As the 119th Congress begins, leaders have indicated that cryptocurrency regulation will be a key focus. There are expectations for clarity on stablecoin regulations and a framework to determine whether the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC) should oversee crypto firms.
Legislative Process and Expectations
Despite rising cryptocurrency prices reflecting investor optimism for quick regulatory clarity, the legislative process is anticipated to be slow. The need to adjust expectations regarding the speed of legislative action has been emphasized, as Congress may be moving quickly by its own standards, but the pace is likely to lag behind the urgent demands of the crypto industry.
The first 100 legislative days are crucial, with the chair of the House Financial Services Committee pledging to advance bills on stablecoins and market structure. These bills are expected to come from key committees before being voted on, with bipartisan support already visible.
Stablecoin Legislation
Stablecoin legislation is likely to take priority, as both parties on the House Financial Services Committee nearly reached a compromise in the previous session. The main issue remains whether stablecoins should be required to maintain a one-to-one backing with U.S. dollars, a requirement that some believe would impose stricter standards than those faced by other financial sectors.
In contrast, the market structure legislation is more complex and contentious. The Financial Innovation and Technology for the 21st Century Act (FIT21) is expected to serve as a foundational draft for upcoming bills. With Republicans now holding a majority in the Senate, there is a push for more ambitious legislation.
Political Dynamics and Bitcoin Reserve
However, past bipartisan support for FIT21 raises questions about the willingness of Democrats to support similar initiatives, especially considering potential political shifts. The idea of establishing a Bitcoin national reserve has sparked mixed opinions among legal experts.
Some believe that former President Trump may not need Congressional support to instruct the Treasury to hold Bitcoin as a reserve currency. However, the chances of Trump signing an executive order to acquire additional Bitcoin or convert existing holdings into Treasury reserves are currently assessed to be less than 50%.
Challenges Ahead
Optimism regarding the passage of a Bitcoin national reserve bill remains cautious. Recent comments from Trump at a Bitcoin conference suggested a focus on utilizing existing government-held Bitcoin rather than acquiring new assets. Previous attempts, such as a proposal from a Wyoming senator for the Treasury to purchase 200,000 bitcoins annually for five years, have not gained traction, indicating a challenging path ahead for similar initiatives.
As Congress navigates the complexities of crypto legislation, political pressures are increasing, particularly with the midterm elections approaching in 2026. The crypto industry has shown its influence on electoral outcomes, with significant campaign contributions from industry stakeholders.
Future of Cryptocurrency Legislation
This financial backing has made it essential for candidates in competitive races to adopt pro-crypto positions. The new Republican majority in both the House and Senate is eager to work with Democrats to expedite the legislative process. However, with no immediate deadlines, Congress is likely to prioritize other pressing issues, including confirmations for controversial presidential appointees and Trump’s campaign priorities, such as border control and tax policy.
The timeline for implementing changes to crypto legislation is expected to be lengthy. Even if the CFTC is granted oversight authority in market structure legislation, the process of designing and implementing new rules could take several months.
The rulemaking process typically spans around 18 months, suggesting that tangible changes in the regulatory landscape may not occur for years. This slow pace of legislative action presents challenges for the crypto markets, which are used to rapid developments.
As Congress addresses the intricacies of crypto regulation, stakeholders in the industry will need to adjust their expectations and strategies in response to the evolving political and regulatory environment. The interaction between legislative priorities and market dynamics will be crucial in shaping the future of cryptocurrency in the United States.
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