The United States is one of the biggest areas of growth for the cryptocurrency industry in the world. The results of the 2022 midterm elections that took place last November have potential to determine next priorities in banking and crypto regulation that will significantly impact the sector.

As a result of the elections, the Democrats have retained control of the Senate by a slim majority and the Republicans have gained control of the House. Consequentially, there will be a newly appointed Speaker of the House and House Financial Committee that will establish key stakeholders for upcoming regulation. Currently, Californian Republican leader Kevin McCarthy has been nominated for the position, but has not ascended to the role as he still faces opposition within the party.  

Divisive opinions

Crypto policy is a relatively new issue, and after Congress’ relentless battles with Big Tech on privacy there is an urgent desire to clamp down on digital asset regulation before it gets out of hand. A survey conducted by The Harris Poll indicated that 38% of American midterm voters would consider candidates’ positions on crypto when filling out their ballots.

Leading crypto firms have spent large funds on the elections by donating large sums to campaigners, such as newly elected Republican Senator Katie Britt, who succeeded anti-crypto Senator Richard Shelby in Alabama. Governor Greg Abbot, who won against Beto O’Rourke in the Texas governor race, is a noted supporter of the blockchain and digital asset industry. Democratic congressional candidate Jonathan Jackson, a staunch supporter of the digital asset industry, won the campaign in his Chicago District by a landslide.

Historically, the GOP has been supportive of the expansion of digital currencies though it is frequently a bipartisan issue. However, several members of the Republican party have been resistant to further study into the potential of central bank digital currencies (CBDCs) in the US. Representative Tom Emmer of (R-MN) proposed a bill in January 2022 to ban the development of federal currency to limit competition for other digital assets such as stablecoins. This indicates that more pressure will be placed on regulatory authorities by the GOP, especially those appointed by President Biden’s administration.

While there  pro-crypto members of Congress of both sides of the aisle, more Democrats have been vocal on their distrust of digital assets. Senator Elizabeth Warren has been critical of Bitcoin due to its energy consumption and negative impact of crypto mining on the environment. In early 2022, Democrat Anna Kelles proposed a bill in New York that banned the development of new crypto-mining facilities using carbon-based energy for two years which pushed companies out of area despite not yet been made into law. Others support the mining facilities that they believe will create more jobs.

After the shock that the FTX fraud left on the crypto industry, post-midterm digital currency policies are refocusing on combatting fraud and theft. The scandal has led to a fervent interest in new legislation, as long time crypto advocates such as Representative Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY) have been pushing for clearer regulation.

Republican congressman Warren Davidson has been re-elected into Congress, who authored the Token Taxonomy Act, which would clarify cryptocurrency regulation.

Upcoming legislation

Bipartisan legislation that has been proposed this year would grant more authority to the Commodity Futures Trading Commission (CFTC) to regulate big digital currencies. New regulations are being proposed to put an end to the regulatory uncertainty and infighting that has been occurring between two large regulatory authorities – the CFTC and the Securities and Exchange Commission (SEC) – as that the SEC has approached regulating digital assets more aggressively and decisively.

Three of major bills for crypto regulation are being placed in front of Congress: the Digital Commodity Exchange Act of 2022, the Responsible Financial Innovation Act, and the Digital Commodities Consumer Protection Act, promote the CFTC to the top regulator of digital assets.

The most comprehensive legislation that is being crafted in Congress is the bipartisan Lummis-Gillibrand bill that is designed to set a regulatory framework for blockchain and digital assets, focusing on the integration and growth of digital currencies in the US with a certain groundwork for competition and innovation.

Other significant digital asset regulatory bills that are undergoing consideration are the Digital Commodities Consumer Protection Act, designed to build transparency and accountability for digital asset firms, and Congressman McHenry and Representative Maxine Waters’ (D-CA) legislative bill on stablecoin to clarify regulation on the crypto market.

What’s next?

Going forward, it appears as though crypto will remain a bipartisan issue. Looking to incoming legislation in 2023, it is likely that there will be a further push to protect consumers and provide transparency in the crypto industry, along with stimulating development in digital currencies through landmark legislation such as the Lummis-Gillibrand bill. Overall, in the wake of the FTX scandal and subsequent crypto collapse, there are major bipartisan legislation in the works in Congress to both foster and regulate digital assets for the future.