The future of digital assets, or ‘crypto,’ has never been so bright. With the latest change in government within the United States, various positive developments look to have added enough fuel for another leg up in an already impressive bull market, which saw Bitcoin (BTC) finally cross the $100,000 mark.
From regulatory reforms to innovative financial strategies, the following is a look at a few of these changes to pave the way for increased adoption, institutional involvement, and mainstream acceptance.
1. SAB 121 Revoked: Banks Can Now Custody Digital Assets
The Staff Accounting Bulletin 121 (SAB 121), which prevented banks from custodying cryptocurrencies, has been officially rescinded. It was long seen as controversial due to market enthusiasts viewing it as the government trying to stifle the industry.
While this may sound relatively trivial, this change has the potential for massive implications. The restrictions previously imposed by SAB 121 placed large burdens on banks due to capital requirements, which mostly discouraged market participation.
Notably, the overturning of SAB 121 received bipartisan support. This highlights a growing recognition and acceptance of crypto’s importance in the modern financial landscape. Now that it has been lifted, true bridges between traditional finance and the crypto industry can finally be built in earnest—something needed for mainstream adoption beyond enthusiasts and the tech-savvy.
This development is of note because it provides institutional investors with a regulated avenue for managing and storing cryptocurrencies through entities they’ve already established trust with over time. It is no secret that banks already have established infrastructure and experience in safeguarding assets. Now, they can leverage and extend this experience and know-how to digital assets.
As banks roll out their custody solutions, expect a gradual but steady increase in institutional participation in the market. This will undoubtedly lead to greater perceived legitimacy and accessibility of digital assets among those who remain hesitant to become market participants. It should attract new retail and institutional participants, driving demand and ultimately solidifying cryptocurrencies as a recognized asset class within the traditional financial system.
2. SEC Pivots and Chokepoint 2.0 Fizzles Out
Under the Biden administration, there was unprecedented animosity between the SEC and the crypto industry that even saw actions by the regulator called into question in court, in addition to it losing multiple cases. This, however, is expected to quickly change as the SEC’s stance appears to have already undergone a marked shift, moving away from its previously more adversarial posture. Only time will tell if this is true, and approaching the industry with regulation through enforcement has ended.
For now, we’ve already seen a change in leadership with Mark T. Uyeda assuming the role of Acting Chairman of the SEC. Notably, Uyeda has commented in the past on how the agency has fumbled to handle cryptocurrencies effectively with its past approaches and believes it needs to adapt.
Along with the cessation of chokepoint 2.0, a new ‘Crypto Task Force‘ has already been established, with Commissioner Hester Peirce at the helm. Its goal is to ‘…help the Commission draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously.‘
Together, these changes mark a departure from previous approaches, signaling a more collaborative relationship with the industry. With Hester ‘Crypto Mom’ Peirce leading the new crypto task force, these changes are expected to open the floodgates for capital inflows and encourage the development of blockchain solutions as clarity is finally afforded to the industry.
3. A Comprehensive Presidential Executive Order on Digital Assets
Not wasting any time, President Trump officially signed a multifaceted Executive Order (EO) on cryptocurrencies only days into his second tenure.
First, and perhaps most importantly, this EO definitively states that the United States will not be issuing a central bank digital currency (CBDC) in the foreseeable future. This removes a potential competitor to decentralized cryptocurrencies like Bitcoin, reaffirming their unique value proposition. While the idea of a CBDC has been floated for years, it is widely viewed as simply another tool for increased government surveillance and financial control. Simply put, a CBDC stands in contrast to the core principles that Bitcoin is built upon. By nixing the potential for a CBDC, the Executive Order essentially acknowledges the importance of these:
- Privacy
- Decentralization
- Censorship-resistance
- Fixed emissions schedule
- etc.,
However, this decision may not be beneficial to all cryptocurrencies. For example, projects like XRP could face challenges. Ripple, the company primarily responsible for XRP, has seen its founders publicly campaign against Bitcoin on social media in the past, targeting the network’s environmental impact. Ripple has also firmly aligned itself with the development of CBDC technology, even running trials with nations like Montenegro — an area now effectively sidelined by the Executive Order. Furthermore, Ripple leaders’ public support and donations for the losing party in the last election could further complicate its position under a potential future administration, given the shifting political dynamics surrounding crypto.
Then, there is the creation of the ‘President’s Working Group on Digital Asset Markets, ‘ which has been tasked by the EO to evaluate the potential for a national digital asset stockpile. Given 180 days to generate a game plan, this move is widely expected to kick off game theory worldwide as rival governments work not to be left behind. If a stockpile comes to fruition, it has the potential to sizeably skew the demand-to-supply ratio of BTC on the market, pushing prices to previously unseen levels, depending on the method of acquirement.
4. Strategic Bitcoin Reserves at a State Level
While a strategic Bitcoin reserve (SBR) at the Federal level may have garnered the bulk of the public attention until now, it is important to not underestimate the impact that could be felt on a State Level. As it stands, there are already various U.S. states exploring the potential of establishing such a reserve, reflecting a growing recognition of their value as a hedge against inflation and economic instability.
This state-level adoption is not just a minor trend; it carries significant weight, especially considering the economic power of Bitcoin-friendly states like Texas. For example, if Texas were an independent country, its economy would rival many major nations, making its actions in the Bitcoin space globally relevant. The fact that such economically powerful entities are considering Bitcoin reserves further underscores its legitimacy as a store of value.
The discussions and debates surrounding these initiatives are actively happening now. As it stands, the following are some of the key states with lawmakers that have already begun down this path:
- Texas: A leader in Bitcoin advocacy, Texas has introduced multiple bills related to Bitcoin adoption and the establishment of state-backed reserves.
- Wyoming: Known for its crypto-friendly policies, Wyoming has considered legislation to create a digital asset reserve, further solidifying its position as a blockchain pioneer.
- Oklahoma: Proposed legislation in Oklahoma examines the potential for the state treasurer to allocate a portion of state funds into Bitcoin or other digital assets.
- Massachusetts: Massachusetts has explored measures to enable the state to hold Bitcoin and other cryptocurrencies in its reserves.
This trend is not limited to these states; others like Pennsylvania, Ohio, and North Dakota are also exploring similar measures. State-level adoption of Bitcoin could set a precedent for governments worldwide to integrate digital assets into their financial strategies.
5. ETF Applications
With all of the above changes, there has been a surge in crypto-based ETF applications. While amazingly successful BTC and ETH variants already exist, the group of applications is intriguing, as it is populated with many controversial networks.
Among the current group of applications, Litecoin is widely viewed as the least controversial and has emerged as the most likely candidate for near-term approval. This is due to several reasons:
- Active for nearly 15 years
- Proven Stability
- Typically viewed as a commodity
- Proven utility
- Widely used as an actual payment network
Despite these factors, the Litecoin filing caught many off guard, as it is not as ‘flashy’ or speculative in nature as many of the meme coins and newer networks that boast outlandish market caps. What it does well, though, is afford its users some of the same appeal as Bitcoin while functioning quicker and cheaper.
However, what is important with the approval of a Litecoin ETF is not the network’s characteristics, but finally marking a shift among regulators to consider assets beyond BTC and ETH. It would be simply one step closer to the approval of a broader range of ETF approvals, including those for multi-asset portfolios. This would thereby benefit the entire crypto market as ETFs serve as a gateway for retail and institutional investors, offering a regulated and straightforward means of gaining exposure to digital assets. The bottom line is that, as more ETFs gain approval, the inflow of capital into the crypto market is likely to increase, driving both adoption and market growth – and Litecoin looks to be the next step towards this occurring.
What Does it All Mean?
As a whole, the developments listed above represent a significant shift in the perception and pending treatment of cryptocurrencies. Whether it be the development of new industry-focused task forces or overturning poorly conceived existing rules, these shifts may just create the ideal conditions for an unprecedented bull market in the coming months and years.
For investors and enthusiasts, this is a moment to watch closely. It may finally be the time for cryptocurrencies to shift the tides, and the transition from fringe to mainstream will become undeniable.
With all that in mind, it’s crucial to recognize that the phrase FOMO, short for the fear of missing out, exists for a reason. It’s easy to get caught up in the hype and what-if scenarios. The bottom line is that nothing should be taken for granted, and when looking at the crypto market from a historical lens, it has operated in four-year cycles. If this remains true, lofty asset predictions may be delayed another few years, despite these recent developments.
