Opaque crypto political contributions undermine trust

The Center for Political Accountability (CPA) has raised alarms regarding the secretive political contributions made by cryptocurrency firms, particularly highlighting the actions of Coinbase and Ripple Labs.

In a recently published report, the CPA emphasises that these "opaque and unaccountable" political donations erode investor confidence and public trust in the long-term viability of these companies.

The organisation points out that Coinbase and Ripple (CRYPTO:XRP) have collectively contributed nearly $52 million to political campaigns, with Coinbase alone accounting for approximately 80% of this total at $40.5 million.

These contributions have been directed towards ousting politicians who oppose cryptocurrency initiatives, resulting in a U.S. Congress perceived as more favorable to the crypto industry following the November 2024 elections.

The CPA warns that such political spending carries significant reputational, legal, and financial risks for the firms involved.

The report urges stakeholders to consider whether donations from crypto companies align with responsible corporate governance and long-term financial stability.

It also highlights that prioritising short-term political gains over transparency could lead to severe consequences for these firms in the future.

The CPA notes that since leadership changes at key regulatory agencies like the Securities and Exchange Commission (SEC), enforcement actions against several crypto firms have been dropped or paused.

This reduction in regulatory scrutiny is linked to the aggressive push for deregulation by crypto firms and their associated Super PACs.

However, the CPA cautions that using political contributions to influence government policy may backfire, potentially drawing increased regulatory attention to the industry.

“By funneling money into congressional races as well as the presidential race, the industry risks bringing even greater attention to itself,” the report states, warning of the volatility this could create and further reputational damage.

For investors, the CPA argues that political spending should be regarded as a crucial risk factor alongside financial statements and business strategies, especially given the cryptocurrency sector's lack of transparency and oversight.

To mitigate these risks, the CPA calls for clearer disclosures and stronger governance from crypto firms, advocating for measures that can foster legitimate and sustainable growth in this evolving financial landscape.