Analysts Predict 2025 Will Be a Turning Point for Crypto Regulation

Analysts believe 2025 has the potential to be a pivotal year for crypto policy, especially after the recent ETH ETF approvals.

The crypto industry is seeing some major policy shifts, and some experts even predict that 2025 will be a much more crypto friendly year. The approval of Bitcoin and Ethereum ETFs, along with support for the Financial Innovation and Technology (FIT) Act, is proof that the regulatory environment for crypto is improving. Coinbase also announced that it resumed XRP trading in New York after a nine-month hiatus, However, CBDCs are still facing some resistance, as the House passed the CBDC Anti-Surveillance State Act to limit Federal Reserve powers. A Federal Reserve survey also showed a decline in U.S. crypto ownership, which contrasts with optimistic industry trends.

A Positive Shift in Crypto Policy

Industry experts are anticipating a much friendlier 2025 for crypto. Senior Bloomberg policy analyst Nathan Dean believes 2025 has the potential to be a pivotal year for crypto policy, especially considering the approval of Bitcoin and Ethereum exchange-traded funds (ETFs) and the increased support for the Financial Innovation and Technology (FIT) Act.

Despite the fact that the United States Securities and Exchange Commission (SEC) still has the power to regulate companies who want to classify their tokens as commodities instead of securities, Dean thinks the overall regulatory landscape appears to be improving.

Bloomberg analyst Eric Balchunas agrees with this, and specifically referred to the fact that a bipartisan group of House lawmakers urged SEC Chair Gary Gensler to approve spot Ether ETFs. Balchunas also pointed out the increased involvement of ETFs in mainstream politics, especially during an election year, and called it fascinating.

Regulatory improvements are not just limited to the United States. The United Kingdom's Financial Conduct Authority recently approved the first Bitcoin and Ether exchange-traded products (ETPs) for professional investors on the London Stock Exchange.

Additionally, Hong Kong's Securities and Futures Commission is considering allowing spot Ether ETF issuers to stake custodied ETH, which could potentially earn yields of 3.6% per annum for validating blockchain transactions.

Overall, the combination of the ETF approvals, more supportive legislation, and evolving regulatory frameworks across the world suggests a much more favorable environment for the crypto industry in the coming year.

ETH ETF Approvals Redefine Token Regulations

The recent ETH ETF approvals is already a big step forward with regards to whether certain cryptos should be labeled securities.

In fact, the approval of spot ETH ETFs by the SEC is seen as an acknowledgment that Ether is not considered a security. Industry analysts suggest this could extend to other tokens as well.

Bloomberg ETF analyst James Seyffart shared in a discussion with Ryan Sean Adams on the Bankless podcast that by approving these commodity-based trust shares, the SEC is effectively stating they will not pursue Ether as a security. Digital asset lawyer Justin Browder added that if Ether ETFs receive S-1 approval, the debate over ETH's status as a security will finally be settled.

Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, believes that this could also apply to other projects' tokens. Despite this, Seyffart and others still warn that the SEC might still target those involved with staking Ether, as ETH itself may not be labeled a security, but staked ETH could be.

Digital asset lawyer Joe Carlasare also agrees with this, and pointed out that the SEC might actually pursue actions against individual actors and staking services even after the ETF launch. This might, in fact, be the case considering the SEC's recent actions like serving a Wells Notice to Ethereum infrastructure firm Consensys.

Meanwhile, finance lawyer Scott Johnsson believes that the SEC’s approval for Ether ETFs did not explicitly confirm Ether’s non-security status, but rather sidestepped the issue.

Coinbase Brings XRP Trading Back to New York

There have also been some positive policy developments surrounding Ripple and XRP. On May 23, Coinbase’s chief legal officer, Paul Grewal, announced that customers in New York can once again trade XRP on the exchange after a nine-month hiatus.

The re-listing of XRP comes after the SEC filed a lawsuit against Ripple Labs in 2020, which accused the company of selling unregistered securities. In response, many centralized exchanges, including Coinbase, Bittrex, and Binance.US, delisted XRP. These exchanges relisted XRP after Judge Analisa Torres ruled in 2023 that secondary sales of XRP did not constitute securities sales.

Despite the court ruling and the subsequent relisting of XRP on U.S. platforms, the token continued to face regulatory challenges in some jurisdictions, including Japan and New York. In September of 2023, the New York Department of Financial Services (NYDFS) removed Ripple Labs from its “Greenlist,” which pushed Coinbase to suspend XRP trading for New York residents.

The positive news from Coinbase led to a slight increase in XRP’s price from $0.51 to almost $0.53. At press time, the remittance token was trading hands at $0.5267. XRP has been struggling with steady downward price action since its recent high of $0.74 in March earlier this year.

Survey Shows Decline in Crypto Ownership

On the other hand, the average crypto holder might not be as optimistic about crypto’s future. The number of U.S. adults who reported owning or using crypto declined to around 18 million in 2023, according to the Federal Reserve's latest annual household survey.

The Fed’s Survey of Household Economics and Decisionmaking (SHED) was published on May 21, and indicated that 7% of surveyed adults used crypto in the 12 months leading up to October 2023. This was a decrease from 10% in 2022 and 12% in 2021. Only 1% of adults reported using crypto for payments or money transfers, down by half from 2022, while 7% used it as an investment.

Interestingly, these figures are very different from Coinbase’s claim that 52 million Americans own crypto. However, Coinbase has never commented on how it arrived at this figure.

Among those using crypto for transactions, almost 30% said they did so because the recipient preferred crypto, while fewer people did so because of a lack of trust in banks.

The survey also revealed that people with annual incomes of $100,000 or more were more likely to use crypto. Millennials, aged 30 to 44, were the largest group of crypto users, followed closely by Generation Z adults aged 18 to 29.

Additionally, men were three times more likely to use crypto than women. Black and Hispanic adults were the most common users for financial transactions, while Asian adults mainly used crypto for investing. White adults were the least likely to use crypto.

The survey included 11,488 U.S. adults aged 18 and older.

House Passes Anti-Surveillance CBDC Act

Despite the progress being made with crypto policy, CBDCs are still getting the cold shoulder. The CBDC Anti-Surveillance State Act passed the United States House of Representatives on May 23. The bill amends the Federal Reserve Act of 1913 to prevent Federal Reserve banks from offering certain products directly to people and from using a central bank digital currency (CBDC) for monetary policy.

Republicans warned of potential government abuse of a CBDC, while Democrats focused on innovation and the dollar’s global competitiveness. Financial Services Committee Subcommittee Chair French Hill is also concerned about government overreach, and Representative Mike Flood warned of the dangers of giving political adversaries control over a CBDC.

Warren Davidson likened the New York Fed’s Project Hamilton to China’s surveillance tool, the digital yuan, and called for legislative control. Representative Alexander Mooney, author of an amendment to restrict CBDC research, also argued against making a CBDC readily available.

The bill was first introduced by Tom Emmer in February of 2023, and was passed by a vote of 216-192.