Washington Politics Threaten to Derail Long-Awaited Crypto Legislation

After months of closed-door negotiations, senators remain divided on how to define digital assets, how to split regulatory power, and who should even be allowed to invest. What began as a bipartisan project to modernize financial law has devolved into a standoff that could push any meaningful action into next year’s post-election landscape, according to a new assessment from TD Cowen’s Washington Research Group.

A Battle Over Who Controls Crypto

The latest draft from Senate Republicans attempts to carve up jurisdiction between the SEC and CFTC, while creating a new legal category for “ancillary assets” – tokens that don’t fit traditional securities law. Democrats, however, countered with a shorter, DeFi-focused proposal aimed at curbing illicit activity, which Republican staff immediately dismissed as unworkable.

The tit-for-tat quickly spilled into the press. One Democratic aide accused the other side of leaking incomplete text, saying their demand for a markup date before agreeing on language was like “planning a wedding before the first date.”

For outside observers, it’s become another case study in how crypto regulation in Washington moves two steps forward and three steps back.

Elections Over Legislation

TD Cowen analyst Jaret Seiberg doesn’t see the latest skirmish as a fatal blow but as proof that lawmakers have no appetite to move quickly. “This isn’t about process – it’s about priorities,” his note read. With the midterms approaching and only a handful of Senate working days left, the odds of progress this year are fading fast.

Once campaign season fully kicks in, crypto is likely to fall down the agenda as lawmakers focus on reelection and political positioning.

Personal Stakes Complicate the Debate

Beneath the procedural noise lies a more explosive issue: conflict-of-interest rules. A Democratic proposal would ban senior officials – including the president and their families – from holding stakes in crypto companies. That clause, insiders say, has quietly become the biggest sticking point.

The measure comes amid growing scrutiny of President Trump’s reported ties to digital asset ventures such as World Liberty Financial and the TRUMP and MELANIA tokens. Bloomberg recently estimated his family’s crypto-related earnings at roughly $620 million, a figure that’s only intensified partisan friction.

Seiberg’s team concluded that while a deal is still technically possible within 12 months, “there are now far more incentives to delay than to act.”

For the crypto industry, that means another year of uncertainty – and another reminder that in Washington, political timing often outweighs technological urgency.