If U.S. law finally defines how federal regulators touch digital assets, cryptocurrencies will be easier to manage, track and trade, and more investors may become involved, potentially increasing the value of each token. But much needs to happen before that happens, and Congress’s efforts to pass the law are at a chaotic crossroads.
Cryptocurrency enthusiasts have long seen themselves as cutting-edge investors, eager to challenge the establishment and stake their claim to something outside the mainstream. But lawmakers are now working to get cryptocurrencies into institutions. The distinction between digital assets and traditional finance will become narrower and, in some cases, disappear entirely.
Cryptocurrency platforms like Coinbase and Kraken will register with federal regulators, who will insist that businesses follow strict rules when handling your assets. Stablecoin issuers such as Circle and Tether must adhere to their own strict regulations similar to banking standards.
If sweeping new laws are introduced, your crypto assets may become more secure from financial disaster, albeit more tightly tracked and managed, and you’ll be more likely to get government help when you have a dispute with a business. If you’re in the minority, have your own custody and use a platform without human curation, your corner of the cryptocurrency space will be subject to more rules designed to deter criminals.
If you’re used to earning returns on your crypto assets through programs like Coinbase’s USDC Rewards, there’s a question about what your returns might look like in the future, depending on how negotiations go.
So, what stage is this potential law currently in?
dizzying senate
If you’ve taken a closer look at how the U.S. government treats cryptocurrencies, you’ve seen a dizzying series of headlines from the Senate recently. This legislation sealed the fate of cryptocurrency activity, but it tends to ebb and flow like a tide during the legislative process. One committee effort came close to action, then fell apart. Another committee’s efforts took the lead.
Congress has two houses: the Senate and the House of Representatives, and the House of Representatives has passed its own Digital Asset Market Clarity Act with overwhelming support. But the House of Representatives is not the biggest problem area for cryptocurrencies. The Senate is often the bottleneck. In this case, the encryption bill is making its way through two committees and must be approved before it can officially take effect as U.S. law.
There is broad preference for the bill among many different stakeholders, including political parties, the White House, the crypto industry, and Wall Street banks, who see both benefits and dangerous threats to the industry. Many of these issues may not seem like a big deal to the average cryptocurrency investor, but the results have the potential to damage or enrich various businesses or projects, hence the intensity of lobbyists and legislators in the trenches.
Eventually, the law may get another crackdown. That’s what happened with the Financial Innovation and Technology for 21st Century Act (FIT21) last congressional session. This was the precursor to today’s bill. But the Clarification Bill already goes further than FIT21, and a series of deals and compromises are still possible to get it done.
things to do
The checklist is this:
- Let the Senate Banking Committee (Securities/SEC focus) and Agriculture Committee (Commodities/CFTC focus) overhaul the bill and advance it.
- Crush a unified version to be voted on by the full Senate.
- Senate approval (which would require at least seven Democrats and possibly more if Republicans don’t vote unanimously for it).
- Return to the House for a final signature vote (expected to have a lower threshold).
- Head to President Donald Trump’s desk for signatures.
The crypto industry has been waiting for these dominoes to fall for a long time. But crossing out the last item — the White House signature — doesn’t mean the process is over for investors. Before all these new rules can begin to transform digital assets into a new node in the U.S. financial system, many federal agencies must dig into what Congress is sending them.
The process of developing regulations can take months or even years. If you are like most investors doing your crypto business through an exchange, you will most likely start to see these companies comply with the intended rules even before they are finalized and officially implemented.
For example, last July, Trump signed the GENIUS Act governing stablecoins into law. The Treasury Department and its agencies have begun releasing proposed regulations but are still awaiting public feedback. The proposals have not yet been finalized.
In the meantime, while everyone who owns cryptocurrencies awaits changes in U.S. rules, there likely won’t be much drama for most investors. Federal regulators like the U.S. Securities and Exchange Commission have stopped going after cryptocurrency businesses and are trying to cobble together some friendly treatment in the absence of congressional laws.
So whether or not this bill passes, it’s likely that this will be the case for a while, and for most people, there won’t be fireworks. In fact, perhaps the biggest concern among cryptocurrency investors is how to properly file a tax return for digital asset gains. But that’s another story (and one that promises to spark another congressional fight).
