Two-Month Countdown: The Democratic Party Regains Control of Congress, Compliance Responses and Strategic Shifts for Cryptocurrency Companies

*Author: Murtuza Merchant, Forbes*

With only two months left until the congressional turnover in January, crypto companies have limited time to adapt to Washington's drastically different policy environment. The Democrats will take control of Congress, and the core market structure bill for the industry is unlikely to advance during the lame-duck session. The focus for crypto companies must shift from "lobbying for legislation" to preparing for hearings and facing stricter regulatory scrutiny.

The Democrats' control of both the House and Senate following the midterm elections is a significant negative for this already struggling crypto bill.

### Congressional Landscape Change: Market Structure Bill at a Standstill

The Clarity Act aims to clarify the trading rules and regulatory jurisdiction for crypto tokens, passing the House in July 2025 with 294 votes in favor and 134 against, including 78 Democratic votes. However, the bill has stalled in the Senate. A vote on September 15 of this year failed, with Senators Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis joining Democratic senators in opposition, with disagreements centered on ethical provisions and other supporting details.

The new Congress will officially take office on January 3 of the following year, leaving only the lame-duck session, and few believe the bill can make progress during this time. Lee Reiners, a researcher at Duke University's Financial Economics Center, stated, "The Clarity Act is already dead." He mentioned that prediction markets give the bill a single-digit probability of being enacted before 2027.

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

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

Crypto industry groups previously invested significant funds to influence this congressional election, but many key targeted congressional seats did not yield the expected results. Former Democratic Chair of the Senate Banking Committee Sherrod Brown defeated Republican candidate Jon Husted. Myher stated, "The industry's political action committees (PACs) collectively spent about $170 million, mostly to support Republicans and block Democrats, but ultimately did not achieve the desired results."

However, the Democrats are not entirely dismissive of the crypto industry, as evidenced by the 78 votes in favor of the Clarity Act in the House. The current challenge is that the industry must change its communication strategy. Sharoni believes that large donations have labeled cryptocurrencies as "partisan tools"; companies must rely on substantive arguments to persuade the majority Democrats. "If I were to advise the industry: bring evidence, not campaign funds; demonstrate to regulators that platforms can independently curb fraud and evade sanctions."

Myher also agrees that the industry needs to change direction: "Moving forward, companies must learn to cooperate with a Democrat-led Congress rather than stand in opposition." This means maintaining bipartisan relationships in the House, which originally had broader support, and reducing campaign funding used to attack opponents.

### Subpoena Power and Hearings: A More Lethal Regulatory Sword

Starting in January, the Democrats will hold the majority power and subpoena authority in various committees, which may have a greater impact on the crypto industry than any single bill. Sharoni stated, "I predict that hearings will occur long before new legislation is introduced."

Myher mentioned that the Democrats' core concerns are consumer protection, illegal finance, and conflicts of interest, and now they control the agenda. Reiners stated that hearings will likely investigate the interactions between the government and the crypto industry, the collaboration details of certain companies during the legislative process, and the enforcement actions of regulatory agencies. Sharoni predicts that crypto projects related to the presidential family will become the first breakthrough for the Democrats to utilize their subpoena power.

It is unlikely that a new crypto bill will become a priority on the Democrats' agenda. Reiners cited polls showing that only 4% of American voters indicated that a candidate's stance on crypto would influence their voting choice, and the Democrats prioritize addressing living costs. Even if discussions on crypto policy continue, the Democrats will likely start drafting a new bill from scratch, as opinions within the party are not unified. Reiners supports viewing crypto tokens as securities regulated by the SEC in the spot market, but it remains uncertain whether there is enough political will to realize this.

### Existing Rules Tightened: Stablecoins and Anti-Money Laundering Become Primary Battlegrounds

Regulatory agencies can tighten rules without a new congressional bill. The Office of the Comptroller of the Currency (OCC) released the final guidance 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 issue anti-money laundering and sanctions compliance guidelines for stablecoin issuers. Sharoni believes this is also the direction lawmakers will first address: "Anti-money laundering will be the first area because both parties agree on this stance." Platforms need to explain how they identify sanctioned individuals and criminal users, even if one person controls dozens of wallet addresses.

The interest income from stablecoins is another major point of conflict. The OCC's new regulations prohibit issuers from directly paying interest to token holders, and regulators have clearly stated that circumventing this by paying interest through third-party cooperation is also a violation. The regulatory document states: issuers cannot indirectly do what the regulations explicitly prohibit.

Myher added that tokenized stocks and other real-world assets (RWAs) will also face more intensive scrutiny in 2027: "Even without new legislation, enforcement and regulatory intensity will continue to tighten." For companies that have already established stablecoin businesses, the core regulatory framework has been set. The GENIUS Act will be signed into effect in July 2025, and related provisions will be implemented as scheduled in January, unaffected by the change in congressional control. Teymour Farman-Farmaian, co-founder and CEO of cross-border payment platform Higlobe, believes that the impact of the elections on daily operations will be limited. He thinks the core contradiction moving forward is not about overturning existing laws but whether lawmakers 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 and predictable regulatory environment. The popularity of stablecoins stems from the real demand for faster and cheaper cross-border payments, and this demand will not disappear due to changes in the political landscape. Myher mentioned that the SEC and CFTC can achieve most of the regulatory goals that the Clarity Act originally aimed for based solely on their existing enforcement powers.

### Window Period Response Suggestions: Prioritize Compliance Capability Over Seeking Exemptions

During this window period before January 3, the focus should be on response rather than lobbying. Myher suggested: "Investors and companies should view the next two months as a planning period rather than a legislative advocacy period." Specific tasks include: improving anti-money laundering controls, enhancing user information disclosure; testing the compliance of tokenized products under stricter regulations; and not expecting the market structure bill to be enacted in the short term.

Sharoni suggested that companies assess their risk control screening capabilities, whether they can associate wallet addresses with actual holders, and trace funds back to criminal or sanctioned entities. He also advised companies to proactively connect with Democratic offices before the formal establishment of various investigative committees, using data to make their case rather than vague promotional rhetoric: "My advice to companies is to treat 2027 as a year to prove compliance capabilities, not a year to seek regulatory exemptions."

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