If US laws finally define how federal regulators can touch digital assets, cryptocurrencies will be easier to manage, keep track of and trade in, and more investors will likely get involved, potentially increasing the value of each token. But much has to happen before that is true, and the work to get laws through Congress is at a messy crossroads.
Crypto enthusiasts have long seen themselves as cutting-edge investors, eager to challenge the system and pursue a stake in something outside the mainstream. But what lawmakers are working on now is meant to put crypto very much into the establishment. The distinction between digital assets and traditional finance would become much narrower and in some cases disappear altogether.
Crypto platforms like Coinbase and Kraken will be registered with federal regulators, who will insist that the companies follow strict rules when handling your assets. Stablecoin issuers like Circle and Tether would have to follow their own strict rules similar to banking standards.
In the event of a sweeping new law, your crypto assets will likely be significantly safer from financial disaster, although they will be much more closely tracked and managed, and you will be more likely to get government help when you have disagreements with companies. If you are among the narrower group that has your own parental authority and uses platforms without human management, your corner of the crypto sector would be subject to more regulations meant to fend off criminals.
And if you’re used to getting a return on your crypto holdings, such as through a program like Coinbase’s USDC Rewards, there’s some uncertainty as to what they might look like in the future depending on how negotiations go.
So where are we at with this potential law?
Dizzy Senate
If you follow the ins and outs of how the US government wants to treat crypto, you’ve seen a dizzying array of headlines from the Senate lately. This one piece of legislation carries the fate of crypto activity, but it’s at a point in the legislative process that tends to ebb and flow like the tides. The effort in a committee comes close to action, then falls apart. The effort in another committee rises to take the lead.
Congress has two chambers, the Senate and the House of Representatives, and the House has already passed its own Digital Asset Market Clarity Act with overwhelming support. But the house has not been the biggest problem area for crypto. The Senate is typically the bottleneck. And in this case, the crypto bill grinds its way through two committees that must opt out before it can steam toward the books as a US law.
A lot of different interested parties have a wide range of preferences for this bill, including both political parties, the White House, the crypto industry and Wall Street banks, who see both benefits and dangerous threats from the sector. To the average crypto investor, many of these issues may not seem like a big deal in any way, but the results have the ability to destroy or enrich various companies or projects, so the intensity is high among the lobbyists and lawmakers in the trenches.
Ultimately, the law could be shot again. This happened with the initiative Financial Innovation and Technology for the 21st Century Act (FIT21) in the previous congress session. It was the precursor to today’s bill. But the Clarity Act has taken it further than FIT21 and it is still possible that a series of deals and compromises could be made to get it done.
To do
The checklist reads as follows:
- Have the bill reviewed and tabled by both the Senate Banking Committee (securities/SEC focus) and Agriculture Committee (commodities/CFTC focus).
- Smash a unified version together to be voted on by the full Senate.
- Get Senate approval (which requires at least seven Democrats, maybe more if Republicans don’t vote unanimously).
- Go back to the house for a final vote (expected to be a low hurdle).
- Go to President Donald Trump’s desk to get a signature.
The crypto industry has been waiting a long time for these dominoes to fall. But crossing off the last point – a signature from the White House – will not be the end of the process for the investor. Before all these new rules are able to start turning digital assets into a new node in the US financial system, a bunch of federal agencies have to dig through what Congress sends them.
There is a process for writing rules that can take months or sometimes even years. If you run your crypto business over an exchange like most investors, it is likely that you will start to see the companies complying with the expected regulations even before they are finalized and formally put in place.
As an example, the GENIUS Act regulating stablecoins was signed by Trump last July. The Treasury Department and its various agencies have begun publishing proposed rules, but are still awaiting public feedback. None of these proposals have been finalized yet.
Meanwhile, while everyone with cryptocurrencies waits to see what happens with US regulations, there probably won’t be much drama for most investors. Federal regulators, such as the Securities and Exchange Commission, have stopped going after crypto companies and are trying to muster a favorable treatment in the absence of congressional legislation.
So the situation is likely to continue for a while longer, regardless of whether the bill passes or not, with no fireworks for most people. Indeed, the biggest concerns for crypto investors may be how to properly file tax returns on their digital asset gains. But that’s another story (and one that promises to bring another congressional battle down the road).
