U.S. House Speaker Drama Could Threaten to Unravel Crypto's 2023 Chances

• The top Republican candidate dropped out of the U.S. House of Representatives speaker race, leaving Republicans in turmoil and crypto legislation in uncertainty.
• As long as the role goes unfilled, House Financial Services Committee Chairman Patrick McHenry can't pay attention to crypto, because he was picked as acting speaker.

Republicans in the U.S. House of Representatives are sprinting toward the worst-case scenario in their scramble for a new speaker of the House, and their infighting could worsen the prospects for crypto legislation this year.

Conventionally, an obvious choice to promote into the speaker role is the majority leader, in this case Rep. Steve Scalise (R-La.). That's who narrowly got the party's nomination, but after less than two days of campaigning for the House's top job, he dropped out in frustration, unable to win over the handful of lawmakers whose resistance could tank his ability to get the 217 votes needed to take the job.

"We have to have everybody put their agendas on the side and focus on what this country needs," Scalise said when he withdrew, adding that some of the members need to look in the mirror and ask themselves what they want. "Are we going to get it back on track? Or they're going to try to pursue their own agenda?"

The next steps are murky as Republicans seek a new nominee, and that uncertainty could envelop digital assets legislation that House lawmakers and crypto lobbyists had hoped would see action in November. Two crypto-focused bills await action in the House: one to set up government guardrails for U.S.-issued stablecoins and the other to establish a wide-reaching system of regulations for crypto markets.

Scalise stepping back leaves Rep. Patrick McHenry (R-N.C.) in the speaker role on a temporary basis, which means he can't mind the store at the House Financial Services Committee, where he's chairman. That's the committee doing the House's heavy lifting on crypto legislation. Meanwhile, the extent of McHenry's powers as a stand-in speaker are unclear, but it's unlikely that pushing crypto legislation would be a top priority.

Since Scalise is staying in his current job, Rep. Tom Emmer (R-Minn.), one of crypto's biggest fans in Congress, won't get greater power by stepping into that majority leader role. This keeps him – at least for now – as majority whip, the No. 3 role in the House leadership, unless the search for a speaker eventually seeks him out.

The leading remaining candidate for speaker is Rep. Jim Jordan (R-Ohio), the chair of the House Judiciary Committee and the favorite of former President Donald Trump. But he's already failed to get the majority of Republicans to back him in their internal balloting to nominate a speaker this week.

Scalise dropping out "injected unneeded additional chaos into the race for House speaker and has members questioning if anyone can reach the magic number of 217," according to an analysis Friday from Beacon Policy Advisors in Washington.

Read More: House Mayhem May Push U.S. Crypto Action Later as Speaker, Budget Draw Focus