Crypto has had a rough 2023, to say the least. But advocates say 2024 is fertile for a turnaround, partly with the help of a changing Congress and some potential court wins in the pipeline.
Any political upswing for crypto could carry significant implications for the financial system and the rules used to regulate it. Large-scale reforms are still a legislative longshot but not impossible.
Just over a year ago, America’s preeminent crypto exchange FTX collapsed, driven by a cesspool of fraud. The industry’s political goodwill in Washington disintegrated almost simultaneously and hasn’t fully recovered.
But the crypto sector has also shown a real capacity for forging and maintaining powerful relationships in the nation’s capital. House Majority Whip Tom Emmer, who nearly became speaker back in October, has long been one of crypto’s strongest backers on the Hill.
And just last week, amid negotiations over annual defense authorization policy between the House and Senate, Rep. Patrick McHenry (R-N.C.) threw his political weight behind an industry-backed bill that would change the market structure of crypto regulation. The standoff likely means financial policy from the Senate will get stripped from the final NDAA.
“Those in Congress who really recognize both the value of the technology and also the fact that it’s here to stay not just in the United States but globally — they never really took their foot off the gas,” said Brett Quick, head of government affairs at the Crypto Council for Innovation.
The 2024 election could also usher in a friendlier cadre of lawmakers as Congress appears to be on track for a historic number of member retirements. That means while Capitol Hill might seem chilly to crypto today, new members could shift political calculus in 2025.
Hopes hang on the judiciary: The industry has vested lots of hope in the courts next year. Challenging policy and enforcement actions from the Securities and Exchange Commission has been a top focus for crypto for years now. While the government still wins a lot more cases than not, some could yield real wins for crypto.
One closely tracked case revolved around the crypto company Grayscale, which spent several years trying to get SEC approval to offer a Bitcoin-centric ETF. The District of Columbia Court of Appeals eventually sided with Grayscale, directing the SEC to fully consider — though not necessarily approve — the company’s application.
There are other major lawsuits working through the courts right now between the SEC and U.S. companies like Coinbase and Kraken, where the government has accused crypto firms of selling “unregistered” securities. The outcomes of those cases, closely watched by many in Congress, could send huge ripples through crypto’s legal landscape.
Speaking of Capitol Hill: Even folks who have benefited from crypto’s legal wins lately say it’s not a sustainable political approach without Congress.
“I don’t think litigation is a long-term solution,” said Craig Salm, chief legal officer at Grayscale. “It’s a way to get clarity. Now I think Congress, in the long term, is the way we will get clarity around classification of digital assets.”
To be clear, the sector is by no means out of the woods. Plenty of lawmakers have deep concerns about crypto’s role in global money laundering, particularly after the Oct. 7 attack on Israel. And additional high-profile crypto executives facing criminal prosecution for money laundering-related crimes — this time, with Binance’s former CEO Changpeng Zhao — won’t alleviate any pressure.
Senate Banking Committee Chair Sherrod Brown (D-Ohio) has been exploring legislation to bolster anti-money laundering requirements among crypto firms. He’s a close ally of Sen. Elizabeth Warren (D-Mass.), who is pushing an anti-money laundering bill reviled by the industry.
“We have crypto bills in the Senate that we’re going to work through and some pretty good policy,” Brown told us.
— Brendan Pedersen
