Democratic divisions emerge as Congress tackles crypto regulation

NBC News

4 hours ago

Democrats are wrestling with their strategy on cryptocurrency, a once underground industry that has become a powerful player on Capitol Hill — and closely associated with President Donald Trump.
Cryptocurrency groups scored a major win in Washington on Tuesday, with the Senate passing a landmark bill to regulate some digital assets. It was a bipartisan vote, with 18 Democrats joining nearly every Republican to support the bill following an intense lobbying and advocacy effort.
But the battle over the legislation has exposed deep Democratic divisions over how to handle the broader issue of crypto in a GOP-controlled Washington. While some Democrats have pushed for the party to be leading the charge on developing policy for the quickly emerging industry, others have been wary of embracing a tool that they say has created conflicts of interest for Trump. Newly released financial disclosures show Trump made one of his largest fortunes last year, $57.3 million, on his family's cryptocurrency company World Liberty Financial.
Progressive Sen. Elizabeth Warren of Massachusetts, the top Democrat on the Senate Banking committee, said the GENIUS Act — the bill the Senate passed that would establish the first regulatory framework for issuers of stablecoins, digital tokens pegged to fiat currencies like the U.S. dollar — would create a 'superhighway' for corruption in the Trump White House.
Warren also lamented to NBC News that the crypto industry is 'pouring money in to try to influence votes here in Congress.'
But other Democrats see this is a rare chance for Congress to get ahead of an issue, arguing they can't afford to wait until they win back power in Washington to act — especially with how quickly technology moves.
'I think every politician will say this. It's the same thing about any industry that they don't like or understand,' Sen. Ruben Gallego, D-Ariz., who supports the GENIUS Act, told NBC news in an interview.
Democrats clash over crypto behind closed doors
The GENIUS Act now heads to the House, where the Democratic divide over cryptocurrency — which can often fall along generational lines — came to a head during a private meeting last week attended by House Minority Leader Hakeem Jeffries, D-N.Y., other Democratic leaders and committee ranking members, according to three sources who were in the room and a fourth source who was briefed on the meeting.
Rep. Angie Craig, D-Minn., who is running for the Senate, expressed her support for the industry and a recent bipartisan bill called the Clarity Act, which would provide a regulatory framework for digital assets, according to three of the sources.
The 53-year-old Craig serves in the House Agriculture Committee as the top Democrat, and 86-year-old Rep. Maxine Waters, D-Calif., is the ranking member in the Financial Services Committee. Waters opposes the legislation and instead wants to bar Trump from benefiting from the digital assets Congress could legitimize.
Waters expressed those concerns in the Wednesday meeting, three of the sources said. Other members agreed, including Rep. Jim Himes, D-Conn., the ranking member of the House Intelligence Committee.
Both Himes and Waters stressed a need for greater insider trading protections in the bill, the three sources said. The lawmakers said Democrats should not enable Trump to get wealthy off of unfettered access to the industry he wants Congress to regulate.
Craig argued Trump was already bound by existing laws, one of the sources said. Waters began talking over Craig, who told the room that she was in the middle of speaking, leading to a heated discussion, the source said.
As this episode was unfolding, Rep. Bobby Scott, D-Va., suggested that perhaps Democrats should act to ban the industry altogether, two sources added — an example of just how wildly far apart some Democrats are on the issue.
Jeffries moved to table the discussion for another time, the three sources said. After the meeting, both Waters and a Craig spokespersons declined to comment, saying the meeting was private. Jeffries' office also declined to comment on a private meeting. A spokesperson for Scott did not respond to a request for comment.
Craig, whose re-election campaign received a big boost from groups associated with the industry last year, has backed a check on Trump. During the Agriculture Committee markup on the Clarity Act, Rep. Eugene Vindman, D-Va., offered an amendment targeting entities that hold meme-based assets associated with the president, vice president or other public officials. All 24 Democrats on the panel, including Craig, backed the amendment; Republicans successfully voted it down.
Crypto groups spent big bucks on the last election
Looming over the Democratic debate is the fact that groups associated with the crypto industry were heavily involved in the last election.
Fairshake, a crypto-focused super PAC that formed in 2023, spent $195 million in the 2024 elections. And the group already has $116 million in cash on hand for the 2026 midterm election cycle, according to the group's spokesperson, Josh Vlasto.
'We are keeping our foot on the gas and all options are on the table,' Vlasto told NBC News.
Crypto groups supported candidates from both parties in 2024, but they also spent $40 million to oppose then-Sen. Sherrod Brown, D-Ohio, who was ultimately defeated by Republican Bernie Moreno. That race is still lingering in the air among Democrats who fear that kind of cash being used against them.
The cryptocurrency industry has also dialed up its lobbying and grassroots advocacy efforts in recent years.
Stand With Crypto, an advocacy group, launched a campaign around the passage of the GENIUS Act encouraging people to call or email their senators in support of the bill. The effort resulted in 75,000 emails being sent to members, according to the organization.
The group also organized so-called fly-in meetings ahead of key votes on the bill in order to link members with constituents who utilize crypto.
Stand With Crypto has not made any election endorsements, but it is leaving itself the room to do so in the future. In the meantime, the group created a 'scorecard' that tracks how members fare on key votes and has been arguing to lawmakers that an increasing number of voters care about crypto.
'For these folks that are afraid of [crypto] people donating money, that's not really what we do. But what they should be concerned about is our voters voting differently, because these votes are up for grabs,' Mason Lynaugh, community director for Stand With Crypto, told NBC News. 'A lot of these people were not civically engaged before, and I don't know if the genie's going back in the bottle.'
Even though Democrats are far from united on the topic, the industry has made some key allies in the party.
'We are here to legislate, and again, to try to bring into compliance an economy that is largely outside the United States is uncontrollable at this point,' Gallego said. 'I think it's the responsibility of us as Congress to put down the rules of the road.'
Sen. Raphael Warnock, D-Ga., who also supports the GENIUS Act, said he voted for the bill because many of his constituents already use crypto.
'We're already using these products. And so from a public policy point of view, one of the questions for me, is, what will leave the consumers in a better place? So we clearly need some kind of regulatory structure,' Warnock told NBC news.
Asked if the industry is pumping too much money into elections, Warnock replied: 'I think there's too much money in our system whether you're talking about oil and gas or the gun industry, it's a serious democracy problem.'