Crypto’s Wild D.C. Ride: From FTX at the Fed to a Scramble for Access

Cryptocurrency lobbyists were riding so high in early 2022 that an FTX executive felt comfortable directly emailing Jerome H. Powell, the chair of the Federal Reserve, to ask him to meet with Sam Bankman-Fried, the soon-to-be-disgraced founder of the cryptocurrency exchange.

It worked.

“The day that would work for me is February 1,” Mr. Powell replied to a Jan. 11 email from Mark Wetjen, an FTX policy official and former commissioner at the Commodity Futures Trading Commission.

Mr. Powell’s public calendar shows that he and Mr. Bankman-Fried met as planned. And Mr. Wetjen went on to send the Fed chair two policy papers that FTX had recently published, according to emails obtained through a public records request. “Hope you’re finding these useful!” Mr. Wetjen wrote. “Great to have people like you serving our country.”

Mr. Powell has long been cautious about the digital currency industry, but, like many in Washington, he was trying to learn more. FTX was eager to do the teaching. According to newly released records, Mr. Wetjen managed to gain access to a range of federal officials. The records show that Mr. Bankman-Fried secured a virtual meeting in October 2021 with another top Fed official, Lael Brainard, who is now the director of the White House National Economic Council. And public calendars show that Mr. Bankman-Fried went on to meet with another top financial regulator, Martin Gruenberg, head of the Federal Deposit Insurance Corporation.

The crypto industry faces a more difficult landscape in Washington after last fall’s collapse of FTX. Mr. Bankman-Fried was arrested on fraud charges in December, and his trial is set to start on Tuesday. The industry has also faced a wide-ranging government crackdown that has sent some crypto entrepreneurs abroad in search of friendlier governments.

The companies that have survived crypto’s downturn are still pouring millions of dollars into lobbying, but they are having a harder time gaining access to the halls of power. Some congressional offices have become reluctant to meet with industry representatives. Crypto lobbyists appear less frequently on the public calendars of key officials at the regulatory agencies, and companies have had to shift strategy, straining to distinguish themselves from FTX.

“There are a bunch of people who’ve had trouble having meetings,” said Sheila Warren, who runs the Crypto Council for Innovation, an advocacy group. “I have heard from some offices that they will not meet with certain people anymore.”

With Mr. Bankman-Fried’s trial approaching, the crypto industry is scrambling to change the subject from FTX.

Stand With Crypto, a nonprofit backed by the giant digital currency exchange Coinbase, is planning to hold a “fly-in” on Wednesday, bringing in industry players from around the country to talk with lawmakers.

“It has been quieter — and more circumspect, in some respects — but the push from the industry hasn’t abated,” said Mark Hays, who tracks cryptocurrency regulation at Americans for Financial Reform. “The crypto industry knows that its star has been tarnished on Capitol Hill, to some extent.”

The mood in Congress was friendlier to the industry in early 2022, when FTX was at its zenith: Mr. Bankman-Fried had been positioned as a sort of wunderkind, eccentric and brilliant. But since its collapse, many lawmakers have argued that the industry should be overseen more strictly.

“The tone has certainly changed among Democrats — they’re much more skeptical,” said Bart Naylor at Public Citizen, a government watchdog that has been tracking cryptocurrency lobbying.

Regulators were more hesitant to embrace crypto firms even in 2022. It was unusual that FTX directly landed a meeting with the Fed chair.

Mr. Powell’s only other listed private-sector meetings in February 2022 were with Jane Fraser, the chief executive of Citigroup; David Solomon from Goldman Sachs; Suzanne Clark from the U.S. Chamber of Commerce; James Gorman, the chief executive, and Tom Wipf, a vice chair, from Morgan Stanley; Jamie Dimon, the chief executive of JPMorgan Chase; the Business Council, a group of chief executives; and the head of Singapore’s sovereign wealth fund.

Mr. Powell has met with other financial technology companies — he talked with a representative from the payment processor Stripe in March 2022, for example. But he has not listed similar meetings in 2023, based on his calendars released to date.

At the meeting with Mr. Bankman-Fried, Mr. Powell and the FTX officials discussed stablecoins as well as central bank digital currencies, a form of electronic cash backed by the government, a person familiar with the matter said.

Mr. Powell has met with other financial technology companies in the past. But he has not listed similar meetings in 2023, based on his calendars released to date.Credit…Kevin Dietsch/Getty Images

Mr. Wetjen knew many of the agency officials with whom he was setting up meetings from his previous policy role in Washington. He and Mr. Powell had worked on regulatory issues together while Mr. Powell was a Fed governor, for instance.

Dennis Kelleher, the head of the regulatory watchdog Better Markets, said FTX had exercised an extensive web of influence in broader regulatory circles, partly through Mr. Wetjen’s connections.

“This is the problem: These relationships, which are not visible to the public, pay dividends year after year after year once these guys swing through the revolving door,” Mr. Kelleher said. FTX also flooded Washington with money, which helped it gain a foothold in congressional offices and at think tanks, he and several lobbyists said.

The Fed did not provide a comment for this article, nor did Mr. Wetjen. The White House had no comment on Ms. Brainard’s meeting with Mr. Bankman-Fried. An F.D.I.C. spokesman noted that chairs of the agency often held courtesy visits with financial firm leaders.

Back in 2022, FTX was trying to shape how the Commodity Futures Trading Commission regulated it, as Mr. Wetjen made clear to Mr. Powell in one email from that May.

“We have an application before the C.F.T.C. that lays out for the agency how to do so,” Mr. Wetjen wrote of regulating FTX. “All the C.F.T.C. has to do is approve it.”

The Fed had little control over such matters, but Mr. Powell does sit on the Financial Stability Oversight Council, an interagency regulatory body that includes the director of the Commodity Futures Trading Commission.

Mr. Wetjen continued: “To the extent the crypto industry comes up in discussions” at the Financial Stability Oversight Council, “we wanted you to have this context and our views at FTX.”

The company clearly failed to make much headway with the Fed chair. Mr. Powell supported an October decision by the Financial Stability Oversight Council to further study the kind of setup that FTX and other trading platforms wanted for crypto asset exchanges, rather than greenlighting it.

Now, FTX’s demise has only bolstered the arguments of regulators who wanted to approach crypto firms carefully. This year, the Securities and Exchange Commission has sued Coinbase and Binance, FTX’s two largest competitors, amid a broader government crackdown. With Mr. Bankman-Fried out of the picture, other financial technology companies are spending millions to make sure that the future of regulatory oversight favors them.

Mr. Hays of Americans for Financial Reform said the industry was hardly being shunned in Washington, because “money talks.”

“I still think they’re getting doors opened.”

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