Blog: Ted Cruz is fighting calls for more regulation on crypto – Houston Chronicle

As politicians across the capitol were calling for greater oversight of an industry that had caused billions of dollars of losses for investors, Cruz, a Texas Republican, was digging in, cautioning against over regulation of a technology that has become popular among anti-establishment thinkers for its challenge to the conventional financial system and which is is a growing business back home.

“Most members of Congress don’t understand crypto, yet they are hell-bent on regulating an industry they know nothing about,” he said in a statement, after declining an interview request.

Cruz has emerged over the past two years as increasingly vocal advocate for cryptocurrency, part of a small collective of bipartisan and mostly younger politicians that have embraced the technology despite misgivings among many in Congress about its high energy use and potential for fraud.

The industry has pumped millions of dollars into Washington in that time through campaign contributions, much of it through Super PACs with limited visibility into where the money goes. Public records show Cruz only received a $5,400 contribution from the parent company of the crypto exchange Kraken and less than $500 in donations from the industry-supported Bit-PAC. He also owns a relatively modest amount of bitcoin, one of more than 30 financial holdings listed on a disclosure form last year.

Most of Cruz’s fellow bitcoin boosters, such as Rep. Tom Emmer, R-Ind., the House Majority Whip, are looking to establish a regulatory regime around cryptocurrency, something the industry itself is advocating for to bring order to the market. House Republicans earlier this year announced the creation of a new subcommittee within the House Financial Services Committee overseeing cryptocurrency and other financial technologies.

But Cruz has carved out his own space outside those regulatory efforts, mostly focused on promoting and expanding cryptocurrency in the United States. 

“His approach has been high level instead of getting into the weeds,” said Ron Hammond, government relations director at the Blockchain Association, a trade group for crypto firms. “He isn’t on the relevant committees. Largely his interest seems more about political ideology.”

Still on the fringe

After China banned bitcoin mining in 2021, concerned about the industry’s high energy demands, crypto firms moved to set up mining operations in other countries, including the United States, drawing support from politicians in states like Texas, who saw mining operations as a booming if volatile new industry for rural economies.

Cruz has not come out against regulation of cryptocurrency altogether, but he has been generally skeptical of politicians’ efforts to do so, warning the United States risks driving the industry overseas as China did. 

At a speech before the conservative Heritage Foundation last year, Cruz described cryptocurrency in histrionic terms as “a remarkable innovation” that offered the opportunity to undermine the power of the Federal Reserve and other central banks.

“Money doesn’t have to be the exclusive province of politicians to play with at their whim and to fund their latest endeavor to get reelected,” he said. “Rather, money and value could be found through blockchain, through a distributed ledger that everyone had access to, that nobody was in charge of.”

That vision is far outside what most economists predict as the future of cryptocurrency, which remains at the fringes of the global financial industry. But such sweeping, anti-establishment declarations are in keeping with a political career in which Cruz has sought to carve out his own brand apart from the Republican mainstream, focused on issues like personal liberty and the growing national debt.

During the speech at the Heritage Foundation he quipped the GOP should adopt the slogan, “Republicans, we spend slightly less than the trillions the other guys are trying to spend.”

Cruz’s outsider status has played well with Texas Republicans, particularly those from the far right who are generally suspicious of government. And cryptocurrency has emerged as important issue for a “a certain subset of Republican primary voters” in Texas, said Mark Jones, a politics professor at Rice University.

“They are very concerned about liberty, personal privacy,” he said. “(Cryptocurrency) provides them with anonymity to conduct their affairs without the government knowing what they’re doing. In some cases it’s to avoid taxes, in others they just have a fear of government. What unites them is a desire to be as far off the radar as possible.”

Practical considerations

And there’s a practical side to Cruz’s advocacy for cryptocurrency, as Texas has emerged as a destination for bitcoin firms.

Bitcoin mining requires large amounts of electricity to run powerful computers that plug in number after number until they come up with the correct 64-digit sequence for one of the 900 bitcoins released each day. And in Texas’s deregulated power market, one can purchase large amounts of electricity relatively cheaply.

So far, some 20 crypto mining operations have opened in Texas, including what was claimed to be the largest mining operation in the world at Riot Blockchain’s operation in Central Texas, drawing support from Republican Texas Gov. Greg Abbott and politicians from both sides of the aisle.

“We are providing the platform for those who are involved in blockchain, for those who are involved in bitcoin, to make sure they are going to have a location they can come to,” Abbott said at an event hosted by the Texas Blockchain Council last year.

Cruz has become a regular presence at such forums, bringing the same studied verbiage to the topic as he did arguing before the U.S. Supreme Court as Texas solicitor general.

And he is a bitcoin investor himself, reporting in early 2022 he purchased between $15,000 and $50,000 worth of the cryptocurrency – though in a report six months later he said the value of his investment at between $1,000 and $15,000.

Lee Bratcher, president of the Texas Blockchain Council, said he first began meeting with Cruz about cryptocurrency two years ago and was impressed to see he was reading “The Bitcoin Standard,” a book by a Lebanese economist arguing for bitcoin as an end to centralized banking.

“He was reading pretty technical books,” Bratcher said. “There are a lot of politicians who are supportive of our industry, particularly in the state legislature. Cruz is probably the highest profile. He seems to come at it from a more philosophical perspective.”

Besides the bill encouraging business in the U.S. capitol to accept bitcoin, Cruz has also introduced legislation forbidding the Federal Reserve from issuing its own digital currency – in response to China’s move to do so there in 2021. He also introduced a bill eliminating a provision within the $1 trillion Bipartisan Infrastructure Law of 2021, which increased taxes on bitcoin companies – something that Hammond, of the Blockchain Association, said “wasn’t realistic.” 

For Cruz, crpytocurrency has offered another platform from which to go after his political opponents on the left.

He criticized President Joe Biden for taking millions in campaign contributions from Bankman-Fried. And he has mocked Sen. Elizabeth Warren, of Massachusetts, for trying to control cryptocurrency with her “sticky, socialist fingers,” after she introduced bipartisan legislation designed to reduce the use of cryptocurrency for money laundering.

At an event hosted by the Texas Blockchain Council last summer, Cruz said there was a “clear and present danger of crippling regulation coming from Washington.”

“I’ve been leading the effort to try and stop that,” he said. “I worry sometimes in the bitcoin world there’s a sense of utopian, ‘We are inevitable, so we don’t need to worry about government.’”

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