Author|Hedy Bi, Jason Jiang

Before Trump officially took office in the White House, the crypto market had already begun to celebrate in advance, cashing in on policy news. This morning, Bitcoin broke through $100,000 due to Trump's official nomination of Paul Atkins as SEC Chairman. Since Trump's election victory, Bitcoin has risen from $68,000 on November 5 to $100,000, achieving a 47% return in just one month. In this article, the author will analyze how policy changes shape the market landscape from the perspective of U.S. crypto policy and the potential development directions in the new landscape.

A "Tough and Rough" Shift in Crypto Regulation Towards More Openness and Friendliness

During his campaign, Trump made ten crypto-friendly commitments to the market, including establishing a strategic Bitcoin reserve. The nominated SEC Chairman Paul Atkins is also known for his friendly attitude towards cryptocurrencies, advocating for reduced regulation to support market innovation. Trump mentioned today that Paul "understands that crypto assets and other innovations are crucial for making America greater than ever and believes in the commitment to strong, innovative capital markets." Paul has also criticized the SEC's hefty fines for harming shareholder interests, advocated for flexible regulatory strategies, and served as co-chair of the Token Alliance. Trump's move to appoint Paul Atkins, who has previously promoted the crypto industry, changes the SEC's previous punitive approach to the crypto sector over the past year, bringing the concept of "financial freedom" into U.S. financial regulatory agencies.

Additionally, other members of Trump's team have provided strong support for the regulatory focus on crypto finance: over 60% of nominated cabinet members have publicly stated that they own Bitcoin or support the development of crypto finance, or indirectly support the growth of crypto assets.

In addition to Trump's commitments in the crypto market and the previously proposed "Financial Innovation and Technology Act of the 21st Century" (FIT 21 Act), the recent Tornado Cash incident also marks a shift towards a more open and friendly direction in U.S. crypto regulation. At the end of November, the Fifth Circuit Court of Appeals ruled that the Treasury's sanctions against Tornado Cash's immutable smart contracts were illegal, stating that these smart contracts do not meet the legal definition of "property." This ruling provides significant support for the legality of smart contracts, allowing developers and users to use these protocols without facing direct conflicts with traditional legal frameworks, thus promoting finance towards a more inclusive and friendly direction, which directly benefits the booming decentralized finance (DeFi) sector.

"America First" Requires More Freedom for Industry and Financial Capital

Financial freedom not only opens up greater development space for the crypto market but also indicates that a profound market integration is brewing as crypto assets connect with traditional financial assets (TradFi). With the development of the digital society and the push from future technologies like artificial intelligence (AI), the way value is created is accelerating its transformation. Former Alibaba strategist Chen Ming has pointed out that general artificial intelligence (AGI) will become a core technological breakthrough in productivity in the future, closely integrating with crypto assets to give rise to a large number of new digital assets.

Blockchain, as a value network technology connecting the digital society with the real world, will play a key role for crypto assets in this transformation. Under the impetus of the "America First" policy, Trump proposed an AI version of the "Manhattan Project," intending to elevate AI technology to a national strategic level and vigorously promote its industrialization process.

In addition to the future digital society, which cannot avoid crypto assets as the main driving force of AI, Standard Chartered Bank has also stated that almost any real asset in the real world can be tokenized, predicting that by 2034, global demand for tokenized assets will reach $30 trillion. Whether it is the future development of the digital society needing crypto assets or the circulation of real-world assets requiring tokenization, the integration of crypto assets with traditional financial assets has the potential to far exceed the "Great Merger Era" of the 1930s and the "Internet Merger Era" of 2000, the former giving rise to $600 billion in industry consolidation and the latter pushing the market size to $3 trillion.

The integration process is now unstoppable. Whether it is the promotion of crypto asset ETFs or the emerging track represented by RWA (real-world assets), just the stablecoin application alone has created a market value of over $200 billion. With the continued penetration of crypto technology, the entire financial market's "cryptofication" process has already begun, which will reshape the global financial landscape and give rise to a new capital ecosystem that is more open and integrated.

How the Three Key Crypto "Commitments" Will Impact the Market

Whether it is the announcement of establishing a strategic Bitcoin reserve or the nomination of a crypto-friendly SEC Chairman, Trump's election seems to usher in the most friendly regulatory environment for the crypto industry in history, thus opening up the recent upward channel for Bitcoin. However, in the medium to long term, the real driving force pushing the crypto industry forward is clearly not the price of Bitcoin, but whether Trump can fulfill those verbal crypto commitments and start providing more space for the crypto market from a legislative level. If Trump can leverage his high prestige within the party and the Republican Party's sweeping victory in both houses of Congress to actively promote key legislation represented by the following three major bills, it may bring a new situation to the crypto industry.

The FIT 21 Act Will Be Prioritized, DeFi Innovation "Returning" to the U.S.

The FIT 21 Act may be the bill that Trump prioritizes after taking office. This bill, hailed as "the most important" crypto legislation to date, not only clearly defines when cryptocurrencies are commodities or securities but will also end the "tug-of-war" between the SEC and CFTC in crypto regulation. The U.S. House of Representatives previously passed the bill by an overwhelming majority and submitted it to the Senate, but the latter has not taken decisive action. However, with Trump in office, the market generally expects the bill's progress to accelerate.

Once the FIT 21 Act is passed, compliant trading platforms and crypto-listed companies will emerge more frequently, and the clear attribute standards will enrich the tradable tokens, providing new opportunities for spot ETFs and other crypto financial products. One of the reasons the Ethereum ETF application struggled to pass was due to vague qualitative definitions; the SEC long believed that Ethereum, after transitioning to a PoS mechanism, resembled a security. It was only when the SEC and Wall Street found a "balance point," clarifying that Ethereum ETFs without staking are not securities, that progress could continue. After the bill is passed, cryptocurrencies clearly categorized as "digital commodities" will find it easier to launch spot ETFs and related financial products, and we may see more types of crypto spot ETFs like SoL, XRP, HBAR, LTC next year.

Multiple institutions have submitted Solana ETF applications

The FIT 21 Act will also promote innovation in decentralized applications, especially in the DeFi sector. The FIT 21 Act specifies that if relevant tokens are deemed decentralized and functional, they will be considered digital commodities and not subject to SEC regulation, and as long as the degree of centralization meets the requirements, they can obtain a certain exemption period, which will encourage more DeFi projects to evolve towards greater decentralization. The bill also requires the SEC and CFTC to study the development of DeFi, assess its impact on traditional financial markets and potential regulatory strategies, and with the exemption period factor, it will attract more DeFi projects to "return."

Additionally, under the influence of friendly policies and expectations of interest rate cuts, more traditional funds will flow into DeFi seeking higher returns, further stimulating DeFi's reinvention. A clear trend is that DeFi will continue to expand collateral assets, bringing more off-chain liquidity on-chain. This will promote the deep integration of DeFi with RWA, allowing tokenized assets like U.S. Treasury bonds and real estate to be used for collateral or lending, enriching the composability and imaginative space of on-chain finance, and allowing DeFi's influence to spread off-chain. The RWA sector will also bring more considerable returns due to its integration with DeFi, accelerating its bidirectional expansion between on-chain and off-chain.

The value of DeFi in the Bitcoin ecosystem cannot be ignored. While penetrating off-chain through ETFs, Bitcoin also shows more possibilities in the on-chain ecosystem. Considering that the Bitcoin market is primarily composed of long-term holders, coupled with the fact that spot ETFs keep market liquidity at a lower level, the resulting Bitcoin lending sector may welcome new opportunities. Since the SEC is likely to allow Ethereum spot ETFs to be staked, staking projects in the DeFi ecosystem may receive widespread attention.

U.S. Stablecoin-Related Legislation Back on the Agenda

In 2023, the U.S. House Financial Services Committee passed the "Payment Stablecoin Clarity Act," but it did not receive approval from the House. In October of this year, crypto-friendly Senator Bill Hagerty submitted a similar draft again, along with Trump's previous commitment not to promote a CBDC issued by the Federal Reserve, and the FIT 21 Act defining licensed payment stablecoins and emphasizing the importance of the licensing system, stablecoin-related legislation may be back on the agenda after Trump takes office.

Stablecoin legislation will directly impact the issuance of U.S. dollar stablecoins and related payment institutions. Some smaller or algorithmic stablecoins may be forced to exit the market, while legitimate stablecoins (like USDC) will occupy a larger market share. At the same time, as legislation clarifies compliance requirements, traditional payment service providers will accelerate the adoption of compliant stablecoins, enhancing their availability and usability in daily transactions, and related enterprises and users will be more willing to accept stablecoins as a supplement to the existing payment system, rather than just for cryptocurrency trading use cases. The market share of stablecoins in cross-border transfers and settlements will continue to rise, with user volume and settlement scale expected to approach or even surpass institutions like Visa.

In addition, whether obtaining returns directly through underlying assets (such as government bonds, money market funds, etc.) and distributing them to relevant participants, or leveraging DeFi protocols to gain on-chain returns, various yield products based on compliant stablecoins will continue to emerge and gain user favor. However, it is important to avoid making stablecoins exhibit characteristics of investment contracts when designing yield mechanisms.

The Repeal of the SAB 21 Proposal is Expected to Restart, Solving the Custody Dilemma for Crypto Assets

The development of crypto financial products such as spot ETFs, as well as the growth of RWA, stablecoins, and DeFi, will boost the demand for crypto custody services. This will compel the restart of the repeal of the SAB 121 (Staff Accounting Bulletin No. 121) proposal. SAB 121 was issued by the SEC in 2022, requiring companies to account for custodial crypto assets as liabilities, which significantly increased corporate leverage ratios, affecting financial health and credit assessments, making related companies reluctant to provide custody services.

Trump promised during his campaign to repeal this announcement upon taking office. The most direct benefit of repealing SAB 121 is the reduction of compliance burdens for crypto custody institutions, allowing banks and other regulated entities to more easily enter the crypto custody space, thereby attracting more institutional investors into the market. Due to the accounting treatment requirements of SAB 121, many banks and financial institutions had previously been relatively cautious about crypto financial products such as spot ETFs; the repeal will reduce the complexity for financial institutions in managing these crypto assets. Stablecoin providers and payment-related businesses are also affected, especially those projects integrated with the traditional financial system. The repeal of SAB 121 may create a more relaxed regulatory environment for these enterprises, aiding their development of core functions such as payments and settlements. The currently popular narrative of RWA will benefit from this, allowing more traditional custody institutions to manage tokenized assets more flexibly, thus attracting more financial institutions willing to participate.

Undeniably, every step of the crypto-friendly policies in the Trump 2.0 era is profoundly reshaping the boundaries of the crypto market. From regulation to accounting standards, every seemingly minor change carries significant strategic implications. The nomination of Paul Atkins signals a more lenient crypto regulatory environment, and the institutional reforms at the asset level are equally noteworthy. The new FASB regulations (ASU 2023-08), which will take effect on December 15, 2024, require companies to record their held crypto assets at fair value. This means that the value fluctuations of crypto assets like Bitcoin held by companies will directly reflect in their financial statements, significantly impacting net income. The implementation of this rule will encourage more companies to include mainstream crypto assets like Bitcoin on their balance sheets. Additionally, Microsoft held a board meeting on December 10 to formally discuss whether to include Bitcoin in its corporate strategic reserves, providing a high-profile industry signal for this trend.

As Bitcoin breaks through $100,000 today, OKX CEO Star stated on the X platform that this is "the power of vision and technology." The path of integrating tradition and innovation is bound to reshape the new order of global capital markets.

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