- The Incoming Administration May Reform the Regulatory Landscape – Republican commissioners and staff attorneys at the Securities and Exchange Commission (SEC) and the Commodity and Futures Trading Commission (CFTC) have signaled that, while waiting to see the approach from new Congressional committee leaders on federal legislation and for confirmation of the new SEC chair, they intend to reduce reliance on enforcement to mold regulatory guardrails, provide increased executive relief through no-action letters, and collaborate with industry participants in crafting rules differentiating tokens as commodities from tokens as securities. In doing so, clearer regulatory guidelines could emerge, fostering a more favorable environment for blockchain investments. Individual states such as California, on the other hand, may increase their enforcement activity in 2025.
With respect to regulations on custody of digital assets and banking, the incoming administration could consider nullifying Staff Accounting Bulletin 121 (SAB 121), which would pave the way for major custodians and lenders to increasingly hold digital assets on behalf of customers. Additionally, the incoming administration may issue statements addressing concerns over what it considers to be the recent “debanking” of the crypto industry.
- Crypto Legislation May Be Deprioritized – The prospects for the passage of comprehensive legislation for digital assets, such as the Financial Innovation and Technology for the 21st Century Act (FIT21), could be significantly influenced by the preferences of the incoming Trump administration, which has not yet provided details on its approach to digital assets legislation. In the near term, there may be sufficient Congressional appetite to debate less comprehensive proposals to regulate stablecoins given the broad support for such a measure. For comprehensive legislation to pass, disagreement among Republicans and Democrats on whether the primary regulator of digital assets should be the states or the federal government, respectively, will need to be resolved. Nevertheless, there appears to be increasing support within both political parties for such comprehensive legislation, including with respect to stablecoins.
- Definitional Clarity May Be Sought for Traditional Intermediaries – As clarity is gained on when a token is a security, the industry could increasingly confront definitional vagueness on what constitutes an exchange, broker-dealer, or clearing agency, possibly implicating industry sectors such as decentralized finance (DeFi). Stakeholders are pushing for a conceptual expansion of these intermediaries to encompass DeFi frameworks via an amendment to Exchange Act Rule 3b-16. A challenge might be how to fit blockchain concepts into the traditional intermediary framework, since that framework might be disrupted by those blockchain concepts.
- Market Share of Crypto ETFs May Increase – Crypto ETFs have seen significant developments, particularly with the approval of spot Bitcoin ETFs by the SEC in January 2024. The emergence and growth of Bitcoin and Ethereum ETFs could continue through 2025, which could make it easier for institutional investors to enter the market. Other crypto-based exchange-traded products (ETPs) may be formed but could struggle to gain the same traction as Bitcoin and Ethereum ETFs, which are well-known to the public and widely available in the market. Still, such ETFs and other ETPs may continue to increase liquidity and stability in the blockchain and digital asset market.
- Adoption of Blockchain-as-a-Service (Baas) May Increase – In 2024, BaaS matured significantly, becoming a key component for businesses looking to leverage blockchain technology without the complexity of developing and maintaining their own infrastructure. Going forward, more companies might adopt BaaS platforms, which could lead to increased application in supply chain management, finance, and health care.
About the authors:
Barbara Jones is co-managing shareholder of the firm’s Los Angeles office and a member of the firm’s Global Corporate practice. Barbara serves as chair of the firm's interdisciplinary Blockchain & Digital Assets Group.
Kyle Jaep is a member of the Corporate Practice in Greenberg Traurig’s Los Angeles office. Kyle focuses his practice on capital markets, venture capital financing, blockchain and digital assets, and general corporate governance matters. He is a member of the firm’s interdisciplinary Blockchain & Digital Assets Group.