US lawmakers will have another chance to pass cryptocurrency legislation as momentum may be on the industry's side to help bills gain momentum in the new year.

Washington is expected to get the most pro-crypto Congress and support from the top given President-elect Donald Trump's numerous promises to cryptocurrency.

The House Financial Services Committee, a likely starting point for this crypto legislation in the new year, will be chaired by Representative French Hill, a Republican from Arkansas. Hill currently chairs a group focused on digital assets and has worked on a number of crypto-related bills, including a bill to regulate stablecoins and another focused on market structure called FIT21.

“If FIT21 and the stablecoin legislation are not passed during the lame duck, both bills will be my top priorities in the 119th Congress,” Hill said in a statement emailed to The Block.

It will take lawmakers about three to four months to get their bearings, but after that they will likely “get to work quickly,” Ron Hammond, director of government affairs at the Blockchain Association, told The Block.

"We're going to see a lot of bills being reintroduced that we're very, very familiar with," Hammond said.

Stablecoin

Lawmakers in the House have been trying to pass a stablecoin bill for years. House Financial Services Committee Chairman Patrick McHenry, a North Carolina Republican who is retiring in January, is working with top Democrat Maxine Waters, a California Democrat, to create a regulatory framework for stablecoins starting in 2022. Waters will again be the committee’s top Democrat.

Their Stablecoin Bill advanced out of a Republican-led committee last year but failed to gain traction. At the time, Waters called the bill “highly problematic” due to a provision that allows government regulators to approve stablecoins without the Federal Reserve’s involvement.

Hill may decide to reintroduce a version of the stablecoin bill in the House, but other lawmakers could also take on that role, Hammond said.

"It's likely to start again in the House, and we'll probably see that going forward because the Senate is going to be very busy early in the year with nominations and things like that," Hammond said.

The bill could be subject to some changes. The sticking point was the division of regulatory powers between the state and federal governments. The re-introduced bill could be more "state-friendly" in a Republican-led Congress, Hammond said.

On the Senate side, Sen. Bill Hagerty, a Tennessee Republican, introduced a bill for debate in October that would create a regulatory framework for stablecoins. It is very similar to the House version.

When asked whether a stablecoin bill could be passed into law in 2025, DeFi Education Fund CEO Miller Whitehouse-Levin said the chances of that happening are slim.

"Hope springs eternal," he said, giving the bill a 25% chance of passage in 2025 and a 75% chance of passage in 2026.

FIT21

Current House Financial Services Committee Chairman Patrick McHenry, a North Carolina Republican, led the effort to help the House pass FIT21. The bill would give more authority and funding to the Commodity Futures Trading Commission to oversee spot markets for cryptocurrencies and “digital commodities,” particularly Bitcoin, and set parameters for the Securities and Exchange Commission.

It’s unclear where FIT21 might go next, Hammond said, in part because the SEC and CFTC will be different in the new year. Trump has appointed former SEC Commissioner Paul Atkins to lead the SEC, who has demonstrated a crypto-friendly approach.

“Potentially a lot of this could be done on the regulatory side rather than the legislative side,” said Hammond of the Blockchain Association.

FIT21 may see some changes to the definition of decentralization, said Whitehouse-Levin of the DeFi Education Fund.

“FIT21 uses the decentralization test to try to differentiate between transactions that are appropriately subject to enhanced disclosure requirements given the nature of those transactions, and transactions that are not,” Whitehouse-Levin said. “The dividing line that FIT21 suggests is the line around whether the transactions are related to a project or network that is decentralized or not.”

A companion bill, the same one that has been introduced in both houses of Congress, has not been introduced by the Democratic-controlled side of the Senate, but Whitehouse-Levin said it could happen next year.

"I could easily see a companion bill," he said.

Asked about the likelihood of FIT21 becoming law in 2025, Whitehouse-Levin said it was unclear.

“Congress will have many, many competing priorities next year,” he said. “This will include major tax-related legislation, major border-related legislation, etc. Beyond the specific bill, there will be intense competition for floor time, which I think will impact the prospects of all cryptocurrency bills, whether FIT21 or others.”

"Tax Super Bowl"

Taxes could be a hot topic in the new year as lawmakers face a deadline for Trump's Tax Cuts and Jobs Act to expire at the end of next year.

“It’s basically the idea that everyone is preparing for what we call the ‘Tax Super Bowl,’” said Alison Mangiero, executive director of the Proof of Stake Alliance, a staking technology advocacy group.

One bill that could be included in the TCJA is a measure introduced by Reps. Wiley Nickel, a North Carolina Democrat, and Drew Ferguson, a Georgia Republican, that would clarify that staking rewards should only be taxed at the time of sale. POSA supports the bill, and Mangero said she hopes language from it will be included in the TCJA update.

Other factors

The idea of ​​creating a strategic bitcoin reserve has been floating around at both the federal and state levels. Before the November election, Trump promised to create a strategic bitcoin reserve. Republican Senator Cynthia Lummis of Wyoming has a bill that would require the U.S. Treasury to buy one million bitcoins over five years.

Lummis' bill will likely be reintroduced, Hammond said.

"I don't see it moving very far, at least at this point," Hammond said, adding that the bill has no partner in the Senate and lacks bipartisan support.

Another factor that could impact cryptocurrency legislation is Warren's new position as the ranking Democrat on the powerful Senate Banking Committee.

"It certainly doesn't help," Whitehouse-Lewin said. "She's clearly not a fan of the industry."

Warren will not be as influential as former Senate Banking Committee Chairman Sherrod Brown, Hammond said. Brown has criticized cryptocurrency and called for a crackdown on the use of cryptocurrency to finance terrorism and evade sanctions, and has ordered federal agencies to use their existing powers to go after bad actors in the industry.

Warren could influence what's called a "quadrilateral signing," which is when the chairman and ranking member of the relevant House and Senate committees get together to agree on certain measures that can then be rolled into a larger bill, Hammond said.

"If you have one delay, that means that piece of legislation doesn't make it into the big must-pass bill, and Senator Warren could easily be that delay," Hammond said.