Digital assets to join the establishment in 2025?

Digital assets ended 2024 on a high note, with the price of bitcoin, for example, passing $100,000 for the first time and reaching a market capitalisation of $2 trillion, making it one of the largest and most liquid individual assets in the world. Some analysts, including Fidelity Digital Assets, believe 2025 will prove a game changer in terms of the acceptance and adoption of bitcoin, with more nation-states, central banks, sovereign wealth funds and government treasuries looking to establish strategic positions in the cryptocurrency.¹

Trump drives digital-asset adoption

The election of Donald Trump as US president in November 2024 should be a key driver behind the acceptance of digital assets. Shortly after taking office on 20 January 2025, Trump declared he wanted to make the US the ‘crypto capital of the planet’ and signed an executive order aimed at promoting the domestic cryptocurrency sector. By contrast, the previous Biden administration had pursued a hostile policy towards digital assets.

Trump’s order established a new Presidential Working Group on Digital Asset Markets, tasked with ‘developing a federal regulatory framework governing digital assets, including stablecoins, and evaluating the creation of a strategic national digital assets stockpile’.²

In addition, the US Securities and Exchange Commission (SEC) rescinded accounting guidance that had made it very expensive for some listed companies to safeguard crypto assets on behalf of third parties. The crypto industry said that guidance had stymied digital-asset adoption, according to Reuters.³ Experts quoted by Reuters said the new approach had the potential to push cryptocurrencies into the mainstream.

Following the order, CNBC reported that major financial firms had claimed they were ready to embrace digital assets if the Trump administration did roll out favourable policies. Morgan Stanley CEO Ted Pick, for example, told CNBC that the bank would be working with federal regulators to determine whether it was possible to deepen its ties to the cryptocurrency market.⁴

Matching Trump’s ambitions

Fidelity argues that Donald Trump’s ambition of establishing a strategic bitcoin reserve in the US could force other countries to follow suit.⁵ However, the firm believes it is likely that nation-states would begin accumulating in secret ‘because no nation has an incentive to announce these plans, as doing so could influence more buyers and drive up the price’.

Trump’s actions, which included a call to ‘promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide’, have already provoked a reaction from the European Central Bank (ECB). Piero Cipollone, a board member of the ECB, told Reuters shortly afterwards that euro-zone banks needed a digital euro in response.

Reuters added that the euro zone’s central bank is currently experimenting with how a digital euro would work in practice. But it will only make a final decision on whether to launch it once European lawmakers approve legislation on the matter.⁶

It is also worth noting the advance of digital assets should go hand in hand with that of tokenisation, which as we discussed in a recent white paper, has the potential to transform investing. Almost every type of asset can be tokenised, from traditional assets such as bonds, commodities, investment funds and real-estate properties to more exotic assets such as sports teams, artwork and even celebrities.

Different routes to market

Establishing a digital euro, guaranteed by the ECB but operated by companies such as banks, would be in direct contrast to the US policy: Trump’s executive order also prohibited the Federal Reserve from issuing its own central-bank digital currency (CBDC).

The belief is that the absence of a federal CBDC could spur creativity in private-sector stablecoin development. Stablecoins work similarly to money-market funds in that they offer exposure to short-term interest rates in an official currency – nearly always the US dollar. They are increasingly seen as viable alternatives to CBDCs in enabling real-time, low-cost and cross-border payments.

Nigeria, Jamaica and the Bahamas have already launched digital currencies and a further 44 countries, including Russia, China, Australia and Brazil, are running pilots, according to the Atlantic Council think tank.⁷

Singapore is perhaps further down the road in adopting digital assets. Its central bank is experimenting with a digital Singapore dollar, while the island republic is home to around 30 payment firms, including the US-based Coinbase and Ripple, and Hong Kong-based Futu, that are licensed to provide digital-token services. Around 40% of Singaporean investors reportedly own cryptocurrency.⁸

Fidelity argues that other factors, such as ‘debilitating inflation, currency debasement, and increasingly crushing fiscal deficits’, will drive digital-asset adoption in 2025. It says this means ‘not making an allocation to bitcoin could be riskier than making one’.

Fidelity adds that while around 80% of investors are retail at this early stage, the number of institutional investors is still high compared with other, similar product launches. It says allocators include hedge funds, pension funds and banks, totalling over 1000 entities. Fidelity believes larger institutions with more stringent oversight or compliance restrictions, such as wirehouses and certain pensions, endowments and foundations, may take longer to allocate.

Sources

¹ https://fwc.widen.net/s/zrvf5hfjfs/fda-2025-look-ahead-report---final
² https://finance.yahoo.com/news/trump-signs-crypto-friendly-executive-201156034.html
³ https://www.reuters.com/business/finance/trump-signs-order-create-cryptocurrency-working-group-2025-01-23/
⁴ https://www.cnbc.com/2025/01/24/trump-crypto-plans-have-wall-street-ceos-excited-about-digital-assets.html
⁵ https://fwc.widen.net/s/zrvf5hfjfs/fda-2025-look-ahead-report---final
⁶ https://www.reuters.com/technology/ecb-pitches-digital-euro-response-trumps-crypto-push-2025-01-24/
⁷ https://www.atlanticcouncil.org/cbdctracker/
⁸ https://dailyhodl.com/2024/12/16/singapore-leading-world-in-crypto-adoption-with-40-of-investors-holding-digital-assets-report/