Bloomberg: With Democrats Regaining Control of Congress, Are Good Days Over for the Crypto Industry in Washington?

Authors: Teresa Xie, Scott Patterson, Bloomberg

Compiled by: Jiahua, ChainCatcher

Political Advantage is Fading

The crypto industry’s political fortune in Washington has come to an abrupt halt. With the Democrats sweeping both houses of Congress in the midterm elections, the industry faces stricter regulations and a closer scrutiny of its ties to President Trump.

For the past two years, the crypto industry has enjoyed a level of treatment in the U.S. capital that few businesses receive: a president who prioritized digital assets as a national agenda while accumulating personal crypto wealth; regulators who cleared obstacles for broader adoption of crypto assets; and a Congress controlled by Republicans that was supportive of the industry's demands.

Now, as this unusual political advantage fades, the crypto industry faces a tougher test: how to establish a lasting influence in the financial sector. The Democratic sweep of Congress may make it more difficult for the industry to push for comprehensive legislation that aligns with its interests, while also increasing the likelihood of congressional investigations into Trump’s crypto dealings.

"Many key figures in the crypto industry have allied 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 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 the industry's 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 the industry’s efforts to garner broader political support.

These contradictions became apparent in September when the Senate failed to advance the CLARITY Act, which was intended to establish clearer rules for exchanges and other digital asset businesses. Trump’s crypto dealings became a focal point of controversy, but disagreements over stablecoin rewards, investor protection, and competition in the banking sector also contributed to the stalemate.

Now, the elections 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 diverge from the regulatory framework many crypto companies sought during the Republican-controlled 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 readjusts to the new congressional leadership, it will take a defensive posture at least initially."

The significant political contributions made by the crypto industry may also yield consequences. In 2024, crypto lobbying groups spent millions supporting the campaign against then-Senator Sherrod Brown, who ultimately lost. Now, Brown has defeated Ohio Republican Senator Jon Husted to regain his Senate seat. Research firm Capstone noted that Brown may hold an important position on the Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC), a key regulatory body for crypto.

Former Senator Sherrod Brown campaigning in Brook Park, Ohio.

Democratic control of Congress also means greater power to investigate Trump’s business interests. Lawmakers have already requested information regarding the president and his family’s business ventures. Trump has consistently denied any conflict between his business interests and presidential duties.

California Congresswoman Maxine Waters has been a vocal critic of Trump’s relationship with the crypto industry, and she is expected to exert greater influence on the House Financial Services Committee; Massachusetts Democrat Elizabeth Warren is anticipated to lead the Senate Banking Committee.

"As the power of committee chairs increases, a series of genuine oversight actions will unfold," Minehardt said. "We have already seen signals from various congressional offices. They will start from various leads to see what they can uncover."

Nevertheless, many of the achievements made by the crypto industry are difficult to overturn. Repealing the federal stablecoin law would require new legislation, while the SEC and CFTC are still formulating relevant rules that could further integrate digital assets into traditional financial markets. Regardless of the election outcome, these efforts can continue under Trump’s administration, although future administrations may reassess the decisions made by regulatory bodies.

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

Bitcoin signage on the streets of New York.

Beyond Regulation, the Crypto Industry Faces Security Challenges

The market presents another challenge. Regardless of which party is in power, Bitcoin has historically experienced dramatic cycles of boom and bust, making it difficult to attribute its price outlook solely to political changes in Washington. Despite the regulatory easing and political support during Trump’s presidency that sparked hopes for a golden age of digital assets, Bitcoin remains far below its previous highs.

The recent Binance hack highlighted another challenge: security. The exchange suffered a loss of $6.3 billion but has since compensated for the stolen crypto assets by combining corporate funds with two insurance funds.

Peter Atwater, a part-time economics professor at the College of William & Mary, stated, "The crypto industry needs to make these hacking incidents disappear from the headlines. Repeated occurrences will have an impact. It will be interesting to see if the Democrats will push for a regulatory shift that places greater emphasis on security and robust operations."

Overall, the future of the crypto industry depends far more on its alliances than just with Trump. Today, the field related to digital assets has expanded to include investment funds, stablecoin payments, and financial infrastructure, with institutions involved having long-term interests that will not vanish with the end of a presidential term. For an industry seeking to attract clients across the political spectrum, reducing partisan colors may ultimately be an advantage rather than a setback.

Crypto advocates have already begun to emphasize their bipartisan appeals.

Ji Kim, CEO of the Crypto Council for Innovation, stated, "Digital assets have always had bipartisan support, and we are ready to work with both new and returning members of Congress from both parties."