Investing.com -- As the cryptocurrency sector grows more optimistic, TD Cowen urges caution about the potential for swift legislative action on crypto market structure and stablecoin regulations. TD Cowen suggests that heightened expectations for progress in Congress may be premature and unfounded.
The crypto industry has been actively lobbying for regulatory clarity, with key figures and entities within the sector expressing optimism about the prospects for significant legislative advancements.
Senate Majority Leader Chuck Schumer recently stated that Congress has the "absolute possible" to pass crypto market structure legislation by the end of the year, fueling this optimism.
As a potential vehicle for this progress, Schumer pointed to FIT21, the House-passed crypto market structure bill, as well as a bill being developed by the Senate Agriculture Committee.
However, analysts at TD Cowen outlines several reasons for skepticism.
“Crypto entities are aggressively making political contributions with Public Citizen reporting Aug. 21 that crypto companies have contributed $119 million this year, which constitutes 48% of corporate contributions,” the analysts said in a note.
Additionally, the Fairshake PAC, a major crypto political action committee, has received about $95 million from industry executives and affiliates. These contributions have undoubtedly influenced legislative priorities, evidenced by the bipartisan efforts to override SEC accounting rules opposed by the industry.
Despite this financial influence, TD Cowen warns that the optimism within the crypto sector may be misplaced.
The note mentions that while Schumer's comments have raised expectations, his track record suggests that these broad pledges may not lead to concrete action, particularly as election campaigns intensify. The analysis draws parallels to the cannabis industry in 2022, where similar promises of legislative action during the lame-duck session ultimately fell short.
TD Cowen also points to potential political obstacles that could hinder progress. “Our view is that the crypto industry also has hurt prospects for legislation this year by spending $12 million to defeat Senate Banking Chair Sherrod Brown,” the analysts said.
Given Brown's influential position, his opposition could be a major barrier to any crypto-related bills, both this year and potentially in the future, depending on the outcome of his re-election.
Moreover, TD Cowen expresses skepticism about the prospects for 2025, regardless of the election outcomes. The note mentions that both political parties might seek to extract more contributions from the crypto sector before delivering any legislative victories, further delaying the process.