The Democrats Won Congress. Here's What Could Come Next for Crypto.

The Democrats won control of both houses of Congress on Nov. 3. For the crypto sector, the implications are large, but probably not much like what the loudest voices were fearing.

The prices of the crypto majors initially reacted positively to the results; by noon on Nov. 4, Bitcoin (CRYPTO: BTC) had risen by 3.7% over the prior 24 hours to reach $80,338, with Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and XRP (CRYPTO: XRP) climbing to a similar degree. Surprisingly, Zcash (CRYPTO: ZEC) was up 10.5%, and other leading altcoins like Monero (CRYPTO: XMR) and Chainlink (CRYPTO: LINK) saw slight gains as well. However, on Nov. 5, some of those gains reversed themselves, with Bitcoin falling back to around $76,000.

The industry cheered the onset of Republican control in 2025, only to see a crypto bear market start by the end of the year. Let's map out what could be coming next for the crypto market, given that it was already emerging from the bear phase before the election results started to roll in.

Image source: Getty Images.

The Clarity Act isn't coming, and any successor bill will look much different

The Clarity Act, the most recent major market-structure bill to be voted down in Congress, would have divided oversight of the crypto market between two regulatory agencies: the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Unless it gets passed through this Congress before Jan. 3, 2027, which it probably will not, the bill, and many of the tenets it calls for, is dead.

A successor bill, heavily modified and proposed by Democrats, might revive it in the next Congress, though it's unlikely to be a top priority.

One difference between the old version and a potential new version could be tighter limits on stablecoin yield. That would help Coinbase Global, Circle Internet Group, and Ripple far less than the original version they backed and spent significant time and money lobbying for. For now, the prediction market Kalshi gives the Clarity Act only 18% odds of becoming law before 2028.

The regulatory agencies will carry more weight in the meantime, and their leaders will likely stay put for a good while.

The SEC's chairman, Paul Atkins, has a term that extends to 2031, and the current president picks agency chairs through January 2029. CFTC Chairman Michael Selig said in April of this year that he'd work to finalize the market structure rules under his purview without Congressional support if needed, and that process is already underway.

The incoming Democrats could try to strike down the regulations developed by Selig and Atkins, but that would take a Congressional Review Act resolution, a measure that lets Congress overturn new agency rules, and the president can veto it. A presidential veto could keep the status quo in place for a while, though likely not beyond the 2028 election.

Aside from that, investors should expect numerous hearings and investigations into the president's crypto ventures, including those involving World Liberty Financial. Even if wrongdoing is discovered there, the impact on the broader crypto market is unlikely to be significant, as none of the crypto businesses associated with the president or his family are large enough to move the prices of major coins.

And regardless of what happens with the president's companies, Democrats may push for much more stringent ethics, insider trading, and corruption rules -- all of which would be good things for the industry's future. A presidential veto could hold those rules off for a while, though likely not beyond the 2028 election.

One additional wrinkle is that now, at least one of crypto's most hoped-for catalysts is probably off the table. The Strategic Bitcoin Reserve, which holds an estimated 328,000 BTC as of early October, almost certainly won't ever be filled using public funds now.

Is this election a reason to sell crypto or buy more?

Historically, crypto has done well under both highly skeptical and more accommodating regulatory regimes.

Gary Gensler's SEC, for example, brought 46 enforcement actions related to crypto in 2023. Bitcoin rose 155.2% that year. It isn't knowable ahead of time what regime the Democrats will actually choose to implement when they take control.

Since nobody can predict which regime is coming, the best crypto assets to invest in are those whose value depends on usage rather than on lobbying outcomes. That means favoring projects that are making headway in implementing their technology roadmaps and attracting more activity and capital to their networks, rather than those trying to skirt regulations or lobby their way out of being subject to them.

In my view, the future is bright for crypto, and the most likely place the market goes from here is up. Even so, investors should not interpret the election results as a sign of doom for the industry, nor as a reason to invest more than usual, at least not at this juncture.

Alex Carchidi has positions in Bitcoin, Ethereum, Monero, Solana, and Zcash. The Motley Fool has positions in and recommends Bitcoin, Chainlink, Ethereum, Solana, and XRP. The Motley Fool recommends Coinbase Global and Monero. The Motley Fool has a disclosure policy.