‘I wanted to send a message’: Democrats break with Warren, Biden on crypto

Sen. Elizabeth Warren’s anti-cryptocurrency crusade is facing pressure from her own party.

Dozens of Democrats, including Senate Majority Leader Chuck Schumer, have broken with her in recent days and supported an effort to undo SEC guidelines that critics say discourage banks from holding digital assets. The Democrats defied not only Warren, but also President Joe Biden, who is threatening to veto the rollback. The rift may grow further next week when the House takes up sweeping, industry-backed legislation to incorporate crypto trading into federal financial regulations.

The sudden burst of support, following waves of scandals and the skeptical posture generally taken by the Biden administration, is rattling some Democrats who see looming risks to consumers and the financial system.

“It scares the dickens out of me,” said Rep. Sean Casten of Illinois, who, with Warren, has tried to warn colleagues about money laundering risks in the industry.

The party’s Capitol Hill clash over crypto policy comes as the issue is becoming more prominent in the 2024 campaign. Former President Donald Trump is courting crypto fans, though they may represent a small minority of the electorate, and signaling that he’d rein in the SEC’s crackdown on the industry. Crypto super PACs are poised to spend more than $80 million to influence control of Congress and secure friendlier policy. It’s leaving Democrats at odds over whether to follow Warren’s push to clamp down on crypto firms or to take a friendlier approach.

A total of 32 Democrats voted with Republicans in recent days to send the SEC crypto rollback to Biden’s desk. Lawmakers were motivated by a mix of crypto advocacy, bank lobbying and deep frustration with the SEC under Chair Gary Gensler. Schumer said in a statement that he supported undoing the SEC guidance because "New York State already has a strong law on the books, and they weren’t consulted on this regulation.”

This month marks the first time the House and Senate have devoted floor time to standalone crypto bills, giving lawmakers a platform to pick a side.

“I wanted to send a message,” Sen. Cory Booker, who was one of 11 Senate Democrats who supported the SEC rollback, said in an interview. “I’m frustrated because we haven’t had a chance to debate any of the real [crypto] bills.”

Warren said in an interview Thursday that she is “concerned about anyone in Congress who is not worried about the threat posed by Iran and North Korea and their use of crypto,” but declined to address the differences in her party.

House members will have to go on the record again next week. Republicans have scheduled a vote on legislation from Financial Services Chair Patrick McHenry and Agriculture Chair G.T. Thompson that would divide crypto trading oversight between the SEC and the CFTC. Some Democrats expect even greater bipartisan support.

“There's still some big names on the Democratic side who haven’t made their thoughts known,” Rep. Wiley Nickel of North Carolina said.

Key Democrats are still resisting the effort. Rep. Maxine Waters, the top Democrat on House Financial Services, and Rep. Stephen Lynch plan to rally opposition to the legislation on the floor next week, aides said.

But it’s not clear how other senior Democrats may come down. House Democratic leadership has yet to decide whether to whip against the crypto legislation scheduled for the floor next week, said another aide granted anonymity to discuss closed-door conversations.

The votes are giving the industry’s campaign arms a clear look at where lawmakers stand as crypto super PACs begin to spend tens of millions of dollars on the 2024 elections. The goal is to elect allies and eliminate critics.

A spokesperson for the largest crypto super PAC network, Josh Vlasto, said in a statement that the group, Fairshake, is “committed to supporting elected officials and candidates on both sides of the aisle who want to get things done and keep tech jobs in America.”

Crypto lobbyists and industry-friendly Democrats are working to shore up support for the big House crypto bill ahead of next week. In addition to Nickel, they include Reps. Ritchie Torres of New York and Ro Khanna of California.

“The advice I’m giving to Democrats is this: We cannot hand this issue to Republicans,” Nickel said.