Crypto
Feb 2, 2025
If you are looking for an inspirational quote to keep you warm and cosy amid a market shakeout, then the policy objectives stated in Strengthening American Leadership in Digital Financial Technology Executive Order published, on 23 January 2025 might be your ticket. It repeals this Executive Order and this cooperative framework.
For anyone in crypto, anywhere, the terms of President Trump’s Executive Order are the opened door to the jail cell of FUD and regulatory hostility that has labelled the US a no-go destination since ever, but particularly following the SEC’s crusade against crypto in the aftermath of SBF’s dalliances with policy development and his infamous tweet “FTX is fine. Assets are fine”.
The terms of the Executive Order are so good, that they should be read, and often, as a reminder that We Are actually, quite possibly, All Going to Make It.
Here’s how Trump’s administration are going to support America’s primacy in crypto and “the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy”:
Individual and private sector use is lawful. The first implementation priority of the Order is to legalise the (lawful) use of public blockchain networks, confirming that consumers and private enterprise may transact, mine, validate and maintain self-custody of digital assets.
US Stables = Digital Reserve Currency: The second implementation priority is particularly interesting. The US will now actively encourage growth and use of USD-backed stablecoins not merely throughout the US but worldwide. This is a boon for private enterprise in stablecoins. XRP (by Ripple), USDT (by Tether) and USDC (by Circle) will be the obvious beneficiaries of this policy. For Ripple in particular this represents a fantastic about-turn from its era as the target of the SEC’s enforcement action for unregistered securities transactions and trading, in which it was at least partially successful, but at exceptional cost. This policy priority reads as an aggressive positioning of the US dollar as the reserve currency of the digital era, combatting a gradual decline of the USD’s dominance as the world's primary reserve currency over the past two decades (from over 70% in 2000 to approximately 59% in 2024 USD as a % of global foreign exchange reserves). Crucially, supporting dollar-backed stablecoins enables the U.S. to export its monetary dominance globally through private sector infrastructure without risking the direct liabilities associated with a CBDC. We are particularly interested in what this will do to USD-backed stablecoin products in light of the death of competition from central bank issued CBDCs.
CBDCs are DOA: The Order kills CBDCs in the US and therefore any competition with USD-backed, home grown stablecoin projects. The Order bans the issuance, circulation, or promotion of CBDCs within the US, citing risks to financial stability, privacy, and sovereignty. Additionally, it highlights concerns that CBDCs pose a threat to decentralization, compete with private-sector innovation, and undermine the U.S.'s free-market policy. Trump indicated his opposition to CBDCs early on in his presidential campaign, so while the position is not surprising, the abruptness with which CBDS are no more is a jolt, particularly to those involved in Project Agorá, Project Cedar and others. Time will tell whether these projects are shuttered indefinitely, or relocate to other locations where centralised assets hold more appeal.
A legal framework for crypto: Gone are the battles between the US’s commodities and securities regulators, the CFTC and SEC respectively, for territory to regulate crypto, and with it collateral damage of the kind experienced by Kukoin, Binance, Coinbase, Ripple, Ookie DAO, BZeroX. The Order establishes the timeline and priority of establishing a federal legal framework for issuance and operation of digital assets, including stablecoins, in the US with provisions for market structure, oversight, consumer protection and risk management. With legal clarity, builders are now free to build, tokens can launch with confidence and most importantly, the US retail market can be (responsibly) leveraged to drive unprecedented adoption for crypto projects globally. An important counterpoint is the effective use of enforcement resources within these regulators. With legal clarity, enforcement efforts can focus on protecting consumers rather than distilling a legal framework that has eluded definition until this very moment. The Order identifies a punchy timeframe. We can expect a “sensible regulatory path” and a legal framework for the regulation of crypto from the newly assembled Working Group on Digital Assets by 22 July 2025.
Working Group on Digital Asset Markets: The work of creating a federal legal framework for crypto is that of the Working Group on Digital Asset Markets, Chaired by Trump’s “special advisor for Crypto and AI”, David Sacks. The Group is a multi-agency multidisciplinary team comprising delegates from the Secretary of Treasury, Attorney General, Secretary of Commerce, and Chairs of the SEC and CFTC. They are tasked to assess existing rules, propose new frameworks for digital assets and stablecoins, and evaluate the potential creation of a national digital asset stockpile.
Broader Implications for the Crypto Industry
For Projects: The Order represents a pivotal shift in US crypto regulation and is a boon for projects globally, but in particular, US home grown projects, and of those, established USD-backed stablecoin projects. By explicitly supporting private blockchain innovation, prohibiting CBDCs and providing a clear regulatory framework for token issuance, it reflects a pro-market approach, distinguishing the US from China where CBDCs are prioritized, and the EU, where regulation often leans toward consumer protection. Lawful access to US retail consumers for (responsible and compliant) crypto projects, globally, is a watershed moment. International crypto projects will find enhanced opportunities to market their products and services to US retail investors, previously avoided due to regulatory uncertainty. Equally, a well-defined regulatory environment is anticipated to encourage institutional participation.
For Knowledge Workers: Depending on their proclivities, legal practitioners and regulatory strategists will rejoice or bemoan the introduction of a clear legal framework for crypto. Intra-agency battles are gone. Legal uncertainty within the US will likely persist to some degree, but not to the same extent as before. Competition between jurisdictions that have positioned themselves as hubs for crypto businesses (UAE, Singapore, EU) will escalate. Although much depends on the particulars of the US’s impending legal framework, it could potentially redirect innovation away from these regional hubs. We expect an inevitable gravitational shift toward the US, at least toward retail market access. Invariably, the value contribution for knowledge workers that support the ecosystem will also evolve.
Implications for Industry Sectors
Gamers/Gaming: Gaming platforms with tokenised in-game assets gain clarity on regulatory expectations, making it easier to create compliant ecosystems. This is particularly important as game publishers have faced the immense challenges of being categorised and regulated like exchanges.
Gambling: Gambling platforms stand to benefit from fair access to banking services and protection against unlawful censorship, which reduces operational risk. Clarity on the regulatory treatment of tokenized betting systems may encourage broader adoption.
Token Issuers: Token issuers gain from a framework encouraging lawful development of digital assets and clarity as to what features of tokens might qualify tokens as securities, and therefore attract registration and other requirements.
AI Projects: Blockchain-enabled AI platforms gain clearer guidelines for token issuance and operation within the US. The potential establishment of a national digital asset stockpile may encourage AI integration into blockchain-based value systems, consistent with current market trends where AI-Agent initiated transactions on the blockchain are expected to exceed human interactions as soon as April 2025.
Exchanges: Beneficiaries of regulatory clarity and fair banking access, Exchanges are incentivized to establish in the US but can expect increased oversight and compliance costs.
Implications for the UAE
The United States' forthcoming legal framework for cryptocurrency presents a direct challenge to Virtual Asset Service Provider (VASP) regulators globally, including those in the Middle East and North Africa (MENA) region. The United Arab Emirates (UAE) has established itself as a prime destination for VASPs, offering favorable regulations. However, competition is intensifying as neighboring countries like Saudi Arabia, Bahrain, and Qatar develop or improve on their own VASP regulations. In the UAE, the presence of multiple regulators overseeing securities, commodities, and virtual assets can lead to regulatory overlap and complexity. As competition among jurisdictions increases, those offering streamlined and transparent regulatory frameworks with efficient licensing processes are likely to attract top-tier projects and talent. Additionally, the growing consumer demand for sophisticated and high-risk products, such as derivatives and leveraged trading, is reshaping VASP priorities and placing new demands on licensing authorities to keep pace with market and consumer trends.
If you are looking for advice and support to cut through new VASP laws in the UAE or regulatory strategy beyond, get in touch with us now.