Kate Karimson, the chief commercial officer at R3, emphasizes that next year will be a significant one for public and private collaboration within the blockchain sector. The US elections have brought both increased confidence in certain areas and uncertainties in others. These changing tides suggest that the US crypto landscape is likely to undergo substantial transformations by the end of 2025. If the Republicans gain control of the White House and Congress, it is expected that much-anticipated legislation will be enacted, clarifying the roles of regulatory agencies and providing much-needed confidence while supporting industry innovation. Although DLT is gradually gaining traction in US financial markets, which were previously constrained by regulatory uncertainties, the establishment of a clear regulatory framework is expected to drive positive momentum.

Outside the US: Landmark Year of Industry Collaborations

In 2024, outside the US, it has been a landmark year as industry collaborations have clearly demonstrated the benefits offered by DLT-based infrastructure. The UK RLN, led by UK Finance, involved 11 of the country's largest banking and payments providers to create a regulated platform for public and private digital monies, including CBDCs and tokenised deposits. With over 80 countries actively exploring CBDCs for both domestic and cross-border use cases and several already in advanced stages, it is highly likely that more of these projects will evolve into live solutions in 2025. However, the uncertainty surrounding the US Republicans' attitudes towards CBDCs may lead other G7 countries to place greater emphasis on their domestic projects.

More Financial Institutions Entering Digital Assets Trading

Rob Wing, the head of digital assets and FX at 4OTC, points out that over the past three years, we have witnessed a growing number of financial institutions venturing into digital assets trading. This trend is expected to continue in 2025 as investors continue to diversify their portfolios by including a range of crypto assets such as Bitcoin and Ethereum. The recent US election and the assumption of power by President Trump in January have already led to a rise in the prices of some of the more established cryptocurrencies.One of the key challenges faced by trading firms is establishing connections with all the exchanges. The market remains highly fragmented, with institutional traders typically connecting to between five and 25 exchanges globally to access market data and liquidity. As crypto trading becomes more institutionalized, firms are demanding robust, secure, and low-latency infrastructure, supported by failover and full disaster recovery procedures. Just like in the FX market, the velocity of trading is increasing as firms analyze larger amounts of data and quantum computing applications enable algorithmic trading, facilitating complex calculations at unprecedented speeds.

Regulators' Increased Activity in the Crypto Space

Jon Light, the head of OTC trading platforms at Devexperts, predicts that in 2025, we will see a significant increase in the activities of regulators in the crypto space. With the Markets in Crypto-Assets Regulation (MiCA) rules fully coming into effect on 30 December, other jurisdictions will be closely observing the EU to assess the impact of the regulation on the crypto market and will respond by formulating their own versions. In the US, it is expected that the regulatory stance will become more friendly under the Trump administration. As the SEC chairman, Gary Gensler, is set to leave in January, pro-crypto regulation is anticipated. Additionally, the UK is preparing to release its regulatory framework for crypto in early 2025.These regulatory moves in the crypto space will play a crucial role in mitigating risks to the overall financial stability. As cryptocurrencies become more intertwined with the traditional financial sector, the challenge will be to achieve regulatory and global coordination. Without such coordination, weaker jurisdictions may be exploited. This cross-border facilitation of regulation is essential for the continuous growth and widespread adoption of the cryptocurrency system by institutional investors.