Authors: Teresa Xie, Scott Patterson, Bloomberg

Translation: Jiahua, ChainCatcher

Political Advantage is Waning

The crypto industry’s political luck in Washington has abruptly ended. With the Democrats sweeping both houses of Congress in the midterm elections and set to take control, the crypto industry faces stricter regulations, and its relationship with President Trump will be scrutinized more closely.

Over the past two years, the crypto industry enjoyed a treatment few businesses get in the U.S. capital: a president who prioritized digital assets as a national concern while amassing personal crypto wealth; regulatory agencies clearing obstacles for broader crypto asset usage; and a Congress controlled by Republicans that was supportive of industry demands.

Now, as this unusual political advantage fades, the crypto industry faces a tougher challenge: how to establish lasting influence in the financial field. The Democratic sweep of Congress makes it potentially harder for the industry to push comprehensive legislation aligned with its demands, while also increasing the likelihood of congressional investigations into Trump’s crypto business.

“There are many important figures in the crypto industry aligned with the Trump family,” said Austin Campbell, a crypto expert, former banker, and current adjunct professor at NYU Stern School of Business. “They will likely have to face the consequences.”

In August, President Trump met with crypto industry executives at the White House in Washington.

Crypto Legislation Will Face Greater Resistance

It is well-known that Trump launched his own digital asset, invited crypto executives to the White House, and incorporated industry demands into his policy agenda. Meanwhile, significant victories achieved by the crypto industry are closely tied to his presidency, but Trump's personal financial interests have complicated efforts to gain broader political support for the industry.

These contradictions became evident in September when the Senate failed to advance the CLARITY Act. This bill was supposed to establish clearer rules for exchanges and other digital asset businesses. Trump’s crypto business became the focal point of controversy, but the disputes surrounding stablecoin incentives, investor protection, and competition in the banking sector also contributed to the deadlock.

Now, the election will change the landscape of this legislative debate. The Democrats have signaled plans to strengthen restrictions on conflicts of interest and consumer protections, as well as expand the SEC's role in regulating digital assets. These changes will deviate from the regulatory framework sought by many crypto companies during the period of Republican control in Congress, but if the industry can gain bipartisan support, it may open a new path for legislation.

Adam Minehardt, Chief Policy Officer at Hyperliquid Policy Center, stated: “As the industry adjusts to the new congressional leadership, it will take a defensive posture at least initially.”

The significant political investments made by the crypto industry may also lead to consequences. In 2024, crypto lobbying groups poured millions into opposing the campaign of then-Senator Sherrod Brown, who ultimately lost his seat. Now, Brown has defeated Ohio Republican Senator Jon Husted to regain a Senate seat. The research firm Capstone notes that Brown may hold an important position on the Senate Agriculture Committee, which supervises the Commodity Futures Trading Commission (CFTC), a key crypto regulatory agency.

Former Senator Sherrod Brown campaigns in Brook Park, Ohio.

The Democrats controlling Congress also means they have greater power to investigate Trump’s business interests. Lawmakers have requested information regarding business projects involving the president and his family. Trump has consistently denied that his business interests conflict with his presidential duties.

California Congresswoman Maxine Waters has been a fierce critic of Trump’s ties to the crypto industry, and she is expected to play a more influential role on the House Financial Services Committee; Massachusetts Democrat Elizabeth Warren is expected to lead the Senate Banking Committee.

“As committee chairs gain more power, a series of real oversight actions will unfold,” Minehardt said. “We have already seen signals from various congressional offices. They will explore various leads to see what they can uncover.”

Nevertheless, many of the gains made by the crypto industry are difficult to reverse. Repealing the federal stablecoin law requires new legislation, and the SEC and CFTC are still developing relevant rules that may push digital assets further into traditional financial markets. Regardless of the election outcome, these efforts can continue during Trump’s presidency, although future administrations may reevaluate the decisions made by regulatory agencies.

Tyler Gellasch, CEO of Healthy Markets Association, stated that Congress indeed has tools to influence regulatory agencies, such as controlling appropriations. Congress can work to prevent agencies from using funds for policies they oppose. He noted that Republicans have long used this tool to prevent the SEC from establishing political spending disclosure rules. He also mentioned that Congress can investigate the decisions made by regulatory agencies and the relationships those agencies have with politically favored companies.

Bitcoin signage on the streets of New York.

Apart from Regulation, the Crypto Industry Faces Security Challenges

The market presents another challenge. Regardless of which party is in power, Bitcoin has experienced dramatic cycles of boom and bust, making it difficult to attribute price prospects solely to political changes in Washington. Despite the deregulation and political support during Trump's presidency sparking hopes for a golden era of digital assets, Bitcoin is currently still far below its previous peak.

A recent hack on Binance highlighted another challenge: security. The exchange suffered a loss of $6.3 billion but has since compensated the stolen crypto assets through a combination of corporate funds and two insurance funds.

Peter Atwater, a part-time economics professor at the College of William and Mary, stated: “The crypto industry needs to make these hacking events disappear from the headlines. Such events happening repeatedly will have an impact. It’s worth watching whether the Democrats will push for a regulatory shift toward greater emphasis on security and robust operations.”

Overall, the outlook for the crypto industry depends far beyond its alliance with Trump. Today, the field related to digital assets has expanded to investment funds, stablecoin payments, and financial infrastructure, with institutions involved holding long-term interests that will not disappear with the end of any presidential term. For an industry looking to attract clients across the political spectrum, reducing partisanship may ultimately be an advantage rather than a setback.

Crypto advocates have already begun to emphasize their bipartisan appeal.

Ji Kim, CEO of the Crypto Council for Innovation, stated: “Digital assets have always had bipartisan support, and we are ready to work with newly elected and re-elected members of both parties.”

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