Democratic Control of Congress May Stall Crypto Bills, Clouding CLARITY Act

Democrats are poised to win majorities in both the Senate and House in the U.S. midterm elections, a shift that could alter the legislative landscape for crypto-related bills.

CoinDesk reported on November 4 that Democrats were on track to retake control of Congress after flipping key seats previously held by Republicans. That could hamper the crypto-friendly regulatory agenda pursued by the Donald Trump administration.

Democrats were also projected to win in Ohio, where the crypto industry had concentrated campaign spending. Industry political funding groups poured about $63 million into efforts to block former Democratic Sen. Sherrod Brown from returning to office, but Brown was still projected to win. In Nebraska, Fairshake, an industry political action committee, spent about $11 million backing Republican candidate Pete Ricketts, who was trailing during the vote count.

A Democratic takeover of Congress could also shape the fate of the CLARITY Act, a U.S. crypto market structure bill. In previous negotiations, Democrats had pressed for tougher provisions on preventing illicit financial transactions, strengthening consumer protections and restricting senior government officials from participating in crypto businesses. If control of Congress changes hands, those regulatory measures could carry more weight.

In the Senate, Democratic Sen. Elizabeth Warren is being mentioned as a possible chair of the Banking Committee. Warren has long pushed for tougher oversight of the crypto industry. Brown, who is projected to return in this election and previously served as chair of the Senate Banking Committee, could also influence related policy debates.

Attention is also focused on a possible leadership change at the House Financial Services Committee. If Democrats win the majority, Democratic Rep. Maxine Waters could return as chair. Meanwhile, current Chair French Hill, a Republican, and Rep. Bryan Steil, who led the crypto subcommittee, were reported to be locked in tight races or trailing.

Still, that does not mean crypto legislation will come to a complete halt. Industry officials expect bipartisan cooperation to remain possible on crypto taxation and some issue-specific regulations. Broader market structure legislation, however, including the CLARITY Act, may be harder to move quickly.