Crypto Sector to Undergo Significant Transformation in 2025

In a memo to EY's blockchain leadership team on November 6, I stated that every private blockchain had essentially become obsolete. Since November 2022, the cryptocurrency and blockchain markets have experienced a period of cautious growth and gradual recovery. The trajectory has been consistently positive, albeit slow, particularly in 2023. However, 2024 saw a sustained acceleration in growth, starting with the launch of a Bitcoin exchange-traded fund and followed by an Ethereum ETF, as well as the adoption of the EU's Markets in Crypto Assets legislation. This marked a significant step towards global regulatory convergence and the adoption of public blockchains. Bitcoin has established itself as a form of digital gold, while Ethereum has become a platform for developing digital assets and services. Although the pace of progress has been steady, it has been hindered by regulatory uncertainty. The prospect of significant regulatory change became more likely following the US election, and it is anticipated that 2025 will bring about a substantial shift in the US regulatory environment. This, in turn, is expected to drive a global shift in the same direction, albeit at a potentially slower pace. Given the US's position as the world's largest financial market, this shift is likely to have a profound impact. Bitcoin is poised to cement its position as a digital store of value and may even be officially recognized as such by countries and governments in 2025. Its scarcity-based nature makes it an attractive asset, as higher prices do not increase supply. Ethereum is also expected to experience significant growth, having successfully transitioned to a proof-of-stake model, which has reduced its carbon footprint by over 99%. The combined Ethereum network has expanded its capacity significantly, and its low transaction fees, scalability, and strong security record make it an attractive choice for digital asset issuers. Beyond cryptocurrency, stablecoin payments are likely to experience a significant boom in 2025. The value proposition for stablecoin payments is already strong, particularly for international remittances. Partnerships between companies such as Circle and Nubank, as well as Celo and Opera, are making stablecoin payments more accessible to users worldwide. Stablecoin payments are also gaining traction in the enterprise sector, with companies like EY, PayPal, and Coinbase working with SAP to enable automated payments from within enterprise systems. The regulatory environment for decentralized finance is expected to become more favorable in 2025, which could lead to increased adoption and innovation in the space. As the competitive landscape in the blockchain ecosystem becomes more intense, companies that have been hesitant to enter the market may finally take the plunge. However, this increased competition may also lead to a rise in fraudulent activities, as regulatory loosening and a carnival-like atmosphere in online trading may attract unscrupulous actors. Ultimately, 2025 is expected to be a transformative year for the cryptocurrency and blockchain sector, marked by significant growth, innovation, and increased adoption.