“Treat 2027 as a year to prove compliance capabilities, rather than a year to seek regulatory exemptions.”

Written by: Murtuza Merchant

Translated by: Chopper, Foresight News

With only two months left before the January congressional transition, crypto companies have limited time to adapt to Washington's drastically different policy environment. The Democrats will take control of Congress, and the core market structure bill of the industry has little hope of advancing during the lame-duck session. The focus of crypto companies must shift from “lobbying for legislation” to preparing for hearings and facing stricter regulatory scrutiny.

Is the Clarity Act dead?

With the Democrats gaining control of both chambers of Congress in Tuesday's midterm elections, this presents a significant negative development for the already struggling crypto bill.

The Clarity Act aims to clarify trading rules and regulatory jurisdiction for crypto tokens, passing in the House in July 2025 with 294 votes for and 134 votes against, including 78 Democrats voting in favor. However, the bill has stalled in the Senate. A vote scheduled for September 15 failed as Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joined Democrats in voting against it, with disagreements centering on ethical provisions and other related rules.

The new Congress will officially take office on January 3 next year, leaving only the lame-duck session, and few expect the bill to make progress during this time. Duke University's financial economics center researcher Lee Reiners stated, “The Clarity Act is dead.” He noted that prediction markets give the bill a single-digit probability of being enacted before 2027.

Even within the industry, there is a consensus on this view. Ryan Myher, co-founder and COO of the self-custody crypto trading platform Genius, said that the current version of the bill is effectively dead, and there is no political momentum to push it through quickly in the coming weeks. Addressable CEO Tomer Sharoni believes that the root of the bill's obstruction lies in ethical controversies rather than fundamental framework disagreements. He predicts that a new version of the market structure bill will emerge in 2027, incorporating stricter anti-money laundering, DeFi, and conflict of interest provisions.

Are political donations from the crypto industry counterproductive?

Crypto industry groups previously invested substantial funds trying to influence this congressional election, but many key seats they aimed for ended up in unfavorable outcomes. Former Senate Banking Committee Democratic Chairman Sherrod Brown from Ohio defeated Republican candidate Jon Husted. Myher stated, “Industry political action committees (PACs) collectively spent about $170 million, mostly to support Republicans and oppose Democrats, yet the expected outcomes did not materialize.”

However, the Democrats are not entirely dismissive of the crypto industry; the 78 votes in favor of the Clarity Act in the House are evidence of this. The current challenge is that the industry must change its communication rhetoric. Sharoni believes that large donations have branded cryptocurrency as a “partisan tool”; to persuade the majority Democrats, companies must rely on substantial arguments. “If I were to advise the industry: bring evidence, not campaign funds; demonstrate to regulators that the platform is capable of self-regulating fraud and evading sanctions.”

Myher also agrees that the industry needs to shift its approach: “Going forward, companies need to learn to cooperate with a Democrat-led Congress rather than standing in opposition.” This means maintaining bipartisan relationships in the House, which has a broader support base, and reducing campaign funding used to attack opponents.

Hearings before new legislation arrives

Starting in January next year, the Democrats will control the leadership and subpoena powers of various committees, which could have a larger impact on the crypto industry than any single piece of legislation. Sharoni said, “I judge that hearings will come long before new legislation is introduced.”

Myher noted that the Democrats are primarily focused on consumer protection, illegal finance, and conflicts of interest, and they now have the agenda-setting power. Reiners stated that hearings will likely investigate the government’s interactions with the crypto industry, some companies' collaborations during the legislative process, and how regulatory enforcement is implemented. Sharoni predicts that crypto projects related to the president’s family will become the first breakthrough for the Democrats to utilize their subpoena powers.

It is difficult for a new crypto bill to become a priority for the Democrats. Reiners cited a public opinion poll from this spring: only 4% of American voters indicated that a candidate's position on crypto would influence their voting choice. The Democrats prioritize addressing living costs. Even if future discussions about crypto policy occur, the Democrats will draft the bill from scratch, with opinions within the party itself not being uniform. Reiners supports treating crypto tokens as securities, with SEC regulating the spot market. “Many Democrats agree with this direction, but I am not sure there is enough political capital or willingness to implement it.”

Key areas of focus for regulatory scrutiny

Regulators can tighten rules without new congressional legislation. The Office of the Comptroller of the Currency (OCC) released the final guidelines for the GENIUS Act stablecoin legislation on October 21, set to take effect on January 18, 2027. The OCC and Treasury will also issue anti-money laundering and sanctions compliance guidelines for stablecoin issuers. Sharoni believes this is the direction legislators will initially focus on: “Anti-money laundering will be the first priority since both parties agree on this stance.” Platforms need to clarify how they identify sanctioned individuals and criminal users, even if one person controls multiple wallet addresses.

Interest earnings on stablecoins are another significant conflict point. The new OCC rules prohibit issuers from paying interest directly to holders, and regulation clearly states: circumventing the prohibition through third-party cooperation to pay interest is also a violation. The regulatory document specifies: issuers cannot indirectly do what the regulation directly prohibits.

Myher added that tokenized stocks and other RWAs will also face more intensive scrutiny in 2027. “Even without new legislation, the intensity of enforcement and regulation will continue to tighten.”

What impact will stablecoin businesses face?

For companies that have already established stablecoin businesses, the core regulatory framework is already set. The GENIUS Act was signed and took effect in July 2025, with related provisions set to be implemented in January, unaffected by the change of congressional control. Teymour Farman-Farmaian, co-founder and CEO of the cross-border payment platform Higlobe, believes that the routine business impacts from the elections are limited. He thinks that the core contradiction ahead is not about overturning existing laws, but whether legislators can continuously support innovation in digital assets.

More crucially, it depends on how regulators enforce existing rules, and whether companies can achieve a stable and predictable regulatory environment. “The popularity of stablecoins comes from the real demand for faster and cheaper cross-border payments, a demand that will not disappear due to changes in the political landscape.”

Myher mentioned that the SEC and CFTC can achieve most of the regulatory goals originally intended by the Clarity Act solely based on their existing enforcement authority.

What should crypto companies do before January?

During the window period before January 3, the focus should be on responding rather than lobbying. Myher stated, “Investors and companies should view the upcoming two months as a planning period rather than a legislative advocacy period.” Specific tasks include: improving anti-money laundering controls, enhancing user disclosures; testing the compliance of tokenized products under stricter regulations; not to expect the market structure law to be enacted in the short term.

Sharoni suggested that companies verify their risk control screening capabilities, specifically their ability to link wallet addresses to actual holders and trace funds back to criminal or sanctioned entities. He also recommended that companies proactively engage with Democrat offices before the official formation of various oversight committees, using data to speak rather than vague promotional rhetoric. “My advice to companies: Treat 2027 as a year to prove compliance capabilities, rather than a year to seek regulatory exemptions.”

For investors, he predicts that market volatility will increase, but the long-term trend remains unchanged: cryptocurrencies will continue to be integrated into the mainstream financial system, albeit at a slower pace with stricter regulatory standards.

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