A change of power in the US Senate will only benefit the cryptocurrency industry. How exactly will it help it?
Republican US Senator Cynthia Lummis said in an interview with CNBC that shifting control of the Senate from Democrats to Republicans will have a positive impact on digital assets. One of the key committees to regulate digital assets is the Senate Banking Committee, which is now chaired by Democratic Senator Sherrod Brown of Ohio. The latter has a negative view of cryptocurrencies and believes that blockchain platforms often fail to apply standard security measures to their customers. However, if power does end up in Republican hands, Brown could be replaced by a politician more loyal to Bitcoin and altcoins.
We have checked the current chances of victory of representatives of different parties in the United States in the upcoming elections on the Polymarket platform. This is a decentralised platform that allows you to bet on a certain event in the future using cryptocurrencies.
At the moment, users believe that the Senate will indeed end up under the control of the Republicans. Traders estimate this probability at 75 per cent.
The probability of victory of representatives of different parties in the United States
It is also important to understand that the possible victory of Donald Trump will definitely lead to a change in the approach of the Securities Commission. Still, the politician has already promised to fire Gary Gensler from the position of SEC chairman on the first day of his new powers.
What will happen to crypto after the U.S. election
If the Senate goes under the control of the Republicans, then the chairman of the committee is likely to become Senator Tim Scott from South Carolina, who favours cryptocurrencies. He has previously proposed a subcommittee that would focus on digital assets, meaning it would work predominantly in this area.
Lummis said the Senate Republican leadership would be more interested in developing a legislative framework for digital assets. Here’s a rejoinder on the subject, as quoted by The Block.
I think it’s better for digital assets if the Senate is Republican. That’s definitely true because Tim Scott will chair the Banking Committee, and he’s much more interested in legislating digital assets than current Chairman Sherrod Brown.
Senator Sherrod Brown
Republicans have a 67 per cent chance of gaining control of the Senate, while the outcome of the House election remains uncertain. Politicians on both sides are working on bills to regulate digital assets, including bills to regulate stablecoins and market structure.
Some members of Congress have criticised SEC head Gary Gensler for not being clear enough on regulations for the crypto industry, while others support his measures to protect investors. Meanwhile, the SEC has previously filed several lawsuits against leading cryptocurrency companies like Binance, Coinbase and Kraken, creating serious problems for the niche industry.
Senator Cynthia Lummis
Lummis said it should be the job of Congress to regulate cryptocurrencies, not just the SEC. In her opinion, the SEC claims to have all the tools for regulation, but their use has led to a lot of litigation. So in essence, instead of creating clear rules for the industry, the SEC is regulating it through enforcement actions, which creates uncertainty.
One thing the regulator definitely did right: the day before, it approved the launch of options based on BlackRock’s spot Bitcoin-ETF. It’s not obvious yet, but in the long run, the event itself could have a serious impact on the price of the main cryptocurrency.
Analysts at CryptoQuant believe that the emergence of options has created a new layer of confusion regarding the crypto market. Here’s their quote.
Options based on spot Bitcoin-ETFs could mean that the “paper” supply of BTC will increase as institutional investors are able to access the coin through buying or selling without investing through the spot market. It appears that it is possible to be in a long position without buying BTC.
They pointed to a significant trend in the futures market, where the “paper” supply of bitcoins increased from 279,000 to 549,000 BTC during the 2022 bear trend. This increase in open positions indicates a growing preference for Bitcoin derivatives over the asset itself.
BTC open position volume dynamics
Trader Gordon Grant noted the implications of this trend, drawing parallels with the gold market. He emphasised that although ‘paper’ trading makes up a significant portion of total trading volume, there is still a need for physical demand to support this supply.
We can see that while paper gold trading is a significant portion of the total average daily transaction amount, the spot market is also important. And while the volume of open positions is able to increase appreciably in paper trading, somewhere along the way paper supply will require paper demand, which implies physical support.
Grant emphasised that as Bitcoin integrates into traditional finance, using it as collateral is proving more difficult. Unlike traditional assets, BTC is not easily accepted as collateral for regulated derivative contracts in North America.
BlackRock company logo
As a result, market participants will use dollars instead of BTC for paper contracts. That is, there is still a need for dollar transactions – obviously because of their liquidity, acceptance and regulatory requirements.
The upcoming US election will prove to be very important for the cryptocurrency industry. First of all, we are talking about a president who may be negatively-neutral towards coins along the lines of Kamala Harris, or approve of crypto and use it, as Trump does. However, events in the Senate are also worth keeping an eye on, as it is the Senate that plays an important role in what is happening in the country.
More other interesting information can be found in our Future Rich crypto chat. Be sure to subscribe, because there is a lot of other useful information about the situation on the coin market.
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