In general, Wall Street is in favor of a divided government — when the House and Senate are split between the Democrats and Republicans. Why? Because it causes a political gridlock, making it difficult for status-quo-upsetting bills to pass.
The issue for crypto firms, however, is the midterm elections. The uncertainty sends the status quo into disarray.
The Ever-Problematic Executive-Agency Policy Debate
Over the past 12 months, it feels as though cryptocurrency executives have done nothing but quarrel with agencies (like the Securities and Exchange Commission) over how traditional regulations should apply to modern digital tokens.
Board members from exchanges like FTX and Coinbase Global Inc. want brand-new regulations to outline everything from the agency they must register with to which coins are classified as securities.
It’s a High Stakes Environment for Crypto Executives
November 2021 saw the crypto market reach an all-time high of $3 trillion. However, the past year has wreaked havoc on the positive trajectory, seeing cryptocurrency lose approximately two-thirds of its overall worth.
Coinbase reports stock decreases of 76% caused by macroeconomic and rising energy rates. And it appears such factors are affecting every risky asset.
Following the company’s earnings call on November 3, 2022, board members expressed hope for rising crypto prices as macro problems begin to level.
Brian Armstrong, the Chief Executive Officer, purportedly stated that clarity with regulations is one of the most critical aspects of regrowth.
The Bills and Regulations Aren’t to Blame for Crypto Uncertainty
Since cryptocurrency has supporters on both sides (Democrats and Republicans), lawmakers have worked on major bills in the last 12 months with bipartisan backing.
For example, a bill sponsored by the lead Republican and Democrat in the Senate Agriculture Committee would provide crypto trading oversight for the Commodity Futures Trading Commission. Both FTX (prior to implosion) and Coinbase have been lobbying for such a result.
As for the House, the Financial Services Committee leaders on both sides have toiled to compromise on the regulation of stablecoins. Such coins peg value against the dollar.
So, regardless of the midterm election’s outcome, both aforementioned bills should remain firmly on the table.
Isaac Boltansky, the director of policy research at BTIG, maintains that crypto-specific bills will make moves in Congress, no matter the midterm’s result, since efforts should retain bipartisan support.
Less About Partisanship, More About Priorities
Truthfully, it isn’t really about Congress control. Instead, it’s about where the government will set its priorities.
Historically, it’s become tricky to pass major laws unless they’ve adhered to a must-pass regulation, such as renewing expiring schemes or spending bills. Thus, crypto entrepreneurs and executives have yearned for the outcome of the midterms.
Executives from FTX US have shelled out almost $70 million to candidates from both parties and political-action committees throughout the elections, making them the country’s third largest contributor.
Recently, The Blockchain Association launched a crypto-focused PAC alongside crypto executives hosting campaign fundraisers for various politicians.
Industry polls have gleaned surprising results — crypto is a very real issue for voters since just as many people own crypto as mutual funds and stocks. A whopping 81% agreed with the market’s opinion that more precise cryptocurrency regulation must exist.
The Direction of Crypto After the Midterms
Should Republicans control the House, crypto’s policy issues could be given a priority boost from Patrick McHenry, who has reportedly expressed such.
There’s also a slight possibility that legislation will advance between now and the subsequent Congress takeover in January. After all, the Senate Agriculture Committee may hold its bill hearing this month.
But, in general, it’s too much of a long shot to expect any crypto regulations to make it to Biden’s desk this year.