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For the crypto industry, the elections in 2024 were a game changer. With 287 “pro-crypto” members of Congress and a president-elect who has proclaimed that the U.S. will be the “crypto capital of the planet,” the industry is poised to be on an accelerated path toward mainstream adoption. As market participants digest the potential impact, one thing is certain: a pivot from “regulation by enforcement” to a regulatory regime where clear, transparent and predictable rules are prioritized will be a major unlock for the space. The inevitable regulatory de-risking that will follow will open the door to a new class of markets, products and applications. Here are some verticals that could thrive in this new environment:
Decentralized finance (DeFi). DeFi is one of the most exciting crypto-powered innovations where applications deploy “smart contracts” to replace intermediaries, offering universal access to trading, borrowing, lending and myriad other financial services. To date, regulators have remained steadfast in their insistence that intermediaries must be required, undermining the fundamental innovation of DeFi. A favorable regulatory climate will change this. A clear regulatory framework could also pave the way for token holders to compliantly share in protocol revenue — something long sought by industry participants.
Artificial intelligence: With artificial intelligence (AI) exponentially accelerating and AI “agents” arriving years earlier than expected, the openness, transparency, scale and even “proof of personhood” achieved by integrating crypto and AI could pave the way for responsible innovation across both technologies.
Fixed income markets. Interest rates are the backbone of traditional financial markets. Nascent fixed income markets are poised to grow as financial institutions, now facing less regulatory resistance, enter global crypto markets. Benchmark yields like the composite ether staking rate (CESR), and perpetual swap funding rates, will bring the utility of the $500 trillion interest rate swap market to the crypto space, appealing to hedgers and speculators alike.
Utility tokens. During the SEC’s regulation by enforcement regime, tokens that demonstrated utility were often targets for enforcement. As a result, memecoins — tokens with no utility — flourished. A favorable regulatory climate could refocus the market on utility — something that could fuel additional mainstream adoption.
Decentralized physical infrastructure (DePIN). DePIN uses the incentivization of tokens to drive mass community participation, allowing for the creation of large, decentralized physical networks. Across telecommunications, mapping, computing and geolocation industries, these networks are providing more scalable and cost efficient solutions than their centralized peers.
Trump 2.0 and the bipartisan, pro-crypto Congress will usher in a brave new world for the crypto industry. A regulatory environment that encourages innovation, rather than stifles it, will finally give the institutions the confidence to enter the market. And entrepreneurs, no longer shackled by the threat of regulatory sanction or personal liability, will be free to focus on building. The future could not be brighter.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.