A Landmark Year for Cryptocurrency Regulations
Paul Brody, the Global Blockchain Leader at EY, anticipates that 2025 will be a landmark year for cryptocurrency regulations in the U.S., leading to greater acceptance of Bitcoin as a digital gold equivalent and the rise of stablecoins as essential elements of payment infrastructure.
In a memo sent to EY’s blockchain leadership team on November 6, Brody highlighted that we are approaching a crucial juncture for private blockchains.
Since November 2022, the crypto and blockchain sectors have been navigating a cautious yet optimistic recovery, albeit at a measured pace throughout this year.
Growing Influence of Bitcoin and Ethereum
The year 2024 marked the beginning of a significant acceleration in this trend.
The introduction of Bitcoin exchange-traded funds (ETFs), followed by Ethereum ETFs and the implementation of the EU’s Markets in Crypto Assets (MiCA) legislation, set the stage for a global synchronization of regulatory frameworks governing major cryptocurrencies and digital assets.
During this period, Bitcoin increasingly gained recognition as a digital counterpart to gold, while Ethereum evolved into a foundational platform enabling the development of a variety of digital assets and services.
Despite this gradual progress, the pace of change has been modest.
Many representatives from major financial institutions have approached public Ethereum with caution, largely due to lingering regulatory concerns.
However, following the U.S. elections on November 5, the potential for regulatory reform appears significantly brighter, clearing the path for faster adoption of public networks.
While the future remains uncertain, Brody expresses strong confidence that 2025 will bring major shifts in U.S. regulatory frameworks, likely influencing global responses at different speeds.
Given the U.S. standing as the largest financial market, its regulatory decisions are set to have wide-reaching consequences.
Expected Growth in Stablecoin Usage
In this evolving landscape, Bitcoin is expected to emerge as a substantial beneficiary.
Brody notes that it could solidify its role as digital gold, with some nations potentially appointing it as an official reserve asset.
He speculates that Bitcoin’s market trajectory might align closely with gold, which has a capitalization of around $14 trillion, highlighting its allure as a finite asset that doesn’t inflate with rising prices.
Ethereum, too, is poised for further progress.
Its recent shift to a proof-of-stake model has not only diminished its carbon footprint but also significantly enhanced its scalability.
With the combined capabilities of its Layer 1 and Layer 2 solutions, Ethereum now operates at a scale hundreds of times greater than in previous market cycles.
This enhanced capacity, coupled with low transaction fees and a strong security pedigree, makes Ethereum the go-to platform for digital asset issuers.
Looking ahead to 2025, notable growth in stablecoin usage is expected.
Demand for stablecoins, particularly for international remittances, is on the rise.
Collaborations such as Circle’s alliance with Nubank in Brazil, and Celo’s partnership with Opera to facilitate stablecoin payments via mobile browsers, are examples of this trend gaining traction.
Stablecoins are finding favor not just among cryptocurrency enthusiasts but also within the enterprise sphere, as significant initiatives develop to streamline payments in enterprise resource planning systems.
We might also see a revival of decentralized finance (DeFi) in 2025.
Although DeFi suffered a slowdown in 2024 due to stagnant regulatory progress and high-interest rates, a more favorable regulatory climate combined with potentially lower interest rates could reinvigorate interest in yield-generation through on-chain opportunities like liquidity pools.
Overall, these impending transformations not only signify new developments but also represent a momentum shift of pre-existing trends.
Many entities, including banks and insurance companies that have previously hesitated, are likely to dive deeper into blockchain technologies and cryptocurrencies in 2025, with increasing numbers of firms announcing their intentions to provide stablecoin services or integrate digital assets into their offerings.
However, the intensifying competition within the blockchain ecosystem will bring its own set of challenges.
Various Layer 2 networks are crowding around Ethereum, resulting in a competitive environment that could squeeze transaction fees.
As the distinctions between Layer 2 solutions blur, projects may need to shift strategies from competing against Ethereum to collaborating with it, highlighting the challenges faced by alternative Layer 1 projects.
Private blockchains may struggle in this rapidly evolving context, as their value propositions risk becoming obsolete in an environment increasingly driven by public blockchain innovation.
Many stakeholders within established private networks are urgently seeking ways to adapt to these shifting dynamics.
Finally, Brody warns that 2025 could also witness an uptick in fraudulent schemes, spurred by the chaotic atmosphere surrounding regulatory changes.
While some fraud tactics may become harder to implement due to better regulatory oversight and advancements in technology, new deceptive methods are likely to emerge.
As we look toward 2025, the cryptocurrency landscape holds much promise, filled with anticipation and potential.
Disclaimer: The views expressed in this commentary are solely those of the author and do not necessarily reflect the opinions of EY or any of its affiliates.
About the Author: Paul Brody is the Global Blockchain Leader for EY (Ernst & Young), guiding the firm’s strategic approach to blockchain technologies, especially within the realms of public blockchains and the Ethereum ecosystem.
Source: Coindesk
