It began slowly with a few stubborn Democrats in Congress who refused to hew to the partisan line set down by party leaders. That drip-drip of resistance became a trickle and then a river in the last month as more of their colleagues—including powerful Senate Majority Leader Chuck Schumer (D-N.Y.) joined them in voting in favor of a piece of crypto legislation. The dam finally broke on Wednesday when 71 Democrats joined 208 Republicans in the House of Representatives to pass another pro-crypto law—this one clarifying the regulatory authority of the SEC and CFTC—and wash away the ideological hardline imposed by the progressive wing of the party.
Crypto Twitter, never subtle at the best of times, treated this week's bipartisan show of support for crypto as a glorious national achievement on par with civil rights legislation or the founding of the republic. The gleeful rhetoric was excessive but understandable. At the start of this year, hope for crypto reform in Washington, D.C., was all but dead, and it looked like the industry's nemesis, SEC Chair Gary Gensler, would have the last laugh. But thanks to a shrewd national PR campaign led in part by former Schumer aide Josh Vlasto, many Democrats came to realize an obvious truth—that a sizable portion of people under 50 care about crypto—and the ground began to shift.
The final straw for senior Democrats may have been the sight of one-time Bitcoin foe former President Donald Trump embracing the industry and positioning himself to vacuum up tens or potentially hundreds of millions of crypto dollars. There is speculation that someone in the White House finally concluded that campaign contributions and electoral politics trumped progressive pearl-clutching when it came to crypto.
The question is what happens now. While the crypto industry won a huge symbolic victory this week, the bills it passed are not over the finish line. The first one, which would make it viable for banks to hold crypto, passed both houses of Congress but is still facing a veto threat by President Joe Biden (though that looks less likely by the day). The other one, concerning the SEC and CFTC's regulatory authority, still must make it out of the Senate, where it could get bottled up by staunch crypto opponent Sen. Sherrod Brown (R-Ohio).
Even if the bills do become law, they are incremental measures and won't help the crypto industry in court, where Gensler has his foot on the throat of leading companies, including Coinbase. Meanwhile, the SEC chair can continue to make mischief on the regulatory front by labeling everything he sees as a security under his jurisdiction. And while the industry appeared to catch a break when another anti-crypto regulator, FDIC Chair Martin Gruenberg, said he would resign amid a sexual harassment scandal, there is every sign he will take his sweet time doing so.
The bottom line is the crypto industry had its best week ever in Washington, D.C. But it still has an uphill battle to carve out a safe place for itself in the U.S. economy. As Churchill once said, "It is not even the beginning of the end. But it is, perhaps, the end of the beginning."
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
