Why a divided government would be the best outcome for crypto in the November election, according to TD Cowen

Published Tue, Jun 25 20249:31 AM EDT

A sweep of the executive and legislative branches by either Democrats or Republicans in the November election could spell more risk to crypto assets, according to TD Cowen. "Divided government is the best possible outcome for financial firms, housing and crypto as we believe there would be bipartisan legislative and regulatory agreements that could survive future political changes," TD Cowen's Jaret Seiberg wrote in a note Monday. "If Biden wins, a Republican Senate could limit his ability to put aggressive regulators in power," Seiberg added. "Trump would likely have a GOP Senate, but House Democrats could block his legislative agenda. Risk rises broadly for both outcomes if either party sweeps the election." The election has become a topic of increased interest for crypto investors, after the political tides for the industry seemed to shift suddenly about a month ago and as former President Donald Trump has tried to position himself as the candidate most in favor of crypto in his bid for re-election. Republican politicians have tended to hold more crypto-friendly views, but the digital currency industry maintains that crypto is a nonpartisan issue. Last month, the House of Representatives passed a crypto infrastructure bill ( FIT 21, or the Financial Innovation and Technology for the 21st Century Act ) in bipartisand vote, 279-136. Many hailed it as a landmark victory and as evidence of the rising importance and growing understanding of crypto in Washington. If President Biden wins a second term with a Republican Senate, a bipartisan crypto market structure bill is likely next year or in 2026, "with a focus on investor protections for tokens that are not commodities," according to Seiberg, a financial services and housing policy analyst for TD Cowen's Washington Research Group. "We view this as an incremental positive for crypto despite Team Biden's at times hostile views," he said. "On the downside, it likely means that SEC Chair Gary Gensler at least stays into 2026." Gensler has become an adversary to the crypto industry, which has long been frustrated with the refusal of the Securities and Exchange Commission, under his leadership, to provide clear guidance for U.S. crypto businesses – choosing instead to regulate by enforcement, the industry says. Meanwhile, if Trump sustains his new brand as a "crypto booster," Seiberg said, that would suggest "that he will back the bipartisan crypto market structure bill and will name regulators who will focus more on guidance and less on enforcement." —CNBC's Michael Bloom contributed reporting.