Washington, crypto's "Schrödinger's cat"?

By: Matt Hougan, Chief Investment Officer at Bitwise

Translation: Luffy, Foresight News

I'm increasingly worried that Congress will mess things up just as we're one step away from success.

I'm extremely optimistic about cryptocurrency's outlook this year, with highly favorable conditions: rising institutional participation, improving regulatory environment, and significant advancements in blockchain technology.

I believe most cryptocurrencies will trade at all-time highs this year, and Bitcoin will rise above $200,000.

But…… People often ask me what could derail crypto from this trajectory? My answer is simple: people; more specifically, politicians.

After the November election last year, crypto prices rose partly due to expectations of a positive stance from Washington. So far, that's been true. In the 100 days since the Trump administration took office, we've seen the following:

• The U.S. established a strategic Bitcoin reserve holding nearly 200,000 Bitcoins

• The White House listed digital assets as a "national priority"

• The Securities and Exchange Commission (SEC) dropped nearly all its baseless lawsuits related to crypto

• The SEC withdrew SAB 121 (a set of harsh accounting rules targeting crypto), allowing more banks and broker-dealers to operate in the space

• Operation Choke Point 2.0 ended, an initiative that previously cut off crypto firms from traditional banking services

• Crypto advocate Paul Atkins was appointed as the new SEC Chair

• Prominent venture capitalist David Sacks was named the White House "Crypto and AI Czar"

This is an impressive list. However……

We need legislation to lock in progress

The common thread among these actions is that they all originated from the White House, meaning a future administration could easily reverse them.

To move the crypto industry forward, we need Congress to pass legislation that codifies these gains into law. At least one crypto bill from Congress would demonstrate bipartisan agreement on crypto issues and make it harder for future administrations to undo this progress.

At the beginning of the year, I thought this was a sure thing. Specifically, I expected Congress to swiftly pass stablecoin legislation, creating a solid regulatory pathway for the world’s largest financial institutions to enter the stablecoin market.

After all, stablecoins benefit everyone:

• For the crypto industry, they expand market access

• For Wall Street, they create a new source of profit

• For Washington, they are major buyers of U.S. Treasuries and effective tools for extending dollar dominance globally

This is a three-way win.

Until recently, we were steadily moving toward this victory.

In mid-March, the Senate Banking Committee passed the main stablecoin bill, the GENIUS Act, by a vote of 18 to 6. During that vote, five Democratic committee members crossed party lines to support it. Even Senate Minority Leader Chuck Schumer expressed support.

But over the weekend, nine Democrats—including four of the five who voted to advance the bill from committee, plus Schumer himself—withdrew their support. They claimed the bill didn't go far enough on anti-money laundering and KYC protections.

This shift reflects the changing political landscape in Washington. In fact, the revised version of the bill has stronger anti-money laundering and KYC provisions than the version passed by the Banking Committee, suggesting that Democrats’ change of heart stems more from declining support for Trump and growing discussion around his potential conflicts of interest regarding crypto, rather than any substantive concerns.

Politics is complex and messy. But often, it's messier than it needs to be.

Equally problematic: various factions within the crypto industry are lobbying to combine stablecoin legislation with broader market structure bills into one comprehensive, "perfect" crypto law.

This pursuit of perfection hinders the implementation of viable solutions. Market structure legislation is crucial for crypto's long-term future, but bundling everything together makes passing any bill significantly harder.

What comes next

I believe the stablecoin bill will ultimately pass. The benefits of stablecoins are simply too clear—for the U.S., the dollar, merchants, entrepreneurs, and others—to be derailed by petty political fights.

The coming days and weeks will be challenging. If legislation fails, this summer could be difficult for the crypto industry. But if Washington can come together, I believe the bull market will be unstoppable.

Regardless of the outcome, keep a close eye on Washington.