The intense battle between the two parties under the principle of separation leading to unification - Crypto's cycle in Washington.

Written by: Luke, Mars Finance

Introduction: A Divided Congress

In the Capitol Hall in Washington D.C., political theatrics often overshadow substantive policy, and a new battleground is emerging: cryptocurrency. On May 6, 2025, according to Politico, Maxine Waters, the chief Democrat on the House Financial Services Committee from California, plans to obstruct a joint hearing on cryptocurrency market structure legislation. Her reasoning? The Republican-pushed bill does not include provisions targeting the Trump family's crypto business, including their official meme coin $TRUMP and investments in decentralized finance (DeFi) projects. Since a joint hearing requires unanimous consent, Waters' actions could lead to the meeting's failure. She then plans to lead a faction of Democrats in holding a 'shadow hearing' focused on the Trump family's entanglements with the crypto industry.

This event is just a microcosm of the fierce battles sparked by cryptocurrency in American politics. From the soaring rise of Bitcoin to the high-profile entry of the Trump family, digital assets have become the focal point of the tug-of-war between the two parties, exposing the profound divisions between the Democrats and Republicans. This article will trace the evolution of the two parties' attitudes towards cryptocurrency, analyze relevant legislation, past consensus, current divergences, the motivations behind them, and the future development paths, striving to present this high-stakes political game with clear logic and vivid narration.

Act One: Initial Consensus (2017–2020)

In the late 2010s, cryptocurrency was still a niche topic in Washington. Bitcoin, as the progenitor of digital assets, was seen as a liberal experiment or, at most, a tool for illegal transactions. Both the Democratic and Republican parties held a cautiously curious attitude towards it, not yet feeling a legislative urgency. The two parties formed a loose consensus on the following points: protecting consumers, preventing fraud, ensuring financial stability, while not stifling innovation.

During this period, both parties began to explore the potential of blockchain. In 2018, the Congressional Blockchain Caucus, co-chaired by Congressman Jared Polis (Democrat from Colorado) and David Schweikert (Republican from Arizona), emerged, educating lawmakers through organized briefings. The caucus positioned blockchain as a bipartisan opportunity — Democrats saw its potential for transparent governance, while Republicans praised its spirit of free markets. Legislative proposals were relatively moderate, focusing on clarifying the tax treatment of cryptocurrency transactions and researching the application of blockchain in supply chains.

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have begun to delineate their responsibilities, with the SEC considering most tokens as securities based on the Howey Test, while the CFTC regulates crypto derivatives. Both parties agree that existing laws are sufficient to handle cryptocurrencies, and there is no need for comprehensive reform at this time. However, as the crypto market's scale has exploded—with Bitcoin surpassing $69,000 in November 2021—this fragile consensus has started to show cracks.

Act Two: The Emergence of Divisions and Factional Struggles (2021–2023)

By 2021, cryptocurrency was no longer a fringe topic. Ethereum's smart contracts, the explosive growth of DeFi, and the popularity of non-fungible tokens (NFTs) pushed digital assets into mainstream finance. The market's extreme volatility, along with scandals like the Bitconnect Ponzi scheme (involving $3.7 billion), spurred calls for regulation. The Democratic and Republican parties gradually diverged in their positions based on their respective ideologies and political considerations.

Democratic Party: Consumer Protection and Prudence

The Democratic Party, under the leadership of Senator Elizabeth Warren (Massachusetts) and Congresswoman Maxine Waters, tends to favor strict regulation. They believe that cryptocurrencies are speculative bubbles that can easily breed fraud, causing disproportionate harm to vulnerable investors. Warren has referred to cryptocurrencies as a "new form of shadow banking," criticizing their lack of transparency and money laundering risks. The Democrats are also concerned about the environmental impact of cryptocurrencies—Bitcoin mining is estimated to consume 127 terawatt-hours of electricity annually in 2022, comparable to some countries.

During her tenure as Chair of the House Financial Services Committee from 2021 to 2023, Waters advocated for strong consumer protection measures. In 2022, she co-sponsored the Digital Asset Anti-Money Laundering Act with Warren, which calls for the provisions of the Bank Secrecy Act to be extended to crypto exchanges and wallet providers. The bill reflects Democratic priorities: curbing illegal financial activities, protecting retail investors, and addressing the systemic risks that may arise from stablecoins (with a market size of $150 billion) if reserves are insufficient.

Republicans: Innovation Driven and Deregulation

The Republican Party views cryptocurrency as an engine of innovation and economic freedom. Senators Cynthia Lummis (Wyoming) and Patrick McHenry (North Carolina), among others, believe that overly strict regulations could push crypto centers overseas. They see blockchain as a tool to combat centralized finance, aligning with their skepticism towards big banks and government intervention. As a Bitcoin holder, Lummis co-sponsored the Responsible Financial Innovation Act with Senator Kirsten Gillibrand (New York Democrat) in 2022, attempting to define crypto assets and clarify the regulatory roles of the SEC and CFTC.

The Republican Party has also leveraged the political influence of the cryptocurrency industry. Lobbying groups such as the Blockchain Association and super PACs like Fairshake have raised over $200 million in 2024 to support pro-crypto candidates. This financial backing, combined with the appeal of cryptocurrencies to younger, liberal-leaning voters, has solidified the Republican Party's position.

Consensus gradually fades

Despite the existing differences, there are still signs of bipartisan cooperation from 2021 to 2023. Both sides agree on the need to clarify the boundaries between securities and commodities in the crypto market, a gray area that has led to legal disputes such as the SEC's lawsuit against Ripple Labs. Although the Lummis-Gillibrand bill did not pass, it reflects a shared desire to seek a balance between innovation and regulation. However, as cryptocurrencies become cultural and economic hotspots, political posturing has gradually eroded this middle ground.

Act Three: The Trump Effect and Partisan Battles (2023–2025)

Trump's involvement has completely changed the landscape of cryptocurrency discussions. He once called Bitcoin a "scam" in 2021, but by 2024, he made a 180-degree turn, promising to make America the "global crypto capital." The Trump family's crypto ventures - the $TRUMP meme coin launched on January 17, 2025, and DeFi projects like World Liberty Financial - have pushed cryptocurrency to the center of partisan struggles.

Republican Offensive: Market Structure Bill

The Republican Party, buoyed by Trump's victory and control of Congress in 2024, is pushing for a comprehensive cryptocurrency regulatory framework. At the core is the 2025 "Cryptocurrency Market Structure Act," which aims to allocate regulatory responsibilities to agencies like the SEC and CFTC, clarifying which tokens are considered securities or commodities. Led by Congressman French Hill (Arkansas), the bill emphasizes market neutrality, with Congressman Bryan Steil (Wisconsin) insisting on "uniform requirements" for all issuers.

Proponents of the bill believe it will promote innovation, attract investment, and maintain the competitiveness of the United States against crypto hubs like Singapore and Dubai. Coinbase's Chief Policy Officer Faryar Shirzad referred to the 119th Congress as the "most crypto-friendly Congress," expecting that under Trump's leadership, crypto-friendly legislation will be easier to pass. The Republican Party also highlighted the executive order signed by Trump on March 6, 2025, establishing a strategic Bitcoin reserve, emphasizing the national importance of cryptocurrency.

Democratic Party Blockade: Conflict of Interest

Led by Waters, the Democrats seized on the Trump family's crypto business to make a big deal out of it. Waters warned that $TRUMP could pose "national security risks" due to anonymous transactions, a viewpoint that will be further amplified at the shadow hearing on May 6, 2025. The Democrats believe the Republican bill overlooks conflicts of interest, given that Trump reportedly profits $1 billion in the crypto space. They are calling for the inclusion of provisions targeting the Trump family's business, accusing the Republicans of legislating to protect their allies.

This stance reflects the broader concerns of the Democratic Party: the volatility of cryptocurrencies, the potential for regulatory arbitrage, and their connections to political insider dealings. Waters' strategy to obstruct the joint hearing aims to delay the Republican-led bill until ethical issues are resolved. The shadow hearing focuses on $TRUMP and World Liberty Financial, intending to shape cryptocurrencies as tools for personal gain rather than vehicles for public interest.

Controversial bill

The following bills highlight the tug-of-war between the two parties:

"Cryptocurrency Market Structure Act" (2025): A Republican-led proposal aimed at simplifying crypto regulation, stalled due to Waters' opposition. The bill seeks to clarify regulatory authority and reduce legal ambiguity.

"Anti-Money Laundering Act for Digital Assets" (2022, reintroduced in 2024): A Democratic proposal aimed at addressing the use of cryptocurrency in illicit finance, supported within the Democratic Party but stalled due to Republican concerns of excessive intervention.

The "Responsible Financial Innovation Act" (2022, reintroduced in 2024): A bipartisan effort by Lummis and Gillibrand, remains a potential compromise solution, but has made little progress due to partisan disputes.

Act Four: Sources of Discrepancy - Intentions and Motivations

The divide between the two parties is not just a policy dispute, but also a game of power, voters, and money. The Republican Party sees cryptocurrency as a wedge to attract young, tech-savvy voters and wealthy donors. The crypto industry has invested over $200 million in the 2024 elections, mostly supporting the Republican Party, highlighting this alliance. Trump's shift towards cryptocurrency was initially an electoral strategy, and now it ties the Republican Party to an industry committed to economic disruption and deregulation.

The Democratic Party examines cryptocurrency from the perspective of fairness and accountability. Its voter base—urban, progressive, and skeptical of unbridled capitalism—demands safeguards against fraud and speculative bubbles. By targeting Trump's cryptocurrency dealings, the Democrats aim to expose Republican hypocrisy and mobilize voters around the theme of anti-corruption. Waters' shadow hearing serves both as a policy critique and a political performance, intended to put the Republicans on the defensive.

However, there are also contradictions within the two parties. Some Democrats, such as Senator Chuck Schumer (New York), advocate for looser regulations to avoid alienating pro-crypto donors. Moderate Republicans are concerned that tying the party to Trump's volatile projects could lead to political backlash if World Liberty Financial (which has only raised $14 million, far below its $300 million target) collapses.

Act Five: The Future - Will those who come together eventually part, and those who part eventually come together?

The debate over cryptocurrency confirms an ancient saying: "What has been divided for a long time must unite, and what has been united for a long time must divide." The early two-party curiosity evolved into partisan strife due to the rising economic and political significance of cryptocurrency. However, the current division is not permanent—economic realities and voter demands may drive convergence.

Short-term Outlook (2025–2026)

Waters' obstruction may delay the market structure bill, but the Republican control of Congress and the White House gives it an advantage in pushing for crypto-friendly policies. Trump's Bitcoin reserve plan and the promise to ease SEC regulations signal a wave of deregulation. However, the Democrats' shadow hearings and investigations into Trump's crypto business could maintain a partisan deadlock, especially if scandals arise. Compromise measures, such as restarting the Loomis-Gillibrand.

Long-term trend (2027–2030)

Cryptocurrency integration into the financial system—Bitcoin surpassing $100,000 and Ethereum ETF approval—makes regulation inevitable. Both parties will face pressure to provide a clear framework for institutional adoption. Global competition, with countries like El Salvador and the UAE embracing cryptocurrency, may force the U.S. to unify its stance to avoid losing market share. The two parties may reach a framework that combines Republican innovation with Democratic consumer protection, but this will likely occur after the election posturing subsides. The maturation of blockchain technology, such as zero-knowledge proofs or Layer-2 scaling solutions, could further reshape regulatory demands, prompting both parties to reassess their positions.

Uncertainty factors

Market Crash: If an event similar to the 2022 Terra-LUNA collapse occurs, it may prove the correctness of the Democratic Party's cautious stance and lead to stricter regulations.

Trump's Influence: If $TRUMP or World Liberty Financial fails, the Republican Party may distance itself from cryptocurrencies to avoid political repercussions, weakening its pro-crypto stance.

Technological Change: Breakthroughs in blockchain privacy or interoperability may trigger new regulatory challenges, forcing both parties to seek a new consensus.

Voter pressure: Support for cryptocurrency among young voters may push both parties towards the center to vie for votes.

Epilogue: The Clash of Two Visions

The legend of cryptocurrency is a microcosm of American politics – a collision between idealism and pragmatism, a contest between innovation and caution. The Republican Party dreams of creating a deregulated crypto utopia, positioning the U.S. as the "global Bitcoin superpower." The Democratic Party, on the other hand, is wary of unbridled power, seeking to establish safeguards for vulnerable groups. Both visions have their merits, but their conflict hinders progress.

As Bitcoin soars and the $TRUMP meme sweeps the internet, the significance of cryptocurrency has transcended partisanship. It is not just about money, but about redefining trust, sovereignty, and the future of finance. Unity will emerge from division, and division will follow from unity—whether Washington can rise above partisan disputes to harness this potential, or continue to fracture under political pressure, depends on whether leaders can move beyond short-term games and focus on the long term. As the ancient saying goes, today’s division may nurture tomorrow’s unity. Currently, the curtain is high, and the plot is still unfolding.