Cryptocurrency businesses may face a challenging period as the industry comes under closer scrutiny.
The unprecedented success of the cryptocurrency industry in Washington appears to be slowing down. According to the Financial Times, cryptocurrency businesses are preparing to face a challenging period as the Democratic Party achieved a resounding victory in the US midterm elections.
The new power dynamics in Congress could increase pressure on the Trump administration's pro-cryptocurrency policies, while also paving the way for closer oversight in the final two years of his term.
The ability to monitor more closely.
Over the past two years, the cryptocurrency industry has enjoyed rare advantages in Washington as the Trump administration has pushed for deregulation of the cryptocurrency sector through a series of policies welcomed by the business community in the field.
President Trump has viewed digital assets as a national priority, regulators have facilitated the sector's expansion, and the Republican-controlled Congress supports the industry's agenda.
According to Reuters, Trump once declared he would turn the US into the "cryptocurrency capital of the world ." These policy changes are believed to have contributed to the industry's growth, while also opening up new business opportunities for companies operating in the cryptocurrency sector.
US President Donald Trump speaks during a meeting with cryptocurrency industry leaders at the White House in Washington in August. Photo: Bloomberg.
As previous political advantages diminish, the cryptocurrency industry must find ways to solidify its long-term position in the financial sector. A Democratic victory could make building a favorable regulatory framework for the industry more challenging, while also drawing greater congressional attention to the connections between cryptocurrency businesses and the Trump family – who have launched their own branded digital assets, according to Bloomberg.
However, this prospect also comes with challenges regarding management and legal compliance.
Over the past two years, Democratic senators such as Richard Blumenthal and Elizabeth Warren have repeatedly requested investigations into companies like Binance and Tether, regarding suspected illegal activities. However, these requests have largely been ignored by the executives.
With a majority of seats in both houses, the Democratic Party now has the power to issue subpoenas, requiring businesses to provide documents and information for inspections. Failure to comply with these requests can result in civil or criminal penalties.
"My advice is that if you receive letters from Democratic lawmakers and don't respond, be prepared to respond directly," said Ron Hammond, head of policy and lobbying at Wintermute, a cryptocurrency market maker.
He also suggested that even companies that have received licenses from regulatory agencies "should prepare themselves for close scrutiny."
"At least initially, the cryptocurrency industry will have to shift to a defensive stance to adapt to the change in leadership," said Adam Minehardt, director of policy at the Hyperliquid Policy Center.
New pressure
Several large companies in the industry have become targets of legislative scrutiny due to their scale of operations and regulatory compliance issues.
Senator Richard Blumenthal previously requested information from Binance regarding allegations of money laundering, as well as from Tether concerning activities that influence cryptocurrency policy in the United States.
Binance stated that it "has zero tolerance for any violations of sanctions or illegal activities, and… does not allow any transactions with sanctioned individuals."
A panoramic view of the Token 2049 cryptocurrency conference in Dubai. Photo: Reuters.
However, according to Alex Zerden, founder of Capitol Peak Strategies, a Washington-based risk consulting firm, gathering information can be difficult if law enforcement agencies do not cooperate fully.
“In congressional investigations, we’re increasingly seeing the executive branch invoke its prerogative to restrict or block information. This trend will continue, and may even increase significantly in the final two years of President Trump’s term,” said Zerden, who previously worked in the U.S. government on anti-corruption, financial enforcement, and oversight issues.
Questionnaires and hearings in Congress are often televised live. Therefore, politicians are expected to publicly disclose their investigative efforts.
“This also has a public presentation element,” commented Joshua Riezman, chief legal and strategy officer of GSR, a cryptocurrency market maker. “The pressure on the industry will be real, and the expectations of this Congress will be different from the previous one.”
However, he also suggested that future management approaches could be more focused, with the ability to clearly distinguish between healthy activities and those with potential risks across the industry.
"I think this Congress will take a more focused approach, with a deeper understanding of cryptocurrencies, so that it can distinguish between the positive and negative aspects of the industry as a whole," Riezman commented.
According to journalist Eleanor Terrett, one option being considered is to expand the proposed amendment, known as the Crypto Investor Consumer Bill of Rights, introduced by Democratic Congresswoman Maxine Waters as part of the CLARITY Act.
The goal is to develop this proposal into a broader bill regulating the structure of the cryptocurrency market, Decrypt reports.
According to sources who spoke to Terrett, this proposal would give the U.S. Securities and Exchange Commission (SEC) more oversight of the cryptocurrency market, while narrowing the role of the Commodity Futures Trading Commission (CFTC).
A Bitcoin sign in New York. Photo: Bloomberg.
Nevertheless, many of the gains made by the cryptocurrency industry are not easily reversed. The federal stablecoin law will require new legislation to repeal it. Meanwhile, the SEC and CFTC are still developing regulations to integrate digital assets more deeply into traditional financial markets. This process could continue under the Trump administration, regardless of the election results, although subsequent administrations may still review regulatory decisions.
Market volatility also poses a challenge for the cryptocurrency industry. Bitcoin has repeatedly surged in price followed by sharp declines under both Democratic and Republican presidents. Therefore, the price of Bitcoin is not solely dependent on US government policy. Even though the Trump administration loosened regulations and showed support for cryptocurrencies, the price of Bitcoin remains significantly lower than its previous peak.
