Grayscale says U.S. midterms will not halt crypto as most activity is abroad

Grayscale says crypto growth does not depend on Washington

Grayscale said the U.S. midterm election results will not stop crypto from growing. The firm pointed to demand outside the United States and wider use by large financial firms.

Democrats won control of the House and the Senate in the midterms, according to the source. The report says that could make it harder to pass President Donald Trump's crypto plans in Congress.

The numbers behind Grayscale's view

• Grayscale estimates that 80% to 85% of global crypto activity takes place outside the U.S.
• The estimate uses 14 measures, including trading volume, mining and ownership, and gives an average U.S. share of 19% and a median of 16%.
• Some measures cover North America rather than the United States alone, and Grayscale calls the calculation illustrative.
• Grayscale cited growing use of dollar-pegged stablecoins, meaning digital tokens tied to the value of the U.S. dollar, in South America and Southeast Asia.

What Grayscale's research head said

Zach Pandl, Grayscale's head of research, wrote in an Oct. 28 research note that crypto is bipartisan, global and increasingly institutional. The source says he argued the industry will keep moving forward whatever the midterm result.

Pandl also described the GENIUS Act, a U.S. stablecoin law, as a step forward. He said wider regulatory clarity and institutional adoption rest on deeper foundations than one Congress.

He pointed to stablecoin services from Visa, Mastercard, Fiserv and Stripe, and tokenized investment funds from BlackRock, Franklin Templeton and JPMorgan, as signs that digital assets are becoming more part of mainstream finance. Tokenized means a traditional asset is represented as a digital token.

Pandl cited a February 2024 Pew Research Center survey in which 18% of Republicans and Republican-leaning independents had invested in, traded or used crypto, compared with 17% of Democrats and Democratic-leaning independents.

BlackRock played down any impact on its business

BlackRock also said the election is unlikely to affect its crypto work. Robert Mitchnick, the firm's head of digital assets, spoke at the ETF Investor Forum in New York. An ETF is a fund traded on an exchange that can hold assets such as bitcoin.

Mitchnick said bitcoin and ether, the second-largest crypto asset, already have much of the regulatory clarity needed for investment products. He said broader crypto legislation is still stalled in Congress.

The source noted that his comments came before the election results were known.

The CLARITY Act faces a tougher path in Congress

The main market-structure bill, the CLARITY Act, is meant to set federal rules for digital assets. The bill failed to advance in September in a 49-50 Senate vote, even when Republicans controlled both chambers.

With Democrats set to take control in January, some industry executives believe the bill has little chance of passing in its current form. Disputes over stablecoin rewards, consumer protections and President Trump's crypto interests remain obstacles, according to the source.

The source also says more than 70 House Democrats previously supported the legislation, and others see room for a revised bipartisan deal.

What remains uncertain

There is still no agreement on whether a revised bill can pass. Grayscale's view that global and institutional demand will sustain crypto is an opinion, not a confirmed result.

Where this report comes from

• CoinDesk