Crypto’s Trump-Fueled Washington Boom Reaches Its Endgame

(Bloomberg) -- Crypto's extraordinary run of political good fortune in Washington has come to an abrupt halt. With Democrats set to control Congress following their midterm sweep, the industry faces the prospect of tougher rules and closer scrutiny of its ties to President Donald Trump.

For two years, the industry enjoyed something few businesses ever get in the nation's capital: a president who made digital assets a national priority while amassing his own crypto fortune, regulators clearing a path for wider adoption, and a Republican Congress sympathetic to its agenda.

Now crypto faces the harder test of becoming a lasting force in finance as its extraordinary political advantage evaporates. The Democratic sweep threatens to make comprehensive legislation harder to secure on the industry's preferred terms and raises the prospect of congressional investigations into Trump's crypto dealings.

"Many significant figures in crypto aligned themselves with the Trump family," said Austin Campbell, a crypto expert and former banker who is now an adjunct professor at the NYU Stern School of Business. "Those chickens are likely to come home to roost."

Trump famously launched his own digital assets, welcomed crypto executives to the White House and made the industry's ambitions part of his political agenda. In turn, crypto's biggest victories became closely associated with his presidency, even as his personal financial interests complicated the industry's efforts to secure broader political support.

All that came to a head in September, when the Senate failed to advance the Clarity Act, which would have established clearer rules for exchanges and other digital-asset businesses. Trump's crypto dealings became a flashpoint, though disagreements over stablecoin rewards, investor protections and banking competition also contributed to the impasse.

The election is now set to change the terms of that debate. Democrats have signaled plans to demand tougher ethics restrictions, stronger consumer protections and a greater role for the Securities and Exchange Commission in overseeing digital assets. Those changes would depart from the framework many crypto companies sought under Republican control, but could also create a new path to legislation if the industry can build support across party lines.