Regulation and oversight of cryptocurrencies are expected to tighten after the Democratic Party won majorities in both chambers of the U.S. Congress in the midterm elections.
Crypto regulation specialists said the Democratic takeover of Congress will strengthen legislation emphasizing investor protection, while making it considerably harder to pass the deregulatory bills the industry has sought, CNBC reported on the 4th.
The measure expected to be hit hardest is the Digital Asset Market Clarity Act of 2025, known as the CLARITY Act. The bill would reduce the Securities and Exchange Commission's oversight authority over some digital assets while expanding the regulatory powers of the Commodity Futures Trading Commission.
The bill passed the House last July by a vote of 294 to 134 but failed in a Senate procedural vote in September this year, 49 to 50. Democrats have warned the bill could weaken disclosure requirements and investor safeguards for some digital assets. Reiners said the CLARITY Act is finished, adding that passage would be difficult even during the lame-duck session before the new Congress convenes in January.
Some analysts said digital asset legislation itself will not come to a halt. Martin Mulyadi, a professor at Shenandoah University, said the election does not end market-structure legislation but changes who will draft the next bill. Investor protection and conflicts of interest surrounding President Donald Trump's digital asset businesses will be the main points of contention in future discussions, the professor said.
The shift could also affect the launch of new digital asset investment products. Mike Katz, a digital assets specialist at the law firm Manatt, said the Democrats' expanded influence could lead to tighter rules or delays for products such as tokenized equities and instruments that pay yield on digital asset holdings. Katz said the legislative agenda will change and oversight will increase, and that it has become much harder to assume Washington will keep providing an environment favorable to the crypto industry.
Even with the balance of power in Congress shifting, the SEC and the CFTC can still use their existing authority to write digital asset rules. Marcel Miu, founder of the wealth management firm Simplify Wealth Planning, said administrative rules set by regulators are easier to change than statutes enacted by Congress, and that this is why the digital asset industry has pushed for the CLARITY Act to become law.
Specialists stressed that tighter regulation from the political arena does not translate directly into falling crypto prices. Lee Reiners, a crypto regulation specialist at Duke University, said trading platforms will continue to offer their existing products and that crypto-friendly officials remain at the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Bitcoin in fact rose about 3% after the Democratic midterm victory, trading above $80,000 (about 107.42 million won). Evan Mills, a financial adviser at Color Advising, said investors should review their holdings, portfolio allocations and the scale of losses they can absorb rather than try to predict policy changes.
Original reporting by Kim Jung-wook for Seoul Economic Daily.
AI-translated from Korean. Quotes from foreign sources are based on Korean-language reports and may not reflect exact original wording.
Watch · Seoul Economic Daily
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