Written by: Hedy Bi, Jason Jiang
Before Trump officially entered the White House, the crypto market has already celebrated in advance, cashing in on policy news. This morning, Bitcoin broke through $100,000 as Trump officially nominated Paul Atkins as SEC Chairman. Since Trump won the election, Bitcoin has risen from $68,000 on November 5 to $100,000, achieving a 47% return in just one month. In this article, the author will deeply analyze how policy changes shape the market landscape from the perspective of US crypto policies and the direction of tracks with future development potential under the new landscape.
"Hard and rough" crypto regulation turns to more open and friendly
Trump made 10 crypto-friendly promises to the crypto market during his campaign, including establishing a strategic Bitcoin reserve. Nominated SEC Chairman Paul Atkins is also known for his friendly attitude towards cryptocurrencies, advocating reducing regulations to support market innovation. Trump said today, "Paul knows that crypto assets and other innovations are critical to making America greater than ever and believes in the promise of strong, innovative capital markets." Paul has also criticized the SEC's huge fines for harming shareholder interests, advocated flexible regulatory strategies, and served as co-chairman of the Token Alliance. Trump's move used Paul Atkins' previous experience in promoting the encryption industry to change the SEC, which had mainly treated the encryption industry with punitive measures in the previous year, and brought the concept of "financial freedom" to the US financial regulatory agencies.
In addition, other members of Trump's team also provided strong support for the special regulation of crypto-finance: more than 60% of the nominated cabinet members publicly stated that they own Bitcoin or support the development of crypto-finance, or indirectly support the growth of crypto assets.
In addition to Trump's commitment to the crypto market and the previously proposed (21st Century Financial Innovation and Technology Act) (FIT 21 Act), the recent Tornado Cash incident also marks that US crypto regulation is moving in a more open and friendly direction. At the end of November, the U.S. Court of Appeals for the Fifth Circuit ruled that the Treasury Department's sanctions on Tornado Cash's immutable smart contracts were illegal, holding that these smart contracts did not meet the legal definition of "property". This ruling provides important support for the legality of smart contracts, so that developers and users no longer face direct conflicts with traditional legal frameworks when using these protocols, thereby promoting finance to move in a more inclusive, friendly and free direction, and is also directly conducive to the booming development of decentralized finance (DeFi).
"America First" industries and financial capital need more freedom
Financial freedom not only opens up greater development space for the crypto market, but also indicates that after the connection between crypto assets and traditional financial assets (TradFi), a far-reaching market integration is brewing. With the development of the digital society, driven by future technologies such as artificial intelligence (AI), the way of value creation is accelerating. Zeng Ming, a former strategy officer of Alibaba, once pointed out that general artificial intelligence (AGI) will become a core technological breakthrough in productivity in the future, closely combined with crypto assets, giving birth to a large number of new digital assets.
As a value network technology that connects the digital society with the real society, blockchain will enable crypto assets to play a key role in this transformation. Driven by the "America First" policy, Trump proposed an AI version of the "Manhattan Project", intending to elevate AI technology to a national strategic level and vigorously promote the industrialization process.
In addition to the fact that the digital society driven by AI in the future cannot avoid crypto assets, Standard Chartered Bank has also stated that almost any real asset in the real world can be tokenized, and it is expected that by 2034, the global demand for tokenized assets will reach 30 trillion US dollars. Whether the future development of the digital society requires crypto assets, or the circulation of assets in the real society requires tokenization, the integration of crypto assets and traditional financial assets, the potential of this market will far exceed the "big merger era" in the 1930s and the "Internet merger era" in 2000. The former gave rise to a $600 billion industry integration, and the latter pushed the market size to $3 trillion.
The integration process is now unstoppable. Whether it is the promotion of crypto asset ETFs or the emerging track represented by RWA (real world assets), the application of stablecoins alone has created a market value of more than 200 billion US dollars. With the continuous penetration of encryption technology, the "encryption" process of the entire financial market has begun, which will reshape the global financial landscape in the future and give birth to a more open and integrated new capital ecology.
How the 3 most critical crypto “promises” will affect the market outlook
Whether it is announcing the establishment of a strategic Bitcoin reserve or nominating a crypto-friendly SEC chairman, Trump's election seems to bring the crypto industry the most friendly regulatory environment in history, and thus open up the recent upward channel for Bitcoin. But in the medium and long term, the real driving force for the crypto industry to continue to move forward is obviously not the price of Bitcoin, but whether Trump can fulfill those verbal crypto promises and provide more space for the crypto market from the legislative level. If Trump can rely on his extremely high prestige within the party and the Republican Party's victory in the Senate and House elections this time, actively promote key legislation represented by the following three major bills, it may bring a new situation to the crypto industry.
FIT 21 will be promoted as a priority, and DeFi innovation will "return" to the United States
FIT 21 may be the first bill Trump will promote after taking office. This crypto bill, which is hailed as the "most important" to date, not only clearly defines when cryptocurrencies are commodities or securities, but will also end the "tug of war" between the SEC and the CFTC over crypto regulation. The U.S. House of Representatives previously passed the bill with an overwhelming majority and submitted it to the Senate, but the latter did not take decisive action. However, with Trump taking office, the market generally expects that the bill's progress will be accelerated.
After the passage of the FIT 21 Act, more compliant trading platforms and crypto-listed companies will emerge, and clear attribute standards will enrich tradable tokens and provide new opportunities for spot ETFs and other crypto-financial products. Part of the reason why Ethereum ETF applications were difficult to pass before was the ambiguity of the nature. The SEC believed for a long time that Ethereum after the conversion to the PoS mechanism was more like a security. It was not until the SEC and Wall Street found a "balance point", that is, it was clear that Ethereum ETFs without pledges were not securities, that they were able to continue to promote it. After the passage of the bill, it will be easier to launch spot ETFs and related financial products for cryptocurrencies that clearly fall into the category of "digital commodities" on the basis of meeting relevant prerequisites. We may see more types of cryptocurrency spot ETFs such as SoL, XRP, HBAR, LTC, etc. next year.
Several institutions have submitted applications for Solana ETFs
The FIT 21 Act will also promote the innovation of decentralized applications, especially the development of the DeFi track. The FIT 21 Act clearly states that if the relevant tokens are determined to be decentralized and functional, they will be regarded as digital commodities and will not be regulated by the SEC. As long as the degree of centralization meets the requirements, they can obtain a certain exemption period, which will encourage more DeFi projects to evolve in a more decentralized direction. The bill also requires the SEC and CFTC to study the development of DeFi, evaluate its impact on traditional financial markets and potential regulatory strategies, and the exemption period factor will attract more DeFi projects to "return".
In addition, driven by friendly policies and expectations of interest rate cuts, more traditional funds will flow into DeFi in search of higher returns, thereby stimulating DeFi's re-innovation. The obvious trend is that DeFi will continue to expand collateral assets and introduce more off-chain liquidity to the chain. This will promote the deep integration of DeFi and RWA, and by allowing tokenized assets such as U.S. bonds and real estate to be mortgaged or borrowed, it will enrich the composability and imagination of on-chain finance and allow DeFi's influence to spread outside the chain. The RWA track will also bring more substantial benefits due to integration with DeFi, accelerating the two-way expansion to the off-chain and on-chain.
The value of DeFi in the Bitcoin ecosystem cannot be ignored. While using ETFs to penetrate into the off-chain, Bitcoin also shows more possibilities in the on-chain ecosystem. Considering that the Bitcoin market is dominated by long-term holders, and the spot ETF keeps the market circulation rate at a lower level, the Bitcoin lending track that has been spawned by this may usher in new opportunities. Since the SEC is likely to allow Ethereum spot ETFs to be pledged, pledge projects in the DeFi ecosystem may receive widespread attention.
US stablecoin-related bill is back on the agenda
In 2023, the U.S. House of Representatives Financial Services Committee passed the (Payment Stablecoin Clarity Act), but it was not approved by the House of Representatives. In October this year, U.S. crypto-friendly Senator Bill Hagerty submitted a similar draft again. Coupled with Trump's previous promise not to promote CBDC issued by the Federal Reserve, and the FIT 21 Act defines licensed payment stablecoins and emphasizes the importance of the licensing system, stablecoin-related legislation may be put back on the agenda after Trump takes office.
Stablecoin legislation will directly affect the issuance of USD stablecoins and related payment institutions. Some small or algorithmic stablecoins may be forced to exit the market, and legal stablecoins (such as USDC) will occupy a larger market share. At the same time, as legislation clarifies compliance requirements, traditional payment service providers will accelerate the adoption of compliant stablecoins to improve their availability and ease of use in daily transactions. Relevant companies and users will also be more confident in accepting stablecoins as a supplement to the existing payment system, rather than just for cryptocurrency trading use cases. The market share of stablecoins in the field of cross-border transfers and settlements will also continue to increase, and the user volume and settlement scale are expected to continue to approach or even surpass institutions such as Visa.
In addition, whether it is obtaining income directly through underlying assets (such as government bonds, money market funds, etc.) and distributing it to relevant participants, or obtaining on-chain income with the help of DeFi protocols, various income products based on compliant stablecoins will continue to emerge and will be favored by users, but care should be taken to avoid making stablecoins show investment contract characteristics when designing income mechanisms.
The proposal to repeal SAB21 is expected to be restarted to solve the problem of crypto asset custody
Whether it is the development of crypto financial products such as spot ETFs, or the growth of RWA, stablecoins, and DeFi, it will boost the demand for crypto custody services. This will force the restart of the proposal to repeal SAB 121 (Staff Accounting Bulletin No. 121). SAB 121 was issued by the SEC in 2022, requiring companies to record custodial crypto assets as liabilities. This move has led to a significant increase in corporate debt-to-asset ratios, affecting financial health and credit assessments, and making related companies unwilling to provide custody services.
Trump promised during his campaign to repeal the proclamation after his election. The most direct benefit of repealing SAB 121 is to reduce the compliance burden of crypto custodians, allowing banks and other regulated institutions to more easily enter the crypto custody field, thereby attracting more institutional investors to enter the market. Due to the accounting requirements of SAB 121, many banks and financial institutions have been relatively cautious about crypto financial products such as spot ETFs. The repeal will reduce the complexity of financial institutions managing these crypto assets. Stablecoin providers and payment-related businesses are also affected, especially those projects that integrate with traditional financial systems. The repeal of SAB 121 may create a more relaxed regulatory environment for these companies, helping them to develop core functions such as payment and settlement. RWA, which is currently a hot narrative, will benefit even more from this, enabling more traditional custodians to manage tokenized assets more flexibly, thereby attracting more financial institutions willing to participate.
It is undeniable that every step of crypto-friendly policies in the Trump 2.0 era is profoundly reshaping the boundaries of the crypto market. From regulations to accounting standards, every seemingly small change has profound strategic implications. The nomination of Paul Atkins sends a signal that the encryption regulatory environment is loose, and institutional innovation at the asset level cannot be ignored. The new FASB rule (ASU 2023-08), which will take effect on December 15, 2024, requires companies to maintain financial records of their crypto-asset holdings based on fair value. This means that changes in the value of a company’s holdings of crypto-assets such as Bitcoin will be directly reflected in its financial statements, having a significant impact on the company’s net income. The implementation of this rule will encourage more companies to include mainstream crypto assets such as Bitcoin on their balance sheets. In addition, Microsoft held a board meeting on December 10 to formally discuss whether to include Bitcoin in its corporate strategic reserves, providing a highly identifiable industry signal for this trend.
As Bitcoin broke through $100,000 today, OKX CEO Star said on the X platform that this is the "power of vision and technology." The integration of tradition and innovation is bound to reshape the new order of the global capital market.
