The presidential and congressional elections in November will reveal a shifting landscape in momentum for crypto legislation, which is moving in a constructive direction. Both political parties are now focusing on fixing what they perceive to be necessary legislative and regulatory issues. They are no longer stuck in this paradigm of whether or not crypto and blockchain are beneficial. Both parties seek a collective legislative framework to keep the US in an innovative leadership position. Let’s look at how the election impacts the scope and the pace of legislation in the 119th Congressional session from January 3, 2025, to January 3, 2027.
There’s an old saying that legislation happens in two ways: leadership and crisis. Historically, the latter has been the source of many impactful bills, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the legislative response to the financial crisis. Regardless of which triggers legislation, the primary reason for success is a bi-partisan effort to achieve a collective outcome. There is good reason to believe the outcome of the elections will provide this opportunity in the 119th session, and leadership will be the driving force.
There are three areas to keep an eye on – Presidential, Senate, and House potential outcomes – and the impact of crypto legislation moving from if to when.
But first, here are some observations on the process:
- Consistent Messaging needs to be a top priority
- Keeping the debate and crypto bi-partisan will be beneficial
- Leadership matters, both at the Committee level and on the floor
- Remember, politics is not an exact science
- CeFi first and then DeFi after studies and feedback is likely the sequence
Now the landscape:
Presidential
The 2024 presidential election is unusual, to say the least. A sitting Vice President, Kamala Harris, who did not run as a primary candidate and is therefore lightly vetted, versus a former President, Donald Trump, who was defeated for re-election in 2020 and is running for a second term and is, one could say, fully vetted.
Trump has courted the crypto community, loudly vouching to support policies that will keep innovation in the US. This past July, he was a featured speaker at the Bitcoin 2024 conference in Nashville. Harris, on the other hand, recently took the reins as the Democratic Party candidate and has broadly expressed openness to supporting crypto-friendly policies, which the Biden Administration has outwardly or quietly opposed.
The goal of keeping crypto innovation in the US is becoming a bi-partisan position and could be a rallying leadership point in the next administration. This point is amplified by the European Union’s landmark framework in crypto, the Markets in Crypto-Assets (MICA).
The real test will be the team the new President-elect assembles. The Treasury Secretary, Deputy Secretary, Assistant Secretaries, and White House Domestic Policy Advisor will be pivotal in shaping the administration's priorities. Who would Harris retain in these positions, as well as the SEC and CFTC Chairman positions, plus others like the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Chair, who play an essential role in stablecoins?
On the other hand, Trump has signaled he will make household changes quickly, and because of a party transfer with the administration, these changes are required and expected.
Senate
In the upper chamber, often called the deliberative body, significant changes could occur; some change is imminent in all outcomes. Democrats (caucusing with independents) hold a slim majority with 51 seats. The Vice President holds the tie-breaking vote. There are 34 seats of 100 up for re-election; Democrats or Independents currently hold 23, setting the stage for a possible majority party change. The Republicans will elect a new leader in January 2025 as the longest-serving party leader of either party, Senator McConnell (R-KY), steps down.
The Senate Banking Committee has SEC oversight jurisdiction. The current Chairman, Senator Brown of Ohio, a Democrat, is in a tightly contested re-election contest, and that could mean a new chairperson regardless of whether the Democrats maintain the majority or not.
The thought leadership on crypto policy has yet to be led by either the Chair or Ranking Member. There is reason to believe this could change in 2025. Two things worth noting: Sen. Scott (R-SC), a potential chairman if the Republicans regain control, has said he will establish a digital asset subcommittee and make crypto a priority. Second, Senator Schumer (D-NY), the current Democratic majority leader, has been vocal and outwardly supporting crypto in recent weeks on behalf of the Harris campaign, and this likely means if the Democrats hold the majority, then either Brown or a successor would be more engaged in making crypto market structure and stablecoins a higher priority.
The Senate Agriculture Committee has CFTC oversight authority. Senator Stabenow (D-MI), who chairs the Senate Agriculture Committee, is retiring, meaning a new chairman regardless of party majority. If Republicans capture the majority, then the current ranking member, Senator Boozman (R-AR), will likely lead, and if the Democrats retain Senate control, they will select a new chairperson. The Committee has been active in the 118th Congress, holding several hearings and drafting bills. Unlike the Senate Banking Committee, the leadership has been actively engaged, so expect more of the same in 2025.
House
Unlike the Senate, all 435 House seats are up for election every two years. Generally there is greater voter turnout in presidential years and lower turnout in non-presidential years, the latter traditionally benefits the Republican party. However, this election has evolved in a way so this conventional logic may or may not prevail.
Both parties have relatively new leadership. Speaker Mike Johnson (R-LA) was elected Speaker in October 2023 and the Democrats elected House Minority Leader Hakeem Jefferies (D-NY) in November 2022. Their crypto positions have been lightly tested, but it seems clear they will defer to the leadership of House Financial Services and House Agriculture Committees for direction, which is standard order.
The Republicans hold a slim four-vote margin, so the majority party election outcome is expected to be close. The House races often follow overall party trends, but all politics is local, and those issues can prevail in many of these races.
The House Financial Services Committee (HFS) has jurisdiction over SEC issues, and the House Agriculture Committee has jurisdiction over CFTC-related issues. Both Committees have been active in holding hearings and markups in the 118th Congress.
In HFS, Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) have actively engaged in crypto market structure and stablecoins. The Committee would be expected to continue to lead. There will be changes whether Republicans maintain control or not. Chairman McHenry is retiring, so the republican leader of the committee, whether chair or ranking, will be selected in January. One candidate is Rep. French Hill (R-AR), who currently chairs the digital asset subcommittee. If he is selected, then his leadership post will be filled by someone new.
On the Democratic side, Rep. Waters is expected to take the HFS Chair position if the Democrats regain the majority. Rep. Lynch (D-MA) is the current ranking member of the digital assets subcommittee. The Leadership of the two committees is at stake, and there is good reason to believe that whichever party wins, crypto legislation will be a priority.
What It Means
First, it means the crypto industry has done a good job of positioning itself with both parties. It must continue to message the bi-partisan benefit and grow the underlying support. Fortunately, the most influential voices in both parties are no longer focused on curtailing crypto or generally challenging the beneficial aspects. This evolutionary thought process has been in motion with most Republicans for some time, and more recently, we are seeing a growing number of Democrats moving in that direction while maintaining its policy position and concern about illicit financing and customer protection.
Second, this trend line results in a reasonably good opportunity to pass legislation providing more legal certainty about digital assets and giving regulators additional tools and guidelines. The 119th Congress and the 47th President’s Administration will inherit a great opportunity to put the US in a crypto leadership position.