Happy new year folks. This past year was interesting. The CoinDesk policy team (or reg pod, as I like to call us) jotted down some notes for what we're watching and expecting in 2025.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

New Year's Eve

The narrative

Donald Trump will become the 47th President of the U.S., the European Union's Markets in Crypto Assets legislation is now in effect and the U.K. expects to publish draft legislation.

Why it matters

Here's what might affect the crypto industry next year.

Breaking it down

Nikhilesh De: While 2024 may not have seen any criminal trials quite as high-profile as USA v. Samuel Bankman-Fried, there were still a number of criminal and civil trials we followed. Many of these will continue into 2025 — including, as it happens, Bankman-Fried's ongoing appeal of his conviction last year on fraud and conspiracy charges. To quickly recap, in September Bankman-Fried's new attorneys filed a lengthy brief arguing that District Judge Lewis Kaplan, who oversaw his trial, was biased against the former FTX CEO. Bankman-Fried's team requested a new trial, alleging Kaplan's comments throughout the trial biased the jury.

In a reply brief filed earlier this month, attorneys with the Department of Justice wrote that Kaplan had properly instructed the jury as to the law and how the members of the panel should come to their verdicts. The judge also did not deride the defense, the DOJ said, but rather urged both the defense and prosecution to keep the trial moving.

"Nor does it matter that certain media sources played up the drama of these exchanges," the brief said. The DOJ referenced the defense filing, which said, "Here, many 'objective observers' have already questioned the judge’s impartiality" citing an article from Slate and the author of this particular newsletter section. The conviction should not be tossed, the DOJ said.

Bankman-Fried's team asked for an extension to file an "oversized reply brief" by Jan. 31, which the Second Circuit Court of Appeals granted. His team is also asking for a hearing for oral arguments.

Perhaps more immediately relevant to the broader crypto industry: There are a number of civil cases still pending from the U.S. Securities and Exchange Commission. SEC Chair Gary Gensler announced he would step down from the role on Jan. 20, when President-elect Donald Trump is inaugurated. Trump has already named former Commissioner Paul Atkins as his nominee for chair of the agency, and it seems pretty likely the agency may shift how it approaches future lawsuits against crypto industry participants. Less clear is how the agency might handle its ongoing cases against companies like Coinbase, Binance, Binance.US, Kraken and others. No attorney seems to think the SEC will outright dismiss these cases, but the next few months of briefs will be more indicative of where the regulator will take them.

Back in the criminal world, Do Kwon's extradition to the U.S. was approved last Friday, suggesting he may actually face trial here. (Given the months of back-and-forth on where Kwon would end up, it's hard to know for sure how this will actually proceed right now.)

Tornado Cash developer Roman Storm's trial on criminal charges tied to the development and operation of the crypto mixing service was pushed to 2025. District Judge Katherine Polk Failla most recently ruled against Storm's efforts to limit certain pretrial expert disclosures. Expert disclosures are now due by early March. In the meantime, Storm also filed a motion asking the judge to reconsider her denial of his motion to dismiss the case, citing a Fifth Circuit Court of Appeals decision saying the U.S. Treasury Department can't sanction Tornado Cash's smart contracts.

The decision affects counts one, two and three in the criminal indictment against Storm, the filing said.

"Any IEEPA [International Emergency Economic Powers Act] violation must be knowing and willful, i.e., deliberate, but Van Loon makes clear that there is no deliberate action Mr. Storm could have taken here," the new filing said. "Moreover, the developers’ lack of control over the proceeds renders them legally incapable of conspiring to commit money laundering and negates the knowledge element of a money laundering charge. Van Loon’s emphasis on control, as well as its holdings that the immutable Tornado Cash smart contracts are not a 'service' performed for a fee or profit, also lend support to Mr. Storm’s arguments for dismissal of Count Two, the money transmitting business charge."

Jesse Hamilton: This is what the crypto world has been waiting for — a like-minded Congress and a booster in the White House. So, now we get down to the detailed (and perilous) work of actual policymaking. Those who will be in charge of the relevant committees in Congress have indicated they'll be jumping off from the foundation set down by the Financial Innovation and Technology for the 21st Century Act (FIT21) bill and the existing stablecoin legislation negotiation. But there are a lot of wrinkles still to iron out before those can reach a bipartisan finish line.

Though Republicans have ascended, the effort does have to come from both parties, because the Senate tends to require broad consensus before it can approve legislation. Even when much of Congress agrees on something, it doesn't always bring a win, and this will be a particularly distracted legislative body as it pivots to the agenda of President-elect Trump (which comes with a lot of other controversial and potentially more urgent priorities on such matters as taxation and immigration).

Bottom line: Post-election excitement often settles into a why-is-this-taking-so-long vibe. Digital assets enthusiasts shouldn't be surprised if things get well into 2025 without landing the crypto bills they're waiting for.

When the market-structure bill does get approved, it'll almost certainly install the Commodity Futures Trading Commission as its primary watchdog for crypto trading. While the digital assets crowds may rejoice at the de-emphasizing of the Securities and Exchange Commission, they should also keep in mind a few things: Once legislation is in place, it may take the agencies a year or more to implement the actual rules the industry will be operating under. There's a long process in which the SEC and CFTC will propose regulations and review public comments before they can pull the trigger. Also, the CFTC isn't experienced in spot-market oversight and doesn't have the staff to handle that workload. So the adjustment to the new system may require a heavy dose of patience from a sector that has already waited around for years.

Despite the industry's special loathing for the SEC, it'll still be a very prominent part of life for those operating in the U.S. Some crypto will be classified as securities, requiring registration for the projects and for the platforms where they change hands. Once the laws are set, the industry will no longer have the option of shrugging off the views of the feds, and agency officials will come crawling through their businesses on a regular basis with magnifying glasses and flashlights.

Yes, there will be compliance headaches, but U.S. regulation may bring investors and entrepreneurs off the sidelines and set a global standard for the industry. An SEC run by Paul Atkins, a conservative former commissioner who has done crypto work, could also rapidly repeal the agency's crypto accounting guidance known as Staff Accounting Bulletin No. 121 (SAB 121). New banking regulators may insist on U.S. banks welcoming back crypto customers. And the Department of the Treasury might shift its view on crypto taxes and overseas sanctions.

With the future president literally being in the business of crypto, it's hard to imagine it won't at least be among the second-tier priorities for Trump's administration.

Camomile Shumba: The U.K. is the Labour Party's now after 14 years under the Conservative Party, which proclaimed great crypto hopes such as turning the country into a digital assets hub. Most knew Labour would eventually take over, which they did in July with a landslide victory. Last year I said the big question on everyone's mind would be: What would things look like under Labour? The answer could feature a decidedly different crypto approach.

There was a long wait between July and Labour's announcement of its crypto approach in November, only for the new government to say it was sticking to the Conservatives' plan — except rather than doing a phased approach by releasing different bits of legislation for different aspects of crypto at different times, the government will instead put everything in place at once, starting with unleashing draft legislation early 2025.

The Financial Conduct Authority, as the regulator overseeing crypto, handed the industry a timeline for how it will roll out and implement rules. In 2025, the government will publish papers on stablecoins, custody and prudential rules, staking, lending and trading.

Labour said even before it was elected it would support the country in becoming a securities tokenization hub as well as advance plans on the digital pound. A decision on the digital pound, a digital token issued by a central bank could be announced in 2025. The government also launched a pilot for a digital gilt - aka a british bond - so that will be something I'll be watching.

I expect the U.K. will keep a close eye on the European Union which is enforcing its crypto regime.

I will also be monitoring the EU's implementation of its Markets in Crypto Assets legislation. Currently, six countries do not have legislation in place to even enforce the European Union's wide-ranging MiCA legislation.

So, how will these countries keep up with other nations like France who have already been accepting applications for the new regime since July? I suspect other countries may also shine — like the Netherlands, which has been receiving Crypto Asset Service Provider license applications since April and has already begun approving them.

We will also monitor what companies manage to get into the EU. I think many will find it hard to attain the coveted CASP license that enables them to operate across the bloc.

In a recent report the EU said it will issue a final draft of the digital euro rulebook. The trading bloc will consider whether or not to issue a digital euro once the legislation has been put in place, it said.

The new EU commissioners — in charge of proposing legislation and overseeing implementation — have now been positioned. On their crypto agenda will be assessing whether or not regulation for decentralized finance activities, lending and borrowing and non-fungible token activity is necessary.

Cheyenne Ligon:

1. Given the crypto-friendliness of the new administration and the number of crypto supporters in Congress, I think it's reasonable to think that we'll get a piece of crypto regulation passed in 2025. My money is on stablecoin legislation passing first.
2. I think at least one state will establish some sort of strategic bitcoin reserve (SBR) in 2025 but the federal government will not.
3. I think we will see fewer crypto-related enforcement actions from the SEC next year.
4. Once Trump takes office, I think it is likely that his crypto project, World Liberty Financial, will quietly fade into obscurity.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Bluesky @nikhileshde.bsky.social.

You can also join the group conversation on Telegram.

See ya’ll next week!