😱 Did you hear? While the U.S. government may be hesitant to buy more Bitcoin, Michael Saylor's MicroStrategy is actively hoarding Bitcoin under the 21/21 plan. Meanwhile, with the Trump administration facing a two-year legislative window for pro-crypto policies, a controversial new IRS rule classifies decentralized finance (DeFi) front ends as brokers, sparking widespread criticism, legal challenges, and concerns about innovation and decentralization in the industry.
📊 Galaxy Digital's research arm predicts that the U.S. government will not buy more Bitcoin (BTC) in 2025, but will focus more on protecting its existing holdings. According to Alex Thorn, head of Galaxy research, the U.S. government will use its existing nearly 183,850 BTC (worth about $17.24 billion) to explore Bitcoin reserve policies. While discussions about using Bitcoin as a reserve asset will continue, the government seems to intend to rely on existing holdings rather than buy more.
🌍 Galaxy Digital analysts believe that the United States' tougher stance on Bitcoin could spark global competition between countries. Analyst "JW" speculates that countries that are not antagonistic to the United States, adversaries of the United States, or countries with large sovereign wealth funds may adopt strategies to mine or buy Bitcoin in response. Bitcoin's adoption potential may also extend to the corporate world, with as many as five companies in the Nasdaq 100 index potentially adding Bitcoin to their balance sheets.
🗣️ Global reactions to the potential U.S. adoption of Bitcoin vary. Japanese Prime Minister Shigeru Ishiba remains unsure about the U.S. and other countries’ moves toward adopting Bitcoin reserves. Meanwhile, former Binance CEO Changpeng Zhao predicted that smaller countries could be the first to adopt Bitcoin reserves, though he also acknowledged that the transition could take time. Changpeng Zhao also hinted that China could become a key player in adopting strategic Bitcoin reserves.
📋 In addition to corporate strategy, Saylor also proposed a comprehensive framework for digital assets in the United States. His plan includes establishing a strategic Bitcoin reserve to offset the U.S. Treasury debt by creating asset wealth of $16 trillion to $81 trillion. He believes that developing the digital asset market to a valuation of $10 trillion can strengthen the dollar's position as a global reserve currency, driving demand for U.S. government securities and ultra-collateralized stablecoins like Tether's USDt.
🔍 Saylor’s framework also divides digital assets into six categories: digital commodities, digital securities, digital currencies, digital tokens, non-fungible tokens (NFTs), and digital ABTs pegged to physical goods.
🗓️ Pro-crypto policies face a two-year deadline! David Sacks, recently appointed “AI and Crypto Czar,” has only a two-year window to advance U.S. cryptocurrency policy before the 2026 midterm elections. Joe Doll, general counsel at NFT marketplace Magic Eden, noted the urgency of the situation in a recent interview, warning that a divided government after the midterm elections could lead to a deadlock. Therefore, it is critical to act while both houses of Congress are still under the control of the current administration. Doll also revealed that with the slim majority in the House of Representatives likely to flip, policymakers only have 24 months to implement major changes.
👏 The crypto community welcomed the incoming administration’s pro-innovation stance. David Sacks, a long-time supporter of cryptocurrency and technological innovation, was celebrated in his new role. On December 4, President-elect Trump also nominated Paul Atkins as chairman of the Securities and Exchange Commission. Subsequently, Stephen Miran was selected as chairman of the Council of Economic Advisors. He was praised for supporting deregulation and encouraging technological advancement.
🗣️ Arkansas Congressman French Hill further emphasized the government's priorities, noting that the Republican Party will focus on introducing a comprehensive regulatory framework for cryptocurrencies. He revealed that the development of a digital asset market structure bill is a top priority for the Republican leadership and that plans are already in place to advance the legislation within the first 100 days of the new legislative session.
😕 While the Trump administration appears to be working to create a crypto-friendly environment, a new IRS rule could put a damper on the excitement.The crypto industry is grappling with a new IRS reporting rule that classifies decentralized finance (DeFi) front ends as broker-dealers.
📅 The rule was published on December 27, 2024 and sparked widespread criticism and immediate legal challenges. If implemented, the regulation would require DeFi frontends and decentralized exchanges to comply with broker-dealer reporting requirements by 2027.
💡 Alex Thorn outlined three potential paths for DeFi applications to deal with the rule. They can choose to comply with IRS requirements and accept their classification as brokers, completely block US users, or choose to become highly decentralized by giving up smart contract upgrades and revenue generation. Thorn also mentioned that extremely decentralized applications (without front-end websites, cannot be upgraded, and do not collect fees) may be exempt from the rule.
😠 The rule has sparked a backlash in the crypto industry, with many advocacy groups and executives viewing it as government overreach. Consensys attorney Bill Hughes also criticized the timing of the rule, suggesting it was deliberately released during the holiday season to reduce scrutiny.
📜 In response, organizations including the Texas Blockchain Council, the Blockchain Association, and the DeFi Education Fund filed a joint lawsuit against the IRS the same day the rule was announced. The lawsuit claims that the rule represents an unconstitutional overreach by the Treasury Department and the IRS. Crypto executives also called on Congress to step in and block the regulation, warning that it could stifle innovation and drive DeFi development away from the United States.
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The above content is for information sharing only and does not constitute any investment advice!
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