The U.S. Congress Faces Challenges in Passing Crypto Legislation

The U.S. Congress appears unlikely to pass stablecoin legislation or approve the FIT21 crypto asset regulatory framework in the Senate. This situation stems from Congress’s inability to secure the necessary majority and the shifting priorities within a packed agenda. The recent surge in tensions in the Middle East is keeping politicians preoccupied ahead of the upcoming elections.

Rising Tensions in the Middle East

In the last two days, Israel and Lebanon have initiated conflicts along their border. This situation differs significantly from previous incidents, as it possesses the potential to escalate into a major war beyond mere border violations. On Tuesday, Iran fired 180 missiles at Israel, several of which bypassed Israel’s “Iron Dome” missile defense system, reaching central and southern regions of the country.

As is often the case, conflicts in the Middle East negatively impact risk markets while positively affecting Gold. Following the missile attacks, Bitcoin $105,262‘s price gradually fell to around $60,000. The implications of this escalating conflict on potential crypto legislation in the U.S. are significant, with Congress’s attention diverted from crucial issues to the unfolding crisis.

Congress’s Priorities

Ron Hammond, Director of Government Relations at the Blockchain Association, commented that major national security discussions tend to disrupt planned legislation. Although FIT21 previously passed the House of Representatives, it still requires Senate approval before Biden can sign it into law. The ongoing busy agenda and upcoming holidays hinder its progress. The proposed legislation aims to place most crypto assets under the regulatory authority of the CFTC, providing guidance on issues such as classifying securities as commodities. However, as mentioned, the Senate has made no advancements, with figures like Senate Banking Committee Chairman Sherrod Brown and Senator Elizabeth Warren opposing the law due to perceived shortcomings in its anti-money laundering provisions.

On the other hand, the stablecoin legislation has garnered significant bipartisan support. The top Democrat on the Financial Services Committee, Maxine Waters, stated last week during an SEC congressional session that a compromise must be reached before year-end. Waters expressed strong confidence in achieving an agreement prioritizing robust protections and federal oversight for citizens.

TD Cowen’s Washington Research Group analyst Jaret Seiberg expressed Monday that he is “pessimistic” about the imminent progress of either law. However, he noted that stablecoin legislation seems somewhat more likely. Even without the rising tensions in the Middle East, Congress’s agenda remains too focused to prioritize cryptocurrency matters. Experts believe that issues like inflation and border security take precedence over crypto legislation. For crypto regulations to have a higher chance of acceptance, they need to be tied to high-priority laws like SAFER banking legislation, according to Blockchain Capital’s general advisor H. Joshua Rivera.

“The stablecoin law must be addressed in relation to other legislation. The conflict in the Middle East is certainly not helping expectations.”

Ron Hammond shares a similar viewpoint.

“Congress has numerous agendas to tackle by year-end, and stablecoin legislation currently stands among potential topics.”

In summary, the likelihood of cryptocurrency legislation passing diminishes further with the escalating conflicts in the Middle East. National security developments creating uncertainty in capital markets redirect Congress’s attention to more urgent matters. This situation suggests that cryptocurrency regulations may be postponed until next year.

• The U.S. Congress is unlikely to pass crypto legislation.
• Middle Eastern conflicts further reduce this probability.
• National security developments disrupt regulatory efforts.