The Trump administration, supported by a Republican-controlled Congress, is set to prioritize reshaping crypto regulations. A key move will be appointing a new SEC Chair and commissioners who are more open to innovation and industry engagement.
However, lasting regulatory clarity is expected to come from Congress rather than the SEC. With majorities in both chambers, Republicans are motivated to fulfill campaign promises by advancing legislation that establishes clear and supportive guidelines for the digital asset ecosystem.
Expect a modified version of FIT-21, incorporating elements of the Lummis-Gillibrand Responsible Financial Innovation Act and addressing Senate concerns regarding illicit finance, to be a top legislative priority. Passage of such legislation would establish a much-needed framework for digital asset issuers and intermediaries, clarifying jurisdictional lines between the SEC and CFTC, streamlining registration processes, and establishing tailored disclosure requirements.
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The shift from regulatory uncertainty to a clear legal framework would also likely encourage institutional adoption and further integrate digital assets into the traditional financial system.
Stablecoin Legislation Gets Signed into Law
The stars are aligned for stablecoin legislation in 2025. With bipartisan support in Congress and a Trump Administration eager to promote financial innovation, a comprehensive stablecoin bill is highly likely to be enacted.
The final legislation will likely draw heavily from Chair McHenry’s Clarity for Payment Stablecoins Act, incorporating a strengthened federal floor for state-qualified issuers and provisions addressing AML/CFT concerns to appease Senate Democrats. Expect a robust state pathway for issuers, fostering competition and innovation in the stablecoin market.
Establishing a federal stablecoin framework would bring crucial regulatory clarity, encouraging mainstream adoption, integration into payment systems, and strengthening the U.S. dollar’s position in global finance. With BRICS developing an alternative financial system—a move Trump has opposed, threatening 100% tariffs on adopters—the Administration may view U.S. dollar-backed stablecoins as a strategic tool to counter BRICS’ influence.
The future of decentralized stablecoins like DAI remains uncertain. While a regulatory framework for centralized stablecoins could accelerate their adoption, it may also place decentralized alternatives at a disadvantage due to challenges in meeting regulatory requirements. This shift could further strengthen the dominance of centralized stablecoins like USDC and USDT.
The ability of decentralized stablecoins to retain market share will hinge on their adaptability to the new regulatory environment and their capacity to demonstrate unique value in a more regulated ecosystem. However, innovation in decentralized stablecoins may stall, potentially delaying the realization of a fully decentralized financial system.
CBDC Development Continues, but Retail is Off the Table
Under a Trump Administration and a Republican-controlled Congress, a retail CBDC is highly unlikely. However, research and development of wholesale CBDCs will continue at the Federal Reserve. The Fed will explore potential use cases for wholesale CBDCs in cross-border payments and settlements, working with industry stakeholders to address privacy and security concerns.
Legislation will likely be enacted to explicitly prohibit the Fed from issuing a retail CBDC without clear Congressional authorization, further solidifying the Republican Party’s stance on protecting financial privacy.
This focus on wholesale CBDCs, while less impactful for individual consumers, could still have significant implications for the financial system, potentially improving efficiency and reducing costs for cross-border transactions. It could also create new opportunities for private sector innovation in developing and implementing CBDC-related technologies and services.
Self-Custody is Protected, but Privacy Remains a Battleground
With a Republican majority in Congress and a Trump Administration committed to protecting individual liberties, the right to self-custody will likely be codified through legislation. This would safeguard individuals’ ability to hold and control their own digital assets, a core tenet of the crypto community.
However, the debate over privacy-enhancing technologies, like mixers, will persist. Expect targeted legislation aimed at addressing the illicit use of mixers, while also seeking to preserve privacy for lawful transactions.
Policymakers face the challenge of balancing privacy rights, national security, and efforts to combat illicit finance. The outcome of this debate will significantly impact the future of financial privacy, shaping the adoption of privacy-preserving technologies in both crypto and traditional finance. Striking the right balance is essential to foster innovation while addressing legitimate law enforcement needs.