Bitwise: Please follow the increasing encryption risks from Congress in Washington.

Author: Matt Hougan, Chief Investment Officer of Bitwise; Translated by: AIMan@

I am very optimistic about the prospects of cryptocurrency this year. The current environment - increasing institutional participation, improving regulatory conditions, and significant advancements in blockchain technology - is very strong.

My basic prediction is that the trading prices of most crypto assets will hit all-time highs this year, with Bitcoin breaking the $200,000 mark.

But...

People often ask me what factors hinder the development of cryptocurrencies. My answer is simple: people. More specifically, politicians.

After the November elections, cryptocurrency prices rose, partly because people believe Washington will take a positive attitude towards cryptocurrencies. So far, that has indeed been the case. Since the Trump administration took office a hundred days ago, we have seen:

The United States has established a strategic Bitcoin reserve, currently holding nearly 200,000 BTC.

The White House has classified digital assets as a "national priority."

The US SEC has dismissed nearly all boring lawsuits related to cryptocurrencies.

The U.S. SEC has rescinded SAB 121 (a set of stringent accounting rules for cryptocurrencies) and allowed more banks and brokerage firms to operate in this field.

The "Throat Action 2.0 Action" has ended, which cut off the services between cryptocurrency companies and traditional banks.

Cryptocurrency advocate Paul Atkins has been appointed as the new chairman of the U.S. SEC.

Famous venture capitalist David Sacks has been appointed by the White House as the "Crypto and AI Czar".

This is truly an incredible list. However...

The common point of the above measures is that they all come from the White House. This means they can be easily overturned by future administrations.

To promote the development of cryptocurrency, we need Congress to pass legislation that incorporates the advancements of cryptocurrency into the legal framework. The passage of at least one cryptocurrency bill by Congress would indicate that the Democrats and Republicans can reach a consensus on cryptocurrency issues, making it more difficult for future administrations to obstruct the progress of cryptocurrency.

Entering this year, I thought this was a sure-win move. Specifically, I expected Congress to quickly pass stablecoin legislation, paving a solid regulatory path for the world's largest financial institutions to enter the stablecoin market.

After all, stablecoins provide something for everyone:

They have broadened market access for cryptocurrencies.

For Wall Street, they have created a new profit center.

For Washington, they are huge buyers of U.S. Treasury bonds and a tool to expand the global dominance of the dollar.

Win, win, win, triple win.

Until recently, we were still smoothly heading towards victory.

In mid-March, the Senate Banking Committee passed a leading stablecoin bill called the "GENIUS Act" with a vote of 18 in favor and 6 against. In this vote, five Democratic committee members crossed party lines to support the bill. Senate Minority Leader Chuck Schumer (Democrat from New York) even expressed his support.

However, last weekend, nine Democrats – including four of the five Democrats who voted in favor of the bill in the Banking Committee, as well as Schumer himself – withdrew their support for the bill. They stated that the bill was insufficient in terms of protections such as anti-money laundering and "know your customer" ( AML/KYC ).

This shift in attitude reflects changes in the political environment in Washington. The revised version of the bill is actually tougher on anti-money laundering/know your customer (AML/KYC) and other aspects than the version passed by the banking committee, indicating that the Democrats' change in stance is more related to the decline in President Trump's approval ratings and the increasing discussions surrounding his conflicts of interest related to cryptocurrency, rather than any substantive concerns.

Politics is inherently chaotic. But many times, it is even more chaotic than it should be.

Equally futile is the fact that the power of the crypto industry is lobbying to combine stablecoin legislation with broader market structure legislation to create a large and attractive crypto bill.

This is simply a textbook case of the opposite of good. Legislative market structure is crucial for the long-term future of cryptocurrencies, but conflating various factors will make the passage of any bill more difficult.

I believe that the stablecoin bill will eventually be passed. The benefits of stablecoins to the United States, the dollar, merchants, entrepreneurs, and other parties are so obvious that trivial political wrangling will not hinder its progress.

At least I hope so.

The next few days and weeks will be full of challenges. If the legislation fails, this summer could be tough for cryptocurrency. But if Washington can come together, I believe the bull market will be unstoppable.

Regardless, please pay attention to Washington.