimate currency.
The politics of crypto
As virtual currencies have gained popularity in recent years — particularly during the hot pandemic-era crypto bull run — lawmakers across the country have wrestled with how to approach the trillion-dollar market, which remains volatile and largely unregulated. To some, the crypto community offers not only a financial opportunity, but a political one as well.
“Democrats are making a huge mistake ceding crypto vote to [the] GOP,” Jeff Roberts, the crypto editor at Fortune, tweeted last year. “Crypto is a wealthy and fast-growing constituency and will support anyone who supports them.”
It’s unclear what exactly initially drew Emmer to crypto. Neither he nor his office responded to multiple requests for comment. But he was an early adopter on Capitol Hill, first getting interested in crypto around seven years ago, he told Axios.
“The future is here and crypto has the ability to decentralize control and empower each and every one of us,” he said during his 2020 campaign. That year, he became one of the first congressional candidates to accept donations in Bitcoin and held the “first ever Cryptocurrency Town Hall.” Since then, he has received the maximum allowable contribution amount from Bitpay, a Bitcoin payment service, whose CEO joined the event.
It’s unclear whether Emmer owns any digital assets of his own. His last financial disclosure report, filed in 2021, does not show any.
But Emmer, whose rural 6th District outside Minneapolis sits far from the country’s financial centers, has opposed stricter banking regulation in the past. Now, he’s part of a growing number of political leaders who have chosen to publicly embrace the new financial technology as its mainstream appeal has spread.
“Bitcoin is a great financial equalizer,” said Scott Conger, a mayor in Tennessee who wants to add a Bitcoin mining network to City Hall, per the New York Times. “It’s a hedge against inflation. It can bridge that wealth gap,” he said in January, even as the crypto market was sliding.
In El-Salvador, Bitcoin is now a national currency. But with the recent market downturn, the country has — at least on paper — lost more than half its investment.
Dueling letters to Yellen
Supporters of cryptocurrencies cite their decentralized nature — meaning they aren’t controlled by big banks or governments — as their greatest strength. But critics say the lack of oversight makes the market ripe for criminals to exploit, and recent billion-dollar money laundering cases have shone a spotlight on the industry’s weaknesses.
“I am deeply concerned by the volatility of the cryptocurrency market and the inadequate regulatory environment in which crypto scams, fraud, theft, and evasion continue to run rampant and mom-and-pop investors’ savings have evaporated,” Democratic Sen. Elizabeth Warren, an outspoken crypto skeptic, wrote to Treasury Secretary Janet Yellen last week.
Warren says that some of the anonymizing features of crypto can be exploited by illicit actors to avoid U.S. sanctions. She urged Yellen to “protect the integrity of the American sanctions regime,” and address the climate implications of mining for cryptocurrencies, which uses swaths of computers and energy, “and protect consumers and investors.”
Emmer, for his part, recently sent Yellen a letter, too — but scrutinized recent enforcement action from the Treasury Department. In August, the department’s Office of Foreign Assets Control sanctioned a piece of anonymizing crypto software known as Tornado Cash, accusing it of being “used to launder more than $7 billion worth of virtual currency since its creation in 2019.”
“This includes over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that was sanctioned by the U.S. in 2019, in the largest known virtual currency heist to date,” OFAC said.
Emmer, however, pointed out that Tornado Cash is a technological tool that is operated by code, and not controlled by a specific person or entity. “[T]he sanctioning of neutral, open-source, decentralized technology presents a series of new questions,” Emmer wrote, “which impact not only our national security, but the right to privacy of every American citizen.”
Emmer has made clear he doesn’t oppose all government regulation; rather, in an effort to boost business, wants it to be minimal. “As Co-Chair of the Congressional Blockchain Caucus, I constantly advocate for increased education and introduce legislation in Congress regarding new technological innovations and our need for light-touch regulations so that development and investment flourish in the United States,” Emmer’s website states.
In an interview with CoinDesk last month, Emmer said of the Treasury Department’s foreign assets regulators: “They have a job to do, there’s no question.”
But more broadly, he believes some federal regulators — the Securities and Exchange Commission in particular — have gone outside their existing jurisdiction to try to crack down on the crypto market. “Congress deserves a ton of criticism for not doing anything to help direct these bureaucracies, these regulators, to do their job,” he said. Lawmakers urgently need to pass legislation to provide guidelines, he said.
In 2021, Emmer introduced the bipartisan Securities Clarity Act to try to provide some definitions for regulators and the crypto industry alike.
“There has been an unreasonable approach by regulators as to how federal securities laws should be applied to transactions involving the sale of blockchain-based tokens, and this lack of clarity is hurting American innovation,” Emmer said in a statement at the time. “Between regulation by enforcement and the varying legal decisions regarding the classification of these assets, regulatory uncertainty has hindered the growth of blockchain technology, leaving many to take the technology overseas.”
The legislation has yet to pass, but Emmer is hopeful Congress will take action in the new year, after the fall midterm elections.
“I think what you’re looking at in the community is Congress is going to have to really get moving next year in getting some definition out there,” he told CoinDesk, “so that we can hold not only the bureaucracy, the regulators accountable, but they know what their lane is.”
In any case, Emmer doesn’t think crypto should be a dividing political issue. “I feel that this cannot be partisan,” he told Axios. “This is literally about looking at America and opportunities for Americans.”