Author: Murtuza Merchant, Forbes

With the congressional turnover in January, cryptocurrency companies have only two months to adapt to the drastically different policy environment in Washington. The Democratic Party will take over Congress, and the market structure bill, which is central to the industry, is essentially hopeless of advancing during the lame-duck session. Cryptocurrency companies must pivot from "lobbying for legislation" to preparing for hearings and more stringent regulatory scrutiny.

The Democrats' control over both chambers after the midterm elections is a major setback for the already struggling cryptocurrency legislation.

Congressional Landscape Change: Market Structure Bill Essentially Stalled

The Clarity Act aims to clarify the trading rules and regulatory jurisdiction of cryptocurrency tokens, passing in the House of Representatives on July 2025 with 294 votes in favor and 134 votes against, including 78 Democratic votes. However, the bill is stalled in the Senate. On September 15 of this year, the vote for advancement failed, with Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joining Democratic lawmakers in voting against it. The disagreements focused on ethical clauses and other accompanying details.

The new Congress will officially begin its duties on January 3 of the following year, with only the lame-duck session remaining; very few people expect the bill to make progress during this time. Lee Reiners, a researcher at Duke University's Financial Economics Center, stated, "The Clarity Act is dead." He mentioned that the probability of the bill being enacted before 2027, according to market predictions, is only in single digits.

Even within the industry, there is a consensus on this view. Ryan Myher, co-founder and COO of the cryptocurrency custody exchange Genius, stated that the current version of the bill is essentially null and void, and there is no political momentum to push it through quickly in the coming weeks. Addressable CEO Tomer Sharoni believes the root cause of the bill's obstruction lies in ethical controversies rather than disagreements over the underlying framework. He anticipates a new version of the market structure bill will be introduced in 2027, incorporating stricter anti-money laundering, DeFi, and conflict of interest clauses.

The Myth of Lobbying Shattered: From Political Donations to Substantive Evidence

Cryptocurrency industry groups had previously invested substantial funds to influence this congressional election, but many of the key seats they targeted ended up resulting in contrary outcomes. Democratic Senator Sherrod Brown of Ohio defeated Republican candidate Jon Husted. Myher stated, "Industry political action committees (PACs) collectively spent about $170 million, mostly to support Republicans and oppose Democrats, and ultimately did not yield the expected results."

However, the Democrats do not entirely reject the cryptocurrency industry, as evidenced by the 78 House votes in favor of the Clarity Act. The current challenge is that the industry needs to change its communication approach. Sharoni believes that large donations have labeled cryptocurrencies as "partisan tools," and companies must rely on substantive arguments to persuade the majority Democratic Party. "If I were to give the industry advice: bring evidence, not campaign funds; demonstrate to regulators that platforms can autonomously curb fraudulent and sanction-evading behaviors."

Myher also agrees that the industry needs to change direction: "Moving forward, companies need to learn to cooperate with the Democrat-controlled Congress instead of standing in opposition." This means maintaining bipartisan relationships in the House of Representatives, which originally had broader support, and reducing campaign funding allocated for attacking opponents.

Subpoena Power and Hearings: A More Lethal Regulatory Sword

Starting January, the Democrats will take control of the lead and subpoena power in various committees, which may have more impact on the cryptocurrency industry than any single bill. Sharoni stated, "I predict that hearings will occur well before new legislation is introduced."

Myher mentioned that the Democrats' core focus on consumer protection, illegal finance, and conflict of interest is now at the forefront of their agenda. Reiners stated that hearings will likely investigate the interactions between the government and the cryptocurrency industry, details of certain companies' collaborations during the legislative process, and the enforcement situation of regulatory agencies. Sharoni anticipates that cryptocurrency projects related to the president's family will become the first targets for the Democrats to utilize their subpoena power.

It is unlikely that a new cryptocurrency bill will become a priority on the Democrats' agenda. Reiners cited a poll showing that only 4% of American voters stated that a candidate's position on cryptocurrency would influence their voting choices, and the Democrats are more focused on addressing issues of living costs. Even if discussions on cryptocurrency policy resume, the Democrats will likely start drafting a new bill from scratch, as opinions within the party are not uniform. Reiners supports viewing cryptocurrency tokens as securities, regulated by the SEC, but it is still uncertain if there is enough political will to realize this.

Tightening Existing Rules: Stablecoins and Anti-Money Laundering as Primary Frontlines

Regulatory agencies can tighten rules without new Congressional legislation. The Office of the Comptroller of the Currency (OCC) has already issued final guidelines for the GENIUS Act stablecoin bill on October 21, set to take effect on January 18, 2027. The OCC and the Treasury will also jointly introduce anti-money laundering and sanction compliance rules for stablecoin issuers. Sharoni believes this is also the direction lawmakers will pursue first: "Anti-money laundering will be the first area because both parties share a common stance on this." Platforms need to explain how to identify sanctioned individuals and criminal users, even if one person controls dozens of wallet addresses.

The interest income from stablecoins is another major conflict point. The new OCC regulations prohibit issuers from directly paying interest to token holders, explicitly stating that distributing interest through cooperative third parties is also a violation. The regulatory document states: issuers cannot indirectly engage in activities directly prohibited by regulations.

Myher added that tokenized stocks and other RWAs will also undergo more intensive scrutiny in 2027: "Even without new legislation, the enforcement and regulatory intensity will continue to tighten." For companies already involved in stablecoin business, the core regulatory framework has been established. The GENIUS Act which took effect on July 2025 will have related provisions implemented in January, unaffected by the change in congressional control. Teymour Farman-Farmaian, co-founder and CEO of cross-border payment platform Higlobe, indicated that the daily business impact from elections is limited. He believes the core contradiction ahead is not about overturning existing laws, but whether legislators can continue to support digital asset innovation.

More critically, it depends on how regulatory agencies enforce existing rules, and whether companies can obtain a stable, predictable regulatory environment. The popularity of stablecoins stems from the real demand for faster and cheaper cross-border payments, which will not disappear due to political landscape changes. Myher noted that the SEC and CFTC can achieve most of the regulatory goals originally intended by the Clarity Act solely through their existing enforcement powers.

Window Period Response Recommendations: Prioritize Compliance Capability Over Seeking Exemptions

The focus of the window period before January 3 should be on response rather than lobbying. Myher suggests: "Investors and companies should view the next two months as a planning cycle rather than a legislative pursuit cycle." Specific tasks include: improving anti-money laundering controls and user information disclosures; testing the compliance of tokenized products under stricter regulations; and not banking on the market structure bill being enacted in the short term.

Sharoni recommends companies assess their risk control capabilities, whether they can associate wallet addresses with actual holders, and trace funds back to criminal or sanctioned entities. He also advises companies to proactively connect with Democratic offices before the formal establishment of various investigative committees, using data to speak instead of vague promotional language: "My advice to companies is to treat 2027 as a year to prove compliance capability, rather than a year to seek regulatory exemptions."

For investors, market volatility will likely increase, but the long-term trend remains unchanged: cryptocurrencies will continue to integrate into the mainstream financial system, albeit at a slower pace and under stricter regulatory standards.