Produced by | OKG Research
Author | Hedy Bi, Jason Jiang
Even before Trump officially took office, the crypto market had already started celebrating and cashing in on policy news. This morning, as Trump officially nominated Paul Atkins as the SEC chairman, Bitcoin broke through $100,000. Since Trump's election victory, Bitcoin has risen from $68,000 on November 5 to $100,000, a 47% gain in just one month. The author of this article will analyze in depth how policy changes shape the market landscape and the potential development directions under the new landscape from the perspective of US crypto policies.
"Tough and Brutal" Crypto Regulation Shifts to More Open and Friendly
During his campaign, Trump had made 10 crypto-friendly commitments, including establishing a strategic Bitcoin reserve. The nominated SEC chairman, Paul Atkins, is also known for his friendly attitude towards cryptocurrencies, advocating for reduced regulation to support market innovation. Trump mentioned today that Paul understands that crypto assets and other innovations are crucial to making America greater than ever before, and believes in the commitment to strong, innovative capital markets. Paul has also criticized the SEC's hefty fines for harming shareholder interests, advocating for a flexible regulatory strategy, and serving as co-chair of the Token Alliance. Trump's move to bring in Paul Atkins, with his previous experience in promoting the crypto industry, changes the SEC's previous one-year focus on punitive measures towards the crypto industry, and brings the "financial freedom" philosophy into the US financial regulatory agency.
Furthermore, other members of Trump's team also provided strong support for the regulatory specialization of crypto finance: over 60% of the nominated cabinet members have 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 commitments in the crypto market and the previously proposed "21st Century Financial Innovation and Technology Act" (FIT 21 Act), the recent Tornado Cash incident also marks the development of US crypto regulation towards a more open and friendly direction. At the end of November, the US Fifth Circuit Court of Appeals ruled that the Treasury Department's sanctions on the Tornado Cash immutable smart contract were illegal, arguing that these smart contracts do not fit the legal definition of "property". This ruling provides important support for the legality of smart contracts, allowing developers and users to use these protocols without facing direct conflicts with the traditional legal framework, thereby promoting finance towards a more inclusive and friendly direction, and directly benefiting the flourishing of decentralized finance (DeFi).
"America First" Requires More Freedom for Industry and Financial Capital
Financial freedom not only opens up a larger development space for the crypto market, but also foreshadows a profound market integration as crypto assets and traditional financial assets (TradFi) become interconnected. With the development of the digital society, the way of value creation is accelerating its transformation, driven by future technologies such as artificial intelligence (AI). Former Alibaba chief strategy officer Zeng Ming pointed out that general artificial intelligence (AGI) will become the core technological breakthrough of productivity in the future, and will be closely combined with crypto assets, giving birth to a large number of new digital assets.
Blockchain, as the value network technology that connects the digital society and the real society, will play a key role in the crypto assets in this transformation. Under the "America First" policy, Trump has proposed an AI version of the "Manhattan Project", aiming to elevate AI technology to the level of national strategic importance and vigorously promote industrialization.
In addition to the future digital society driven mainly by AI that cannot bypass crypto assets, Standard Chartered Bank has also stated that almost any real-world asset can be tokenized, and it is expected that the global demand for tokenized assets will reach $30 trillion by 2034. Whether it is the future development of the digital society that requires crypto assets, or the circulation of real-world assets that requires tokenization, the integration of crypto assets and traditional financial assets, the potential of this market will far exceed the "Great Merger Era" of the 1930s and the "Internet Merger Era" of the 2000s, the former of which led to a $600 billion industry integration, and the latter drove the market scale to reach $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 stablecoin application alone has created a market capitalization of over $200 billion. With the continuous penetration of crypto technology, the "Crypto-ization" of the entire financial market has already begun, and the future will reshape the global financial landscape, giving birth to a more open and integrated capital ecosystem.
How Will the 3 Key "Promises" of Crypto Affect the Future Market?
Whether it's announcing the establishment of a strategic Bitcoin reserve or nominating a crypto-friendly SEC chairman, Trump's election seems to be ushering in the most crypto-friendly regulatory environment in history, thus opening up the recent upward channel for Bitcoin. However, from a medium to long-term perspective, the real driving force behind the continuous advancement of the crypto industry is obviously not the price of Bitcoin, but whether Trump can fulfill those verbal crypto commitments and provide more space for the crypto market at the legislative level. If Trump, with his extremely high party prestige and the Republican Party's complete victory in the Senate and House elections, can actively promote the key legislation represented by the 3 major bills mentioned below, it may bring a completely new landscape to the crypto industry.
FIT 21 Act Will Be Prioritized, DeFi Innovation "Returns" to the US
The FIT 21 Act is likely to be the first bill that Trump will prioritize after taking office. This bill, hailed as "the most important crypto bill to date", not only clearly defines when cryptocurrencies are commodities or securities, but will also end the "tug-of-war" between the SEC and CFTC in crypto regulation. The US House of Representatives previously passed this bill by 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 the progress of this bill to be accelerated.
After the FIT 21 Act is passed, more compliant trading platforms and crypto-listed companies will emerge, and the clear attribute standards will also enrich the tradable tokens and provide new opportunities for spot ETFs and other crypto financial products. One of the reasons why the Ethereum ETF application was previously difficult to pass was the ambiguous definition, and the SEC considered Ethereum more like a security after the PoS mechanism conversion for a long time. It was not until the SEC and Wall Street found a "balance point", that is, clarifying that Ethereum ETFs without staking are not securities, that the promotion could continue. After the passage of the bill, for cryptocurrencies that are clearly in the "digital commodity" category, spot ETFs and related financial products will be easier to launch on the basis of meeting the relevant prerequisites. We may see more types of crypto spot ETFs such as SOL, XRP, HBAR, and LTC next year.
Multiple institutions have submitted Solana ETF applications
The FIT 21 Act will also drive the development of decentralized application innovation, especially the DeFi track. The FIT 21 Act clearly states that if related tokens are judged to be decentralized and functional, they will be treated as digital commodities and not subject to SEC regulation, and 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 towards a more decentralized direction. The bill also requires the SEC and CFTC to study the development of DeFi, assess its impact on the traditional financial market and potential regulatory strategies, and the exemption period factor will attract more DeFi projects to "return" to the US.
Furthermore, under the influence of friendly policies and expectations of rate cuts, more traditional capital will flow into DeFi to seek higher returns, which will in turn stimulate further innovation in DeFi. A clear trend is that DeFi will continue to expand the range of collateral assets, bringing more off-chain liquidity onto the chain. This will drive the deep integration of DeFi and RWA, by allowing tokenized assets such as US Treasuries and real estate to be used as collateral or for lending, enriching the composability and imagination of on-chain finance, and allowing the influence of DeFi to spread off-chain. The RWA track will also accelerate its two-way expansion from off-chain to on-chain, due to the more attractive returns brought by its integration with DeFi.
The value of DeFi in the Bitcoin ecosystem should not be overlooked either. While leveraging ETFs to penetrate the off-chain market, Bitcoin is also showing more possibilities in its on-chain ecosystem. Considering that the Bitcoin market is dominated by long-term holders, and the spot ETF keeps the market liquidity at a lower level, this may create new opportunities for the Bitcoin lending track. Given the probability that the SEC will allow Ethereum spot ETFs to be used as collateral, the staking projects in the DeFi ecosystem may also receive widespread attention.
Stablecoin-related bills in the US are back on the agenda
In 2023, the US House Financial Services Committee passed the Stablecoin Clarity Act, but it was not approved by the House. In October this year, US crypto-friendly Senator Bill Hagerty resubmitted a similar draft, along with Trump's previous promise not to push for a CBDC issued by the Federal Reserve, and the FIT 21 Act defining licensed payment stablecoins and emphasizing the importance of the licensing system, stablecoin-related legislation may be back on the agenda after Trump takes office.
Stablecoin legislation will directly impact the issuance of US dollar stablecoins and related payment institutions. Some smaller or algorithmic stablecoins may be forced to exit the market, while compliant 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, improving their availability and usability in daily transactions, and related enterprises and users will be more willing to accept stablecoins as a supplement to the existing payment system, rather than just for cryptocurrency trading use cases. The market share of stablecoins in cross-border remittances and settlements is also expected to continue to rise, with user volume and settlement scale likely to approach or even surpass institutions like Visa.
Furthermore, whether it is directly obtaining yields from underlying assets (such as government bonds, money market funds, etc.) and distributing them to relevant participants, or using DeFi protocols to obtain on-chain yields, various yield products based on compliant stablecoins will continue to emerge and be welcomed by users, but attention should be paid to avoiding the investment contract characteristics of stablecoins when designing the yield mechanism.
Repealing SAB 21 is expected to restart, solving the crypto custody dilemma
Whether it is the development of crypto financial products like spot ETFs, or the growth of RWA, stablecoins and DeFi, the demand for crypto custody services will be boosted. This will force the restart of the proposal to repeal SAB 121 (Staff Accounting Bulletin No. 121). SAB 121, issued by the SEC in 2022, requires companies to record custodied crypto assets as liabilities, significantly increasing their debt-to-asset ratios, affecting financial health and credit ratings, and making related companies reluctant to provide custody services.
Trump had promised to repeal this bulletin if elected. The direct benefit of repealing SAB 121 is to reduce the compliance burden on crypto custody institutions, allowing banks and other regulated entities to more easily enter the crypto custody field, thereby attracting more institutional investors into the market. Due to the accounting treatment requirements of SAB 121, many banks and financial institutions have been relatively cautious about crypto financial products like spot ETFs, and the repeal will reduce the complexity for financial institutions to manage these crypto assets. Stablecoin providers and payment-related businesses have also been affected, especially those integrated with the traditional financial system. Repealing SAB 121 may create a more relaxed regulatory environment for these companies, helping them develop core functions like payments and settlements. The currently popular RWA narrative will also benefit, allowing more traditional custodians to manage tokenized assets more flexibly, thereby attracting more financial institutions to participate.
Undeniably, every crypto-friendly policy move in the Trump 2.0 era is profoundly reshaping the boundaries of the crypto market. From regulation to accounting standards, each seemingly minor change conceals far-reaching strategic significance. The nomination of Paul Atkins signals a relaxation of the crypto regulatory environment, and institutional reforms at the asset level are equally noteworthy. The FASB's new rule (ASU 2023-08) coming into effect on December 15, 2024 requires companies to record the fair value of their held crypto assets on their financial statements. This means that changes in the value of companies' Bitcoin and other crypto assets will be directly reflected in their financial statements, with a significant impact on their net income. The implementation of this rule will incentivize more companies to include mainstream crypto assets like Bitcoin on their balance sheets. Furthermore, Microsoft held a board meeting on December 10th to formally discuss the inclusion of Bitcoin in its corporate strategic reserves, providing a high-profile industry signal for this trend.
As Bitcoin breaks through $100,000 today, OKX CEO Star stated on the X platform that this is the "power of vision and technology". The path of integrating tradition and innovation will inevitably reshape the new order of the global capital market.
