US Blockchain Adoption: No Looking Back, But What Happens Next?
US Blockchain Adoption:
No Looking Back, But What Happens Next?
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 details and make some initial predictions on what the new US plan for our industry may include. However, we will return with our 2025 Blockchain Predictions later this month, so stay tuned.
Investment Thesis
We want to start by reminding you of the investment thesis we wrote down a decade or so ago. It is unchanged, and more inevitable than ever. It is quite straightforward as described in the following exhibit.
Every bullet point is still as true today, or truer, than when we wrote it down back in the far away early teens of this century.
US Has Been The Global Laggard
However, progress towards our vision of a world of digital monies, commodities and assets has been suffering from the reality that for four years, and for some unclear reasons, the leadership of the world's largest economy has been trying to slow it all down.
Every other leading financial center has been moving quickly to prepare for the future, and the global race to be a digital asset hub is well articulated in our bi-annual DIGITAL ASSET REGULATION REPORT - YEAR-END 2024 which was published last week.
The headlines on the following exhibit make a powerful case for how the majority of the world's governments are working hard to be pro innovation and pro digital finance.
Our report includes the details of where each of the top 25 global financial centers stands, and the map of their status highlights the US as the world's leading laggard.
In practical terms this really matters. US based blockchain innovators have spent far too much time living with, and reacting to, US regulatory uncertainty and the leading US blockchain unicorns have had to spend more than $400 million battling the SEC's Gary Gensler-inspired war of 'regulation through enforcement' which applies legislation that in some cases was created a hundred years ago and is clearly unfit for purpose in a digital age.
Despite the hostile four years of the outgoing Biden administration, all of the fundamentals which we track to measure progress of the global adoption of blockchain are moving along exceptionally well. However, we expect they will be turbocharged by a positive, pro innovation US mindset.
2024 Election Results - A Clean Sweep
Given this context, we were watching the 2024 US Presidential Election very closely, and you can watch our earlier podcast with Blockchain Association President, Kristin Smith, to see where we were two weeks before the election.
The results are in, and the citizens of the US threw out the leadership of the last four years in no uncertain terms. It was a clean sweep at each of the Presidential, Senate, and Governor levels of US government. As of the date of publication, the House count is not yet finalized but the Republicans are currently in the majority.
While we don't want to suggest for a moment that blockchain was a defining issue of the election, it was a part, and the incoming US leadership had firmly stapled a pro blockchain narrative to their manifesto. From President elect Donald Trump, to the majority of Senate and House candidates, a pro crypto stance was evident, and the voters, including the 50% of Americans who are digital natives, were taking note.
Pro-Crypto Candidates In Significant Majority
We were early supporters of Stand with Crypto which is an organization focused on helping voters learn about the stance of their elected and prospective government leaders with regard to our industry.
Stand with Crypto tracks the specifics of every government official's stance, and the results are dramatic. Roughly two thirds of House and Senate winners began the race as pro-crypto. Conversely, a good number of candidates hostile to the industry lost their races.
There were a number of particularly important races in this election, which the industry really wanted to see won by the pro blockchain candidates. This is where the industry PACs focused their support, and the results are exceptionally powerful. As Brian Armstrong, CEO of Coinbase, puts it, "Crypto won 48 out of 48 races - not bad"
To name but one, Bernie Moreno won Ohio from Sherrod Brown, the former Chair of the Senate Committee on Banking, and one of the most hostile to crypto Biden administration members.
Once the dust settles, every US prospective government candidate will realize the obvious 'so whats' of this.
They gain NOTHING by being anti innovation and anti blockchain;
Conversely, they receive the support of the digital natives, pro crypto voters and the industry if they get on board.
By the 2026 mid-terms we expect that almost 100% of candidates will be pro blockchain, and Coinbase and A16Z just announced that they have already funded the leading industry PAC to the tune of $50m to get the mid-term campaign started.
Initial Thoughts on the US's 2025 Pro Blockchain Plan
What are the implications of having so many members of the government at all levels arrive in January with an intent to accelerate our industry and the US' leadership of it?
Our initial thoughts follow, and we must begin with President elect Donald Trump's recent words, “I'm laying out my plan to ensure that the United States will be the crypto capital of the planet and the Bitcoin superpower of the world”.
Our top six thoughts follow:
1. Abort Gensler ‘Regulation by Enforcement’ Cases
Central to the challenges of the last four years has been the SEC Chairman of whom Vice President elect JD Vance says "If there's a candidate for the worst person in the Biden [admin]...[it's] Gary Gensler". Gensler has led a war of regulation by enforcement including cases against industry leaders, and Blockchain Coinvestors' portfolio companies, including Coinbase, Kraken, Ripple and Uniswap.
We expect that Gensler will be fired before year end, and the legal cases he has wasted tens of millions of taxpayer money pursuing, and which the industry has spent more than $400m defending, will be aborted.
2. Bank custody approval (Repeal SAB 121)
Second, we expect that US banks will get what they want now, which is permission to custody digital assets beginning with Bitcoin. This issue was essentially approved by both the Senate and House but was vetoed by Biden and Gensler in the most undemocratic of ways earlier this year.
We expect SAB 121, the SEC action that blocks the banks from participating in the future, to be overturned quickly now. Having banks act as custodians for digital assets, among others, will clearly improve the protections for US investors, which is one of the most important priorities for the SEC, although the SEC does not provide oversight for banks.
3. US Stablecoin regulation
Thirdly, the US must have a view on stablecoins which are one of the fastest growing use cases for blockchain, and which are very supportive of the position of the US dollar as a global reserve currency, since almost all the stablecoin volume is in those backed by dollars.
We expect that the US will catch up with most of the rest of the world by passing stablecoin regulation.
4. Market structure bill (e.g. FIT 21)
Next, the election should break the log jam on market structure bills which are central to the development of legislation for the industry. Unlike in many countries around the world, the US fragments financial services oversight among many regulators including CFTC, SEC, Bank regulators and so on, at both Federal and sometimes State levels. The Biden administration had famously refused to clarify who should be on point for what, with Gensler sticking to his obviously flawed position that 'They are all Securities'.
We expect a bill such as the bipartisan, already drafted FIT 21 will now pass quickly and certainly before the end of 2025. This will help enormously. Linked to this, we also expect pro blockchain appointments to Chairs of the CFTC and SEC, with a possible interim appointment of a very pro blockchain leader to a temporary US Committee on Digital Assets.
5. US Bitcoin mining plans & strategic reserve
In the run up to the election, Trump had talked about making sure the US was the global leader in Bitcoin, and others in his inner circle had begun to talk about a US strategic Bitcoin reserve. Senator Cynthia Lummis of Wyoming, suggesting the latter should be a minimum of 1 million of the 21 million Bitcoin which at today's prices would cost about $79 billion (at the time of writing when Bitcoin is at an all time high of $79,000).
We expect the passing of laws that will make it easy for Bitcoin mining companies to operate in energy abundant states like Texas, and we expect the US government to hold onto its Bitcoin, and perhaps start buying more at a rapid rate.
6. Rapid Tradfi digitalization (e.g. BlackRock BUIDL)
Our bi-annual report on Institutional Adoption has demonstrated the rapid deployment of blockchain among the world's leading asset managers. This progress has occurred in the face of fierce opposition from the US government over the last four years. Now that will change quickly.
We expect a rapid acceleration of institutional adoption of blockchain in the US. This will come in many flavors. As examples:
We expect most pension funds, retirement systems, wealth advisors, and family offices in America to now seek out exposure;
We expect most asset managers will move quickly to have products to offer them;
And we expect most digital platforms to begin to offer the digitized versions of TradFi products such as BlackRock's digitized money market fund, BUIDL.
These are our top six ideas in the week following the election. Later this month we will publish our 2025 Blockchain Predictions, so expect more shortly.
Conclusions
Our conclusions are simple:
US blockchain adoption will now ramp up fast.
There is no looking back.
Digital monies, commodities and assets are inevitable, and all of the world's financial infrastructure will need to be upgraded.
So a very important week, and a very bright future.
Thank you for reading
The Blockchain Coinvestors Partners
About Blockchain Coinvestors
Blockchain Coinvestors is the best way to invest 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 10th year and are backed by 400+ investors globally. To date we have invested in 40+ pure play blockchain venture capital funds in the Americas, Asia, and Europe and in a combined portfolio of 1,250+ blockchain companies and projects including 95 blockchain unicorns. Blockchain Coinvestors’ first fund of funds ranks in the top decile amongst all funds in its category on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in London, New York, Grand Cayman, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.
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