How the Last 50 Days Will Drive Blockchain Adoption and Value Accretion Skywards
How the Last 50 Days Will Drive Blockchain Adoption and Value Accretion Skywards
2025 is proving to be momentous for the transition towards a digital financial future and blockchain and crypto.
At the end of last year we wrote:
It just happened. The world's most important innovation economy went to the ballot box last week and voted on a new future which will include leadership in the global race for digital monies, commodities, and assets. We could not be happier. Our investment thesis just received the most powerful accelerator we could have hoped for.
In today's newsletter we outline the remarkable progress that has been made in the USA towards leadership in the blockchain and crypto space in just the first 50 days of a new administration.
LEADERSHIP, GOVERNANCE, STRATEGIES, PLANS, AND DEADLINES
Today's newsletter builds upon what we shared with you after two weeks of this administration as the first set of Executive Orders were published. If you wish to refresh your knowledge of those orders please re-read Blockchain Coinvestors Newsletter Vo 7, No 2 - US Blockchain Adoption: The First 14 Days.
Central to the new administration's approach is to establish leadership, governance, strategies, plans, and deadlines for making the US the world's leader in Digital Financial Technology (remember we have talked in the past about how Digital Financial Technology is powered by multiple technologies of which distributed ledger is central, and that crypto is a sub-category of digital monies, commodities, and assets since every asset can be tokenized - not just distributed, decentralized ones).
This was accomplished with the first Executive Order shown in Exhibit 1.
Exhibit 1: EO Leadership in Digital Financial Technology
The progress has been remarkable in just the last 50 days. There is so much we could write, but to cover so much, we will stick with bullet points:
January -- Strengthening American Leadership in Digital Financial Technology Executive Order did 5 important things (among others):
Called out the need to rapidly revoke anti-innovation Biden era policies – clean slate
Prohibited an Orwellian fed-issued CBDC opening the future for private sector stablecoins to lead
Created a working group to propose Federal Regulatory framework in 180 days (accompanied by the appointment of the US's first Crypto and AI Czar, David Sachs)
Outlined clear policy objectives for Senate and House leadership including the specific legislation they should work towards and the deadline for each
Made it clear that Federal agencies could not block and undermine blockchain innovation any longer
Same day -- SEC repeals SAB 121. Altogether, this means:
Banks can now custody digital assets
Crypto companies can now access US banking rails & services
Removes unduly burdensome capital & regulatory requirements
Increases capital efficiency for our 1,250 portfolio companies
Banks become clients not competitors, opening a whole new, massive client segment
Clears the way for institutional investment, creating a green light in their eyes
And more
February
Beyond SAB 121 we saw the wholesale striking off of most of the Biden administration's most egregious, and sometimes illegal, work
The new Senate and House leadership of key committees got to work in scheduling meetings to support the earlier Executive Orders
In parallel, SEC and CFTC interim leadership also began to create pro-innovation and blockchain actions, with the first announced during the month
At the SEC and Depart of Justice legal cases were aborted and US leading players including Coinbase, Consensys, Kraken, Ripple, Uniswap, and others were freed from the burden that had wasted hundreds of millions of their shareholder capital spent defending against capricious court cases that had in turn wasted hundreds of millions of dollars of taxpayer money
The 'anti-crypto army' of Warren and Gensler was identified, and in many cases terminated or reassigned to places where they could no longer damage American interests
Chokepoint 2.0 debanking activities of multiple Federal and State government agencies were revealed and initial hearings began in both the Senate and House - here the FDIC still has to share unredacted papers and much more illegal activity will surely be forthcoming and the DoJ has indicated that court cases may begin when illegal activities are revealed
A large number of US states began to discuss, and evaluate changing their state investment policies to include holding crypto assets beginning with Bitcoin
And more
Before turning to the breaking news of March, let us summarize some implications of this whirlwind of activity.
Private Market Implications
Blockchain companies can get back to work focused on innovating in America rather than burning up leadership time defending against errant government attacks
Overseas players can now either launch into the US, or return back to the US, to bring their blockchain teams and their innovations onshore
Capital markets can begin to reset, as regulatory uncertainty is removed and capital can more easily flow towards innovation and the entrepreneurial teams that create it
Users can feel able to first try, and then use, these new innovations, knowing their government is not going to come down hard on them if they do so
International capital can now more easily support US private sector innovation - we are already seeing this at Blockchain Coinvestors where for example, we just invested another $16m into Securitize led by heightened European and Asian investor interest in getting into the best US blockchain companies
And more
Public Market implications
Likely we will see a string of blockchain IPOs and DeSPAC mergers this year
Given the slew of late stage, mature, IPO-ready assets
We are investors in scores of blockchain unicorns and most have been discussing this topic for at least a year or two
Likely we will also see a string of partnerships, JVs and major acquisitions this year
As major banks, asset managers, payment companies, exchanges and so on try to rapidly in-house this technology...
...They will try to catch up quickly - it is very rare to have a new emerging financial technology that the world's largest enterprises are 5 years behind in embracing.
Other implications
Likely to see web3 developers/talent come back onshore to the US once they realize they no longer need to fear innovating here
Similarly, likely to see a handful of large blockchain companies and perhaps protocol foundations redomicile to the US
Support for USD-stables reinforces hegemony of US dollar globally (both Circle and Tether have been living in a grey world of US regulatory uncertainty)
Likely will lead to a surge in investment, first in core infrastructure (exchanges, market makers, custody) as well as in blockchain applications
So that is a brief recap of January and February progress, but now onto the new news from this last week and it is equally earthshaking.
BREAKING NEWS
Is this whirlwind of pro blockchain and crypto government actions coming to an end?
Far from it. March has already seen two actions that will have enormous and long term impact on our industry.
First, the President has just issued another Executive Order as shown in Exhibit 2. This time to make the US one of the world's first countries to incorporate a Bitcoin strategic reserve into its treasury activities, as well as a second Digital Asset Stockpile for holding other crypto assets.
Exhibit 2: EO Strategic Bitcoin Reserve & Digital Asset Stockpile
The beginning will be that all Federal digital assets already held will be moved into these new locations. Perhaps more than 200,000 Bitcoins and other crypto assets including holdings of Cardano, Solano, and XRP for starters.
Perhaps more dramatic is that the President also instructed his Cabinet to explore budget neutral ways to grow these reserves.
Just as one example, one could imagine auditing Fort Knox and then selling large quantities of gold and reinvesting the proceeds into Bitcoin and other assets.
To read the executive order in full click here.
If that was not enough, this week, and somewhat overshadowed by the above, the Office of the Comptroller of the Currency also got into the act. Exhibit 3 is the first part of Interpretive Letter 1183.
Exhibit 3: OCC Bank Crypto-Asset Activities
This is so hot off the press that we don't have our own analysis completed yet. But suffice to say, this begins to dismantle the anti-crypto armies' work that made it impossible for the banking industry to embrace digital assets. With this Interpretive Letter, we see the unwinding of prior anti-innovation work of the anti-'progressive' end of the last administration.
Once 3,000 plus US banks get going, adoption will increase exponentially. As the CEO of Bank of America put it at Davos in February (and we summarize) stablecoin rails will be offered alongside other payment rails going forward. Of course, as we have continuously pointed out to our readers, stablecoins provide almost instantaneous, almost free global payments in easy to use formats. They represent a much superior value proposition to end users over other payment rails like Swift, ACH, Bank transfers, and so on. The CEO of Bank of America understands where the future will migrate, and while he can't say 'our existing payment rails are slow, costly, and difficult to use', he has clearly now embraced the reality that his future will be fully digital.
These two actions mark the beginning of March. What else does March hold? We don't want to speculate, but apparently, tax policy is under review, and it is even possible that 'made in America' digital assets may see reduced, or even zero capital gains if held more than a year. That would be dramatic, but we don't know if it will happen.
What we do know is that this pro digital finance technology movement is only just beginning.
WHAT COMES NEXT
Let's summarize a few points that will drive the future of the Digital Financial Technology industry that appear to be in clear view:
We now have the most pro crypto government in history, and it is the largest - the USA
Institutions have the clarity they need to invest now, and important lawmaking will make this even more transparent in coming months
Portfolio companies have access to a new set of potential clients and partners, including at the world's largest financial institutions
Exit opportunities are expanding and we expect IPOs and DeSPAC mergers to be announced in increasing numbers
Banks and other leading financial institutions will move to catch up quickly in this race
Anticipate a string of acquisitions, partnerships, and JVs to be announced in 2025
If that was not already a lot, remember that the rest of the world tends to follow US innovation leadership. Expect those countries that have not already moved ahead to get started, and those that already embraced digital finance and blockchain, such as Switzerland, to harmonize with US regulations as they roll out to ensure interoperability.
IMPLICATIONS FOR BLOCKCHAIN ADOPTION AND VALUE CREATION
Early this year, we published a set of blockchain value creation KPIs that we intend to track in 2025 and beyond. To read more about this as well as our 2025 predictions, please read our prior Blockchain Coinvestors Newsletter Vol 6, No 12 - 2025 Blockchain Predictions From Blockchain Coinvestors.
Exhibit 4: Blockchain Value Creation KPIs
In short, the first 50 days of this new administration has dramatically raised our expectations for all of the blockchain value creation KPIs shown in Exhibit 4.
Not least, we believe we are at an inflection point with regard to the fundamental growth drivers: 1) Crypto wallet users; 2) monthly active accounts; 3) institutional adoption; and 4) government support for our space.
Expect more from us on these value drivers in future newsletters.
IMPLICATIONS FOR INVESTORS
So what does this mean for Blockchain Coinvestors and for our investors?
Our investment thesis continues to be on point and inevitable - but we will now see an acceleration of momentum towards it;
We believe our investment strategies are perfectly positioned and will now be driven forward by powerful tailwinds that will rapidly increase values;
We are already seeing this with all time highs for some crypto tokens including Bitcoin, and rapidly increasing secondary market prices on private blockchain equities including some of our portfolio companies.
It could not be a better time to allocate more capital to blockchain ventures - and we are.
Here at Blockchain Coinvestors we have just made new commitments from our latest investment strategy, into several blockchain venture funds including 1kx, 1Confirmation, Blockchain Capital, Blufolio, Castle Island, Dragonfly, Fabric, Greenfield, LIF, and Pantera with more to follow.
If you want to learn more about our investment strategies, please just contact us at IR@BlockchainCoinvestors.com.
Please do consider allocating capital with us ahead of - and now behind - this new acceleration.
Thank you for reading.
The Blockchain Coinvestors Partners
About Blockchain Coinvestors
Blockchain Coinvestors invests in blockchain businesses. Our vision is that digital monies, commodities, and assets are inevitable and all of the world’s financial infrastructure must be upgraded. Our mission is to provide broad coverage of early stage blockchain investments and access to emerging blockchain unicorns. Blockchain Coinvestors’ investment strategies are now in their 12th year and to date we have invested in a combined portfolio of 1,250 blockchain companies and projects including more than 110 blockchain unicorns. Visit us at www.BlockchainCoinvestors.com to learn more.
“We Invest in Blockchain Businesses”