With Democrats taking full control of Congress in the midterm elections, the political landscape for the crypto industry has undergone a fundamental reversal, leaving companies with only two months to adjust their strategic focus.
2027 will become a critical test of the industry's compliance capabilities rather than a window to seek regulatory exemptions.
This dramatic shift in the political landscape means the previous model of relying on lobbying to push legislation has completely failed, and crypto firms must quickly pivot to responding to stricter regulatory scrutiny and congressional hearings to adapt to a very different policy direction in Washington.
The legislative prospects of the Clarity Act have fallen into substantial stagnation. The bill, which aimed to clarify trading rules and regulatory jurisdiction for crypto tokens, had passed the House in July 2025 by a vote of 294 to 134, including support from 78 Democratic lawmakers. However, at the Senate level, the bill encountered major resistance. On September 15 of this year, the Senate voted on a cloture motion to advance the bill, with the result being 49 in favor and 50 against, and the motion was not approved. Those who voted against included all 46 members of the Democratic caucus (including 2 independents) as well as four Republican senators — Susan Collins, Josh Hawley, Jerry Moran and Thom Tillis — with the core disagreements centering on ethics provisions and other accompanying details. Since the new Congress will formally take office on January 3 of the following year, leaving only a lame-duck session in between, the industry is broadly pessimistic about any breakthrough during this period. Lee Reiners, a researcher at Duke University's Center for Financial Economics, said bluntly that the Clarity Act is already dead, and noted that prediction markets put the probability of the bill becoming law before 2027 at only single digits. Ryan Myher, co-founder and COO of self-custody crypto trading platform Genius, also believes the existing version of the bill is effectively defunct, with no political momentum in the coming weeks to push it through quickly. Tomer Sharoni, CEO of Addressable, pointed out that the root cause of the bill's setback lies in ethics disputes rather than disagreements over the underlying framework, and he predicts that a new version of market structure legislation introduced in 2027 will include stricter anti-money laundering, DeFi and conflict-of-interest provisions.
The crypto industry's political donation strategy suffered a defeat in this election, forcing the industry to restructure its communication approach. Previously, industry groups invested enormous sums trying to influence election outcomes, but the key seats they targeted did not go as hoped. For example, former federal senator and former Senate Banking Committee Chairman Sherrod Brown defeated incumbent Republican Senator Jon Husted in Ohio, and PAC spending in that state's Senate race was reported at $64 million. Myher noted that industry political action committees (PACs) invested a combined total of about $170 million, with most of the funds used to support Republicans and block Democrats, ultimately failing to deliver the expected results. Sharoni believes that large donations have branded cryptocurrency as a "partisan tool," and if companies want to persuade the Democratic majority, they must rely on substantive arguments rather than campaign cash. He advises companies to prove to regulators that their platforms have the ability to autonomously curb fraud and sanctions evasion. Myher also emphasized that going forward, companies need to learn to cooperate with a Democratic-led Congress rather than stand in opposition. This means maintaining bipartisan relationships in the House and reducing aggressive campaign spending. It is worth noting that Democrats are not entirely opposed to the crypto industry, as evidenced by the 78 House votes in support of the Clarity Act, but the current challenge is that the industry must change its communication approach, bringing evidence rather than money.
Data compiled by Woofun AI shows that regulators can tighten rules without waiting for new congressional legislation, and the key areas for scrutiny have already been made clear. The Office of the Comptroller of the Currency (OCC) issued final guidance on October 21 accompanying the GENIUS Act stablecoin legislation, which will formally take effect on January 18, 2027. The OCC and the Treasury Department will also jointly issue anti-money laundering and sanctions compliance rules for stablecoin issuers. Sharoni believes anti-money laundering is the first area lawmakers will target, because both parties share the same position on this issue. Platforms need to explain how they identify sanctioned individuals and criminal users, even when one person controls dozens of wallet addresses. Stablecoin interest yield has become another major point of conflict, with new OCC rules prohibiting issuers from directly paying interest to token holders. A previous draft had presumed that paying interest indirectly through partner third parties would also be a violation, but the final rule removed that presumption and changed to case-by-case review. Regulatory documents also state that issuers cannot indirectly do what regulations directly prohibit. Myher added that tokenized stocks and other RWAs will face more intensive scrutiny in 2027, and even without new legislation, enforcement and regulatory intensity will continue to tighten. In addition, the SEC and CFTC can achieve some of the regulatory goals originally intended by the Clarity Act using only their existing enforcement authority. Although the stablecoin business is protected by the GENIUS Act framework, it still needs to address challenges at the implementation level. The bill was signed into law in July 2025, and its relevant 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, judged that the election's impact on day-to-day business is limited. He believes the core contradiction is not overturning existing laws, but whether lawmakers can continue to support digital asset innovation and how regulators will enforce existing rules. The spread of stablecoins stems from the real demand for faster, lower-cost cross-border payments, and that demand will not disappear because of changes in the political landscape. However, SEC and CFTC enforcement actions could amplify market volatility. Myher mentioned that regulators can achieve most of their regulatory goals using only existing authority, and companies need to pay attention to the specific enforcement actions of the SEC and CFTC rather than relying solely on legislative protection. Sharoni also pointed out that although the GENIUS Act provides a framework, companies still need to refine implementation details themselves, especially in anti-money laundering and sanctions compliance. In the window before January 3, crypto companies should focus on responding rather than lobbying. Myher suggests that investors and companies need to treat the next two months as a planning cycle, with specific work including improving anti-money laundering controls, user-facing information disclosure, and testing the compliance of tokenized products under stricter regulation. Sharoni advises companies to check their own risk control screening capabilities, ensuring they can link wallet addresses to actual holders and trace the source of funds to criminal or sanctioned entities. He also suggests companies proactively engage Democratic offices before investigative committees are formally formed, and speak with data. Reiners cited a joint poll by POLITICO and Public First showing that only 4% of American voters said a candidate's crypto stance would affect their voting choice, and Democrats give higher priority to addressing cost-of-living issues. Therefore, crypto policy is not their top agenda, but hearings may arrive earlier than new legislation, investigating government interactions with the crypto industry, details of corporate legislative collaboration and regulatory enforcement. Sharoni predicts that crypto projects related to the president's family may become the Democratic Party's first breakthrough in using subpoena power. In the long run, cryptocurrency will continue to be incorporated into the mainstream financial system, but at a slower pace and under stricter regulatory standards.
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