The United States Bold crypto policy, will it be a reality?

As we look toward the future of cryptocurrency under the Trump administration, we're on the cusp of what could be the most transformative shift in American financial policy since the gold standard was abandoned. 2025 will likely present a fundamental rethinking of the global economic system, where digital assets will dictate the balance of power… let’s call it the modern space race. Suppose the rise of digital technologies will define the 21st century. In that case, Trump's proposed policies may set the stage for a new financial era that mirrors the shifts we saw with the introduction of the fiat currency standard in the 1970s.

In my previous newsletter, The Crypto Magic Formula, I explored how the forces driving cryptocurrency markets are fuelled by investor psychology, technological innovation, and macroeconomic shifts. But the narrative is evolving. The Trump administration is positioning itself to move beyond traditional financial frameworks, recognising the revolutionary potential of blockchain and digital currencies. The integration of these technologies into the U.S. financial system is sending ripple effects that are capturing global attention.

Breaking the Traditional Mold

This transformation starts with leadership. The Trump administration’s selection of blockchain advocates like Paul Atkins for the SEC and David Sacks as a newly appointed Crypto and AI Czar is a clear sign that innovation will be prioritised over the regulatory heavy-handedness that has defined past presidencies. As discussed in the newsletter, Bitcoin hits $100k: The golden age begins, these epic appointments are the architects of a new digital economy, where blockchain and cryptocurrency have a clear road of regulatory innovation and sustainable development. This shift in leadership speaks volumes about the administration’s broader approach.

If we take a second to look at the roadmap that lies ahead for the crypto world, we can start to piece together a clear puzzle of how the events of 2025 should play out. As Donald Trump prepares to take office on the 20th of January, the crypto and Bitcoin space is overflowing with anticipation for upcoming events and potential shifts in policy. Starting with his inauguration, markets are closely watching for a likely initial correction before a surge of volume comes in… more colloquially known as “Buy the rumour, sell the news”. Trump's pro-crypto stance has already fuelled optimism in the market, with many predicting Bitcoin could hit or exceed $150k.

Post-inauguration, Trump is expected to unveil significant crypto-related policies. Among these is the executive order or legislative push to establish a Strategic Bitcoin Reserve, positioning the U.S. government as an official Bitcoin holder. Additionally, Trump has promised to create an advisory council for digital assets, likely to guide policies aimed at fostering innovation in the crypto space… this begins with the already-appointed David Sacks and the breaking news of Bo Hines. Legislative actions could also gain momentum, with Trump supporting bills like the Financial Innovation and Technology for the 21st Century Act (FIT21) to bring greater regulatory clarity.

Moving into February, the new SEC leadership with Paul Atkins at the helm could bring immediate regulatory adjustments, such as approvals for spot ETFs with alternative currencies (Solana). With a pro-crypto SEC Chair, we are also likely to see a boom in Web3 Decentralised Finance in the US, after a few years of this industry being oppressed due to the heavy hand of Gensler, once this is lifted with Paul Atkins taking the lead we are likely to see a mass of new users pile liquidity into a decentralised financial space.

Looking beyond February, the global crypto landscape will see intensified competition as other nations respond to U.S. policies by establishing their own Bitcoin reserves or revising their crypto strategies. Domestically, clearer regulations will spur a wave of innovation, increased institutional investments, and broader adoption of cryptocurrencies in traditional finance. Enthusiasts remain long-term bullish, believing that if Trump’s policies are successfully implemented, the crypto market could experience significant growth, pushing Bitcoin and other digital assets further into the mainstream and ultimately into the famed “Super Cycle”.

As Trump prepares to take office in January, significant developments are expected regarding cryptocurrency regulation and the establishment of the Strategic Bitcoin Reserve. The landscape appears favourable for pro-regulation initiatives due to Republican control of Congress and anticipated leadership changes in regulatory agencies. However, challenges remain, particularly concerning the Federal Reserve's stance on cryptocurrency ownership and market stability concerns. The first few months of Trump's presidency will be crucial in shaping these policies and addressing potential risks associated with government involvement in digital assets.

The Federal Reserve Challenge

The Federal Reserve has long been the central pillar of America's financial infrastructure; we are all too familiar with Powell’s famous “Good Morning” being one of the most market-disrupting statements… at least for us low time frame traders in the trenches during the FOMC (Federal Open Market Committee) events. At the recent FOMC meeting, Federal Reserve Chair Jerome Powell addressed questions about establishing a Bitcoin Strategic Reserve, making it clear that the Federal Reserve cannot own Bitcoin. “We’re not allowed to own Bitcoin,” Powell stated, emphasising that any policy change would require Congressional action. He also clarified that the Fed has no intention of seeking changes to existing laws to allow Bitcoin ownership. These comments came amidst discussions around President-elect Donald Trump’s proposal for a strategic Bitcoin reserve.

Powell’s remarks had an immediate impact on Bitcoin’s market price, sending it down a few per cent. This decline reflected market sentiment that the Fed’s stance reduced the likelihood of near-term U.S. government endorsement of Bitcoin as a reserve asset. The conversation occurred in the context of the FOMC’s decision to cut interest rates by 25 basis points, signalling caution in monetary policy amidst broader economic concerns going into 2025. The idea of a Bitcoin Strategic Reserve under Trump’s administration has garnered mixed reactions. Analysts point out significant legislative and practical challenges, such as obtaining Congressional approval and potentially issuing new Treasury debt to fund Bitcoin acquisitions. Scepticism remains high despite support from some Republican lawmakers, including Senator Cynthia Lummis, who advocates for such initiatives.

Under current law, the Federal Reserve is prohibited from owning Bitcoin, as Powell reiterated. Establishing a Bitcoin Strategic Reserve would likely fall under the purview of the U.S. Treasury. Proposed plans suggest purchasing up to 1 million Bitcoins over five years, potentially funded through profits from Federal Reserve deposits and gold reserves. However, the implementation would require clear frameworks for acquisition methods, management protocols, and compliance with federal asset laws.

In short, while the Trump administration might advocate for a Bitcoin reserve, the Federal Reserve's legal restrictions complicate the feasibility of direct involvement. Legislative efforts would need to navigate a divided Congress and address regulatory concerns, leaving the proposal's future uncertain. Although ambitious, the idea faces significant hurdles before it could become a reality, contributing to initial market fears and a resulting volatility event for Bitcoin. The core issue lies in the Federal Reserve’s traditional models and regulatory frameworks, which were designed for a pre-digital era and are increasingly ill-suited to the rapid rise of cryptocurrencies.

What if the Federal Reserve swipes left?

At this point, you may be wondering the worst… what if the Fed Blocks the Bitcoin Strategic Reserve… then what? Well, there are avenues to take that bypass the direct involvement of the Federal Reverse. First, Congress would need to draft comprehensive legislation that clearly outlines the purpose, structure, and operational guidelines for the reserve. This approach would require designating a specific federal agency, such as the U.S. Treasury, to oversee the reserve instead of the Federal Reserve. Clear acquisition and management protocols would be essential to mitigate risks like price volatility and security breaches. After all, imagine the fallout if the U.S. Bitcoin reserve were compromised due to something as reckless as storing private keys online or failing to implement proper multi-signature cold storage… the ultimate rug! To enhance stability, Congress could adopt risk mitigation strategies, including diversifying the reserve with other digital assets to spread risk and mandating regular audits and public performance reports to ensure transparency and accountability.

In terms of regulatory frameworks, Congress would likely create oversight mechanisms, such as special committees to review the reserve’s activities and require detailed reports to assess its impact on fiscal policy and market stability. Collaboration with regulatory bodies like the SEC (Securities and Exchange Commission) or CFTC (Commodity Futures Trading Commission) could also help ensure operations comply with existing financial standards. Although the Federal Reserve might oppose such a proposal, its ability to block the establishment of a Strategic Bitcoin Reserve is limited, given Congress's constitutional authority. Strong bipartisan support could further reduce the Federal Reserve’s influence.

If necessary, Congress has alternatives to bypass the Fed’s involvement. For example, they could assign the U.S. Treasury or a newly created entity to manage the reserve, establish a Special Purpose Vehicle (SPV) to handle Bitcoin assets independently or use budget reconciliation to streamline legislative approval. Ultimately, Congress has several avenues to assert its authority and establish a Strategic Bitcoin Reserve regardless of the sentiment from Powell and the Federal Reserve.

The Regulatory Renaissance

Under the leadership of Paul Atkins as the newly appointed SEC Chair and David Sacks as the Crypto and AI Czar, we’re likely to witness a regulatory renaissance, especially in the cryptocurrency and Web3 space. Atkins is expected to prioritise clarity and balance in regulations, shifting away from the enforcement-heavy approach of his predecessor, Gary Gensler. One of his first moves is likely going to be a comprehensive review of the SEC’s policies on digital assets, aiming to provide clearer frameworks that define what constitutes a security. With the recent approval of Ethereum ETFs, Atkins will streamline approval processes for future crypto-based financial products, ensuring that innovation aligns with investor protection.

What most people are excited about, besides the winding down of current SEC open cases, is having Paul Atkins lead and foster a positive regulatory environment. Atkins will encourage clearer guidelines for token issuance and trading, which will reduce the risk of violating securities laws. He will also engage more openly and positively with Web3 companies to draft practical regulations that support technological advancement in building the Web3 Hub we all desire within the U.S.! By shifting the SEC’s focus from strict enforcement to a more collaborative approach, Atkins will incentivise compliance through transparent rules and incentives, providing businesses with a clearer path to regulatory approval.

A more predictable and innovation-friendly SEC is going to boost confidence in the crypto space, attracting increased investment in U.S. based Web3 ventures. Globally, this approach could help the U.S. reclaim its position as a leader in blockchain and cryptocurrency innovation, countering the trend of companies moving to more crypto-friendly jurisdictions. While the full extent of Atkins’ impact will depend on navigating complex legislative and political dynamics, his anticipated approach signals a promising era for regulatory reform that balances innovation and investor protection.

As of 2 days ago, we have breaking news out of the white house. President-elect Donald Trump has appointed Bo Hines as the executive director of the newly formed Presidential Council of Advisers for Digital Assets, colloquially known as the "Crypto Council." His appointment, alongside David Sacks as the "Crypto Czar," has sparked mixed reactions within the crypto community… some are optimistic about the potential for regulatory clarity and industry growth, while others question Hines’ depth of expertise. Despite concerns about his expertise, I believe Bo Hines, working alongside David Sacks and the new pro-crypto SEC, is well-positioned to act as a strong bridge between politics and the digital asset world.

Global Ripple Effects

As the U.S. begins to implement its bold vision for blockchain and cryptocurrency, a global shift is unfolding in how digital assets are being viewed and ultimately integrated into national financial strategies. Let’s jump across the pond and look at the European Union (EU).

At the heart of the EU’s efforts is the Markets in Crypto-Assets (MiCA) framework, adopted in May 2023. MiCA represents a significant step forward, offering a comprehensive legal framework to regulate crypto assets. It addresses unbacked crypto-assets, asset-referenced tokens (ARTs), e-money tokens (EMTs), and stablecoins, introducing stringent requirements for transparency, reserves, and consumer protection. For Crypto-Asset Service Providers (CASPs), MiCA mandates licensing, governance standards, and anti-money laundering compliance while also extending market abuse regulations to the crypto sector. Moreover, it introduces environmental disclosure requirements, reflecting Europe’s commitment to sustainability.

However, MiCA’s cautious nature has drawn criticism for potentially stifling innovation. The compliance costs and stringent regulations may deter startups and drive businesses outside the EU. This conservative stance stands in contrast to the U.S.’s more agile approach, which is not only fostering innovation but also capturing market confidence, as evidenced by Bitcoin’s recent surge past $107,000 two weeks ago. The U.S.’s leadership in exploring blockchain solutions and digital asset strategies is exerting pressure on European policymakers to act more decisively.

The conversation within Europe is shifting, with increasing calls for bold moves such as the creation of a European Bitcoin reserve. Advocates like European Parliament member Sarah Knafo and German MP Joana Cotar argue that Bitcoin could serve as a strategic asset, offering protection against inflation, diversifying reserves, and promoting financial decentralisation. A European Bitcoin reserve could also enhance the EU’s competitiveness, attracting blockchain and crypto businesses and positioning the region as a leader in digital finance.

Yet, significant challenges are still evident. Implementing a Bitcoin reserve would require alignment with MiCA’s regulations, consensus among EU member states, and strategies to manage Bitcoin’s inherent volatility. Moreover, the EU must reconcile its cautious regulatory framework with the need for flexibility to keep pace with rapid innovation.

Globally, the ripple effects of U.S. crypto policies are becoming evident. Nations like Japan, Brazil, and Russia are exploring Bitcoin reserves, while others, such as El Salvador and Bhutan, have already embraced Bitcoin in varying capacities. These developments highlight the urgency for the EU to remain competitive in the digital asset economy.

In short, the EU finds itself at a pinnacle inflection point. While MiCA provides much-needed regulatory clarity, its conservative nature risks leaving Europe behind in the global crypto race. The U.S.’s proactive stance and market confidence serve as a wake-up call, challenging Europe to rethink its approach. To maintain relevance and leadership in the digital economy, the EU must strike a delicate balance, building on the foundation of MiCA while embracing forward-thinking strategies like a Bitcoin reserve. If the U.S. Strategic Bitcoin Reserve proves successful and its pro-regulatory environment thrives, it is likely to create ripple effects, pressuring other countries to adopt the emerging asset class to avoid being left behind.

Market Dynamics

The traditional financial world is rapidly adapting to the opportunities presented by digital assets as institutional adoption of cryptocurrency accelerates. Legacy players are scrambling to position themselves in this new landscape, with the recent inflows into the BlackRock Ethereum and Bitcoin ETFs serving as clear evidence of mass institutional demand. The BlackRock Bitcoin ETF, specifically the iShares Bitcoin Trust (IBIT), has become a landmark in demonstrating institutional interest in cryptocurrencies.

Since its launch, IBIT has seen massive inflows, with billions of dollars invested, signalling strong institutional demand for digital assets. The ETF's growth has made it one of the largest Bitcoin ETFs by AUM (Assets Under Management), surpassing established vehicles like Grayscale’s GBTC. IBIT has attracted a diverse range of institutional investors, including asset managers, hedge funds, and pension funds, demonstrating the broad acceptance of Bitcoin in institutional portfolios.

At the same time, we are seeing a growing acceptance of cryptocurrencies as a legitimate asset class within portfolio management. Bitcoin is increasingly viewed as "digital gold," a store of value that provides an alternative to traditional commodities and fiat currencies. This shift in perception has driven the emergence of new investment vehicles such as Bitcoin ETFs, Bitcoin futures, and even Bitcoin-backed real estate and debt instruments. The digital gold rush is real.

What’s most striking right now is the rise of "crypto-first" investment strategies. These approaches prioritise blockchain-based assets over traditional financial instruments, and they’re reshaping how we think about storing and transferring value. Investors are realising that digital assets will play a huge role in the future of wealth, and they’re positioning themselves for that shift. Although I’ve been ahead of the curve on crypto institutional adoption for years, I’m especially bullish for 2025! Specifically, I’m focusing on the gaming and AI narratives within the Web3 space, as I’ve mentioned in previous newsletters. With the inauguration of the pro-business, pro-crypto, and pro-AI policies from the Republicans, alongside the alignment of business and debt cycles, I believe we’re looking at a strong risk market for 2025. Despite current monetary reservations, I’m positioning for risk assets to perform well through 2025 and into early 2026.

Looking Beyond 2025

As we look beyond 2025, it’s likely the shift will conclude with cryptocurrencies forming the cornerstone of national economic strategy. The convergence of AI and blockchain technologies will create financial systems that are automated, intelligent and generative and, therefore, can learn, adapt, and evolve based on real-time data and predictive algorithms. These systems will be capable of managing national economies, balancing supply and demand, and even optimising fiscal policies in ways we can't yet imagine.

The future of governance is also unfolding in real time. The principles of blockchain, transparency, decentralisation, and immutability are already being explored in new forms of digital governance. As governments experiment with blockchain to enhance transparency in decision-making, elections, and public services, we could see the emergence of decentralised forms of governance that challenge the very nature of nation-states.

For investors, the opportunities presented by this transformation are unparalleled. As America takes steps toward creating a Strategic Bitcoin Reserve, those who position themselves ahead of the curve are positioning for a fundamental shift in global wealth. The companies that are building the infrastructure to support crypto adoption today will lay the foundation for future financial systems. From blockchain-powered payment processors to regulatory tech solutions that ensure compliance in the crypto space, these businesses are integral to the future of finance. The emergence of new financial instruments that blend traditional finance with crypto innovation will further reshape the investment landscape.

America’s vision for a Strategic Bitcoin Reserve is a bold step into the future, signalling a global space race for monetary decentralisation.

Some Key takeaways:

1. Strategic Bitcoin Reserve: The Trump administration proposes a groundbreaking Bitcoin reserve, positioning the U.S. as a leader in digital finance.

2. Pro-Crypto Leadership: Appointments like Paul Atkins and David Sacks signal a shift towards innovation-friendly policies in crypto and blockchain regulation.

3. Global Ripple Effects: U.S. policies are pushing other nations to rethink their digital asset strategies, igniting a competitive "modern space race."

4. Institutional Momentum: Inflows into Bitcoin and Ethereum ETFs highlight strong institutional demand, paving the way for broader adoption.

5. Regulatory Renaissance: A balanced approach to regulation under new leadership could create a thriving environment for Web3 and crypto innovation in the U.S.

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