The criminal question in the coming wave of pro-crypto legislation

A number of pro-cryptocurrency bills are expected to be enacted by Congress and the Trump administration as the levers of power in Washington DC are about to change hands. So far, there has been less focus on the cybersecurity aspects of political efforts, which could be problematic for cryptocurrencies in relation to their popularity among a cautious American public.

Cryptocurrency has Bitcoin but Ethereum, dogecoinIt has gained enthusiastic support among American adults. According to Pew Research Center, 17% of American adults have made a crypto transaction, but the market share of U.S. wallets has remained largely unchanged since 2021. According to a public opinion poll A Pew poll conducted just before the election found that 63% of adults have little confidence in investing or trading in cryptocurrencies, nor do they believe they are trustworthy or safe.

The incoming Trump administration has touted the authenticity of cryptocurrencies, focusing on the industry rather than consumers.

Dusty Johnson (R-South Dakota), co-author of “Financial Innovation and Technology in the 21st Century,” said, “The most important priority for the industry is to ensure that the regulatory framework is in place to do business.” ” he said. An Act Addressing the Treatment of Digital Assets Under U.S. Law (FIT21). The legislation passed the House with bipartisan support but has not been considered in the Senate.

FIT21 includes specific cryptographic cybersecurity provisions, which Johnson predicts the new administration will build on.

House Agriculture Committee Chairman Glenn “GT” Thompson (R-Pennsylvania), co-author of FIT21, said the bill’s cybersecurity provisions remain key for the next administration.

“FIT21 requires significant cybersecurity safeguards from financial intermediaries involved in digital assets,” Thompson said in a statement to CNBC, “to protect both the services and services provided by regulated entities.” It added that FIT21 contains clear provisions to ensure that measures are taken to assess and mitigate cyber vulnerabilities. Assets held on behalf of customers.

“These cybersecurity requirements are critical to protecting digital asset markets and market participants,” Thompson said.

But some experts doubt the bill will take similar security measures, given that crypto advocates have been closely advising the Trump administration.

“HR is policy,” says Jeff Lee, Vice President of Global Government Affairs and Public Policy at Security Scorecard and former Deputy Cabinet Secretary in the California Governor’s Office. The leaders of the incoming economic team, which will consist of SEC Chairman-designate Paul Atkins, Commerce Secretary Howard Lutnick, and Treasury Secretary-designate Scott Bessent, say they have a strong track record of supporting cryptocurrencies. Yes,” Lee said.

Among other key positions in his second administration, President-elect Trump has appointed venture capital investor David Sachs as the “czar” of AI and cryptocurrencies.

The role of the virtual currency industry in political realignment

The crypto industry made large donations in the 2024 election cycle, but the donations were not limited to Republicans, but were broadly focused on members of Congress with industry-friendly views on crypto regulation. Perhaps it will continue to influence political calculations. The pro-crypto, nonpartisan super PAC Fairshake and its affiliates have already raised more than $100 million for the 2026 midterm elections, including Coinbase and Coinbase’s early backers. It also includes funding from Andreessen Horowitz, a Silicon Valley venture fund. A top Andreessen Horowitz executive has been selected for a role in the Trump administration.

“We have the most pro-crypto Congress ever [in] “We’re going to have one of the most pro-cryptocurrency presidents in history,” Faryal Shirzad, Coinbase’s chief policy officer, recently told CNBC.

“It’s unusual for crypto advocates to advocate for stronger regulation in this space, for any reason,” said Jason Baker, senior threat intelligence consultant at GuidePoint Security.

Baker said that the anonymity and independence of cryptocurrencies are often cited as key benefits that are suppressed by law, and that the decentralized nature of cryptocurrencies makes them difficult to regulate in the traditional sense.

“Given the current signals from the incoming administration and the interests of crypto advocates who have influence in the administration, we do not expect significant progress in crypto regulation over the next four years,” Baker said.

He said the correlation between pro-cryptocurrency Washington, D.C., and investors’ bullish bets on digital assets will have a clear negative impact on cybersecurity without more regulatory action.

“Cybercrime is often driven by profits from the rise in the value of cryptocurrencies. For example, in ransomware, ransoms are usually demanded in US dollars, but payments are most often made in Bitcoin. “If the value of Bitcoin increases, cybercriminals will benefit,” Baker said.

Baker said, “A lack of emphasis on virtual currency regulation in the future means that cybercriminal activity using Bitcoin remains viable and may result in government disruption of operators in this space.” “This could positively indicate that there is a low level of

Baker added that cybercriminals are also changing tactics to evade regulations and oversight, switching to low-profile cryptocurrencies like Monero.

Potential role of ransomware in Congressional activities

Baker believes that regulation around organizations issuing crypto payments, whether in the form of ransom payments or for other purposes, is achievable and potentially favorable in the current regulatory environment. is predicted to be high.

“This could include, for example, stronger reporting requirements when ransom payments are made, a policy that has not gained much traction in recent years.” Baker said. It can be argued that this approach regulates end users and purposes rather than the underlying cryptocurrency itself.

In addition to ransomware payments to regain access to technology systems, there are other reasons why cryptocurrency payments are common in digital extortion schemes. This includes, among other things, to protect the identity of criminals and operational security. Private organizations may also choose to use cryptocurrencies to purchase leaked data and credentials made available in illegal forums.

There may also be situations where individuals, voluntarily or coerced, report discovered vulnerabilities under “bug bounty” programs and seek to receive compensation for doing so (so-called “beggar bounties”). . They may require payment in cryptocurrencies due to personal preference or a general desire for privacy, and private organizations may or may not comply.

“There are definitely other options for organizations to use cryptocurrencies in some form, but these are the main forms we see on a regular or more frequent basis,” Baker said. “However, such actions would almost certainly have a downstream impact on the value of cryptocurrencies due to the impact on trading volumes,” Baker added.

Steve McNew, global leader of blockchain and digital assets at FTI Consulting, said cyber-cryptocurrency legislation could be enacted that would specifically restrict ransomware victims from paying attackers in cryptocurrencies. I think it’s sexual.

“It’s not just public policy that’s at stake,” McNew said. If a company is compromised in a cyberattack and is required to disclose the ransom it paid, it could become a bigger target for other criminal enterprises in the future, McNew said. Disclosing where the funds went and what cryptocurrencies were used to make the payments may make sense on the one hand, but doing so may expose the company (and by extension its customers, employees, and partners) to It may cause damage.

“Policy decisions regarding the disclosure of cryptocurrencies in this context therefore require balancing the need for transparency regarding the use of cryptocurrencies in criminal cases with the risks that such transparency may exacerbate. “There is,” McNew said.

Although FIT21 passed the House with broad bipartisan support, it did not specifically address these issues.

Le is hoping for some legislative action to try to address this issue. “The next Congress could see more momentum for bills such as the Virtual Currency Cybersecurity Information Sharing Act of 2022, which would allow companies to share information about cybersecurity threats with the federal government and with each other. ” he said.

Lee said Congress will also look to the efforts of outgoing Financial Services Chairman Patrick McHenry (R-North Carolina) and Rep. Brittany Pettersen (D-Colorado) to “strengthen the nation’s resilience.” He said he may reconsider the Ransomware and Financial Stability Act of 2024. US financial system against ransomware attacks. Establish clear protocols for ransom payments to ensure payments involving cryptocurrencies. within a controlled and law-compliant framework. ”

But he added that it is unclear whether the Trump administration will continue the Biden administration’s leadership role in the Global Anti-Ransomware Initiative, a 68-nation coalition aimed at blocking ransomware payments.

The broader Bitcoin governance battle

McNew notes that many fundamental parameters surrounding cryptocurrencies, right down to their definition, could impede technological innovation and even aspects of legislation intended to foster industry adoption. .

“U.S. lawmakers have work to do to determine the roles, responsibilities, and fundamental parameters of how the industry will be governed before meaningful legislation can be enacted,” McNew said. said. As an example, establishing a designated authority for digital assets is an imperative that has not yet been addressed.

The basic governance structure has been a major sticking point for the Biden administration and a key reason why Securities and Exchange Commission Chairman Gary Gensler has been a thorn in the crypto industry’s side.

“Lawmakers must decide whether responsibility falls to the SEC, CFTC, or other agencies. Issues regarding taxation of digital asset markets and the definition of broker-dealers will also be defined, and the We need to be provided with a clear set of rules,” McNew said, adding that it may be difficult to forge a consensus in the next Congress given how closely divided the House is. .