Democrats and Republicans are collaborating on significant matters, including crypto, China, and stocks.

• Despite the division between voters and Washington, Democrats and Republicans in Congress have found common ground on several issues, including crypto, China, lawmakers' stock trading, and others.
• As they campaign for the midterm elections, Democrats and Republicans may find themselves supporting similar legislation.
• Both Democrats and Republicans face risks when pursuing bipartisanship. Democrats may lose the support of their liberal base, while Republicans could face backlash from former President Trump and his supporters.

Despite the sharp division between Washington and the American electorate along partisan lines, there are some areas where Republicans and Democrats in Congress can find common ground.

Both Democratic Senators Elizabeth Warren and Cynthia Lummis believe that Congress should take a more active role in regulating cryptocurrency. House Speaker Nancy Pelosi, a Democrat, and her Republican counterpart, Kevin McCarthy, agree that stock-trading rules for members of Congress should be tightened. Almost all lawmakers in Congress agree that steps need to be taken to strengthen the United States' competitiveness with China.

This year, during the midterm elections, Democrats and Republicans may agree on legislation in three specific areas: a China-U.S. business bill, regulations on cryptocurrency, and revisions to the Electoral Count Act of 1887.

Despite disagreements, Democrats and Republicans reached a compromise in November on a $1 trillion infrastructure bill, which will allocate hundreds of billions into roads, bridges, and broadband across the country over the next several years.

But such bipartisanship carries risks for both sides.

Despite holding narrow majorities in Congress, Democrats face an uphill battle this year due to President Joe Biden's declining polling numbers, the historical tendency for the president's party to lose seats in a first-term midterm campaign, and the possibility of alienating their liberal base by making concessions to Republicans.

If Republicans on the other side of the aisle strike deals with Democrats, it could lead to problems for them in the primaries with former President Donald Trump, who has a history of attacking GOP members he deems disloyal, such as former ally and ex-Vice President Mike Pence, Senate Minority Leader Mitch McConnell of Kentucky, and Republicans who supported the infrastructure bill.

Whether the two parties can agree on any of these initiatives depends on minute details.

Stock-trading clampdown

An increasing number of Democrats and Republicans are advocating for laws prohibiting members of Congress from engaging in stock trades.

In 2020, several lawmakers, both Republican and Democrat, faced criticism for their financial transactions during the early stages of the Covid-19 pandemic. Following a briefing from federal health officials on the virus and its potential impact, there were concerns about whether the lawmakers' subsequent stock trades were influenced by this information.

Democratic leaders in the House are pushing for stricter rules on lawmakers' stock trading, with Pelosi recently approving a plan to draft legislation at the Committee on House Administration. This shift in stance from Pelosi represents a pivot, as she has previously viewed such restrictions as unnecessary.

It is unclear whether Pelosi supports stricter rules for spousal trading, as her husband Paul Pelosi is an investment manager who frequently reports large transactions worth hundreds of thousands to millions of dollars.

During her weekly press conference on Wednesday morning, Pelosi did not reveal whether she supports stricter regulations on spouses. However, she stated that she would like to see harsher penalties for those who violate the STOCK Act, a 2012 law that prohibits members of Congress from trading based on nonpublic information for personal gain.

If tightening fines on STOCK Act violators is not enough to deter behavior, then we will have to consider other measures," she said. "It's a confidence issue. And if that's what the members want to do, then that's what we will do.

Several senators, including Warren and Daines, are working on versions of a stock-trading ban. Some of the bills proposed so far, such as the one backed by Ossoff and Kelly, would require incoming members of Congress to place their stock portfolios in a traditional blind trust.

Daines stated on CNBC on Wednesday that as an elected official, it is crucial to serve the people rather than the elite. He believes that a stock trading ban is a significant step towards restoring the faith and trust of the American people in the institution.

In recent weeks, McCarthy, the House minority leader, and other top Republican lawmakers have discussed with donors potential campaign strategies centered on restricting lawmakers' equity ownership.

Competition with China

The most conservative Republican and the most liberal Democrat share a common concern: a deep skepticism of China and a desire to maintain U.S. economic competitiveness.

According to a survey by Gallup, Americans' views on China are as cold as they've ever been, with 79% of Americans viewing Beijing as "very" or "mostly" unfavorable.

The Biden administration has retained many of the hardline economic and national security measures first imposed under Trump, but has traded his predecessor's openly bellicose language and tit-for-tat tariff exchanges for a more subtle strategy that seeks to check Beijing through global alliances and by reducing U.S. reliance on Chinese commerce.

The pending legislation to modernize U.S. semiconductor manufacturing and boost competitiveness with the communist superpower could be a significant bipartisan effort that reaches Biden's desk in 2022.

The U.S. Innovation and Competition Act, a $250 billion measure, was first passed by the Senate in June on a bipartisan basis. This bill was the result of input from various Senate committees and both Republicans and Democrats, with Majority Leader Chuck Schumer, D-N.Y., leading the way in guiding it through the chamber.

Sen. Ben Sasse, R-Neb., expressed his approval of the bill's objectives when it passed and stated that he wished for a more specific version of the legislation.

As a China hawk and a fiscal hawk, I would have preferred a more focused and aggressive approach to the China threat in this bill. However, it is a strong start. The Chinese Communist Party is intensely working on cyber, AI, and machine learning to become the world's dominant superpower.

After months of deliberation, the House passed its version of the bill, titled the America Competes Act, on Friday.

The House passed a bill with language to address racial disparities and inequalities, while the Senate did not include this language.

In early February, Michael Zezas, a policy strategist at Morgan Stanley, emphasized the need to strengthen the U.S. supply chain and decrease dependence on foreign sources through domestic manufacturing.

The conference committee, formed to reconcile the versions of two bills, will have to address differences such as the Senate Republicans' demand for bolder language against Beijing and removal of the Green Climate Fund contributions.

But Zezas remains optimistic that lawmakers will ultimately come to a compromise.

The US-China relationship among voters and policymakers has long been characterized by bipartisan skepticism, making it conducive for the enactment of a bill of this kind.

Blockchain buddies

Another potential area for bipartisan policy partnership is on cryptocurrency regulation.

Both Democrats and Republicans are eager to establish a framework for marketing digital assets, such as crypto investors, issuers, miners, and exchanges. The market is currently unregulated, with Gary Gensler, the Securities and Exchange Commission Chair, repeatedly urging lawmakers to pass legislation.

Could better guidelines and regulations help safeguard investors from the price fluctuations that have affected many digital assets, including bitcoin, which has lost more than 33% of its value in the past three months?

A major piece of legislation from Lummis, a Republican senator from Wyoming and a crypto-industry supporter, is expected to be introduced in the coming weeks. Although the specifics of the bill are not yet known, it is anticipated that it will incorporate input from various government agencies and address many of the uncertainties currently facing the industry.

Congress has been requested by the industry and regulators to provide guidance on the classification of assets, protections for retail investors, and the jurisdiction of the SEC, CFTC, and Federal Reserve.

Moderate Democrats may back the Lummis bill, but progressives like Warren may push for changes due to disagreements about the level of regulation and risk it poses to investors.

During a hearing on the Biden administration's report on stablecoins, Rep. Patrick McHenry, a North Carolina Republican, emphasized the bipartisan support for more legislation on digital assets.

We must act swiftly to establish a legal framework for digital assets, as nearly a quarter of American adults are now invested in crypto and there is currently no federal law addressing this issue.

Electoral Count Act

One of the most contentious matters currently confronting Congress is the question of whether, and if so, how, to amend the country's electoral laws.

In January, Senate Democrats were unable to pass a voting rights bill aimed at countering the wave of new ballot restrictions enacted by Republican state legislatures in response to the 2020 election and Trump's defeat. The majority had hoped to establish national standards for ballot access to weaken the new voting rules.

But one area of bipartisanship remains.

In the wake of the historic election two years ago, there is a push to tighten the rules around future contests as a bid to revise the Electoral Count Act of 1887.

Trump and his allies attempted to utilize ambiguous language in the law to reverse the election outcome and prevent Biden's victory. Specifically, the former president contends that then-Vice President Mike Pence could have acted independently on January 6, 2021, as the presiding officer of the joint session of Congress to reject states' electoral votes. Pence declined to do so, and a mob of Trump supporters stormed the Capitol, delaying Congress's certification of Biden's victory.

Pence stated that the idea that any one person could choose the American president is "un-American."

To prevent future conflicts, a bipartisan group of at least 15 senators are currently working on strengthening the language in the law.

The proposal would make it clear that the vice president has no authority to reject a state's electors, grant states more time to complete valid recounts, and increase the Congress's threshold for considering objections.

Currently, a valid objection only requires one lawmaker from each chamber.

According to Tom Block, a policy strategist at Fundstrat Global Advisors, it was astonishing to discover that just one Senator and one House member were enough to challenge a state's election results on January 6, 2021.

The former President Trump's confusion about the VP's role in electoral vote counting has added to the confusion, and there is broad bipartisan support for updating the 1887 Act.

Spending, spending, spending

The ongoing geopolitical tensions between the U.S. and Russia have prompted members of both parties to contemplate whether Congress should allocate more funds to the American military in the upcoming budget.

The government shutdown is being averted with a short-term bill, while Democrats and Republicans continue to discuss spending levels for the current fiscal year.

While the White House has proposed a 15.9% increase in nondefense spending for fiscal 2022, the armed forces budget only received a 1.7% bump.

The GOP has criticized the disparity in recent weeks as geopolitical tensions worsen between the U.S. and Russia over Ukraine. The Pentagon is requesting Congress to approve a deal that would provide it with more flexibility and capability to respond to evolving threats worldwide.

The biggest challenge to achieving a bipartisan agreement is finding a solution for funding the government budget for the rest of fiscal year 2022, according to Block. There is broad agreement that the US must adapt its military spending in response to shifting geopolitical forces, which will necessitate decisions beyond the fixed spending that is inherent in a continuing resolution.

An omnibus spending bill with new funding split between defense and nondefense is being discussed by the two sides, and it may be the largest bipartisan legislative achievement/requirement of the year, according to him.

— CNBC’s Michael Bloom contributed to this article.