Four scenarios for crypto legislation in the lame duck
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Stablecoins and regulatory structure have been the big focus for the crypto industry's legislative efforts, and three scenarios have emerged that provide the best chance for either one of them to pass before January.
Why it matters: The lame duck session of Congress — the period between the election and the swearing in of newly elected members — might not be lame at all for the blockchain industry.
The most likely path to new legislation, based on takeaways from multiple conversations with congressional staffers, is that stablecoin legislation gets linked to either the Defense Authorization Act or the end-of-the year budget renewal.
- The second is that a market structure bill — legislation that defines how cryptocurrencies get regulated more broadly, and by which agency — also gets attached.
- The third scenario involves stables and market structure as part of standalone financial services legislation that deals with crypto and banking rules for legal marijuana dispensaries (aka SAFER banking).
Zoom out: Stablecoins have been the most successful crypto product, with tens of trillions in annual volume and nearly $200 billion in liquid assets backing them.
- The market's size and their growing role in payments have drawn bipartisan calls for regulation in order to preserve U.S. dollar dominance, combat illicit actors and protect consumers.
- On regulation, the biggest question has been when a sale of a crypto asset falls under the authority of the Securities and Exchange Commission. So far, that has been up to the agency to determine, but Congress looks likely to set guidelines — someday.
Between the lines: The fourth and most likely scenario is that Congress puts off the issue entirely until the next session. Crypto lobbyists believe this is as likely, but there are key legislators now who may have strong motivation to act before year's end.
- Senate Majority Leader Chuck Schumer (D-N.Y.) may want to show the crypto PACs, which have already started raising money for the 2026 midterms, that he can play ball.
Meanwhile, there are four committees that matter most to crypto legislation: House Financial Services; Senate Banking; and both Agriculture committees (which oversee the Commodities Futures Trading Commission).
- The chairs or two of them, Sen. Debbie Stabenow (D-Mich.) of Senate Agriculture, and Rep. Patrick McHenry (R-N.C.) of House Financial Services, are not seeking reelection and both have demonstrated a strong desire to move crypto legislation before they leave Congress.
Behind the scenes: Sources inside Congress tell Axios that Rep. McHenry wants to move legislation, but he's not going to move until he believes he can get it done.
- That means that he's very likely waiting for leadership to give him the go-ahead on one of the options above.
- Notably, his Democratic counterpart, Rep. Maxine Waters (D-Calif.), has his back on this one.
One wild card is Senate Banking chair Sen. Sherrod Brown (D-Ohio).
- The crypto industry just spent $40 million against him in his reelection race. It remains to be seen whether he'll be a lame duck or not, or whether the industry's campaign against him would embolden his anti-crypto stance, or cause him to rethink.
What's next: The election. Once everyone knows who is coming back and who's not next year, they can start making deals.
