"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 until Congress changes hands in January, crypto companies have limited time to adapt to the distinctly different policy environment in Washington. The Democrats will take control of Congress, and the market structure bill critical to the industry has little hope of progressing during the lame-duck session. The focus for crypto companies must shift from "lobbying for legislation" to preparing for hearings and stricter regulatory scrutiny.

Is the Clarity Act dead?

The Democrats regained control of both the House and Senate in Tuesday's midterm elections, a significant blow to the already struggling cryptocurrency bill.

The Clarity Act aims to clarify the trading rules and regulatory jurisdiction of crypto tokens, passing the House in July 2025 with 294 votes in favor and 134 against, including support from 78 Democratic lawmakers. However, the bill has stalled in the Senate. On September 15 of this year, a push for a vote failed, with Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joining Democrats in opposition, the disagreements centering on ethical provisions and other accompanying details.

The new Congress will officially take office on January 3, leaving only the lame-duck session remaining, and few expect the bill to make progress during this period. Lee Reiners, a researcher at Duke University’s Financial Economics Center, 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 consensus on this view. Ryan Myher, co-founder and COO of the self-custody crypto trading platform Genius, alleged that the current version of the bill is essentially defunct, and there is no political momentum to push it through quickly in the coming weeks. Addressable CEO Tomer Sharoni believes the blockage of the bill roots from ethical disputes 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.

Do political donations from the crypto industry backfire?

In the past, crypto industry groups invested substantial amounts of money trying to influence this Congressional election, but many of the targeted congressional seats ended up disappointing. Former Senate Banking Committee Chairman Sherrod Brown from Ohio defeated Republican candidate Jon Husted. Myher stated, "The industry political action committees (PACs) collectively spent around $170 million, mostly to support Republicans and block Democrats, but ultimately did not yield the expected results."

However, the Democrats are not wholly negative towards the crypto industry, as evidenced by the House’s 78 votes in favor of the Clarity Act. The current challenge is that the industry must change its communication strategy. Sharoni argues that large donations have led to cryptocurrency being labeled as a "partisan tool"; companies must rely on substantive arguments to persuade the majority Democrats. "If I were to advise the industry: bring evidence, not campaign funds; demonstrate to regulators that the platform is capable of autonomously curbing fraud and avoiding sanctions."

Myher also agrees that the industry needs to change direction: "Going forward, companies must learn to cooperate with a Democrat-led Congress rather than stand in opposition." This means maintaining bipartisan relationships in the House, where support is broader, while reducing campaign funds used to attack opponents.

Hearings will come before new legislation

Starting in January, the Democrats will hold the lead in committee powers and subpoena authority, which may influence the crypto industry more than any single piece of legislation. Sharoni: "I assess that hearings will far precede the introduction of new legislation."

Myher stated that the Democrats' core concerns are consumer protection, illegal finance, and conflicts of interest, and they now have control over the agenda. Reiners indicated that hearings will likely investigate interactions between the government and the crypto industry, collaboration details of some companies during the legislative process, and the enforcement actions of regulatory agencies. Sharoni predicts that crypto projects related to the presidential family may become the opportunity for the Democrats to first use their subpoena powers.

The new crypto legislation is unlikely to be prioritized by the Democrats. Reiners cited a survey from spring of this year: only 4% of American voters indicated that a candidate's stance on crypto would influence their voting choice. The Democrats prioritize addressing livelihood and cost-of-living issues. Even if discussions on crypto policy arise later, the Democrats will start drafting legislation from scratch, as opinions within the party are not united. Reiners supports viewing crypto tokens as securities and having the SEC regulate the spot market. "Many Democrats agree with this direction, but I'm not sure if there is enough political capital or will to implement it."

Key focus areas for regulatory scrutiny

Regulatory agencies do not need new Congressional legislation to tighten rules. The Office of the Comptroller of the Currency (OCC) released the final guidance for the GENIUS Act stablecoin legislation on October 21, which will take effect on January 18, 2027. The OCC and the Treasury will also jointly introduce anti-money laundering and sanctions compliance guidelines for stablecoin issuers. Sharoni believes this will be the direction legislators first target: "Anti-money laundering will be the first area because both parties agree on this stance." Platforms need to clarify how they identify sanctioned individuals and criminal users, even if one person controls dozens of wallet addresses.

Stablecoin interest income is another major point of conflict. The OCC's new regulations prohibit issuers from directly paying interest to token holders, and regulators clarified that circumventing this through third parties to distribute interest is also a violation. The regulatory document states that issuers cannot indirectly engage in actions that are directly prohibited by regulations.

Myher added that tokenized stocks and other RWA will also undergo more intensive scrutiny in 2027. "Even without new legislation, enforcement and regulatory pressure will continue to tighten."

What impacts will stablecoin businesses face?

For companies already engaged in stablecoin operations, the core regulatory framework has been established. The GENIUS Act signed and enacted in July 2025 has pertinent provisions set to take effect in January, unaffected by the change in Congressional control. Teymour Farman-Farmaian, co-founder and CEO of cross-border payment platform Higlobe, believes that the election will have limited day-to-day business impacts. He posits that the core conflict ahead is not about overturning existing laws, but whether legislators can sustain support for digital asset innovation.

More crucial is how regulatory agencies enforce existing rules and whether companies can obtain a stable and predictable regulatory environment. "The popularity of stablecoins stems from the genuine demand for faster and cheaper cross-border payments, and this demand will not dissipate 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 with their existing enforcement powers.

What should crypto companies do before January?

In the window period before January 3, the focus should be on responding rather than lobbying. Myher: "Investors and companies should view the next two months as a planning period, rather than a legislative campaigning period." Specific tasks include: improving anti-money laundering controls and user information disclosure; testing the compliance of tokenized products under stricter regulation; and refraining from expecting quick passage of a market structure bill.

Sharoni suggests companies review their own risk control screening capabilities, checking whether they can link wallet addresses to actual holders and trace fund flows to criminal or sanctioned entities. He also advises companies to proactively connect with Democratic offices before formal committee formations, using data to speak rather than vague promotional rhetoric. "My advice to companies: treat 2027 as a year to prove compliance capabilities, not as 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.