Regulation Will Make or Break Crypto Adoption in 2025—Analysts
Key Takeaways:
The changing regulatory environment in both the US and the EU will be an important factor for increased crypto adoption this year, say analysts. The EU’s MiCA regulation will introduce tough requirements for crypto firms. But spot Bitcoin and Ethereum ETFs in the US have created a bridge for traditional finance investors to crypto investment.2024 was a big year for cryptocurrencies, as Bitcoin and Ethereum gained mainstream recognition with the approval of spot exchange-traded funds (ETFs). Will institutional and retail adoption continue to grow this year?
Juan Pellicer, senior research analyst at IntoTheBlock, said the changing regulatory environment in both the United States and the European Union will be an important factor for increased adoption.
“Regulatory uncertainty has historically hindered crypto adoption, particularly among corporations. However, recent strides toward regulatory clarity are setting the stage for companies to embrace crypto more confidently,” Pellicer told Cryptonews, adding:
“The ecosystem is showing remarkable maturity. Innovations in DeFi, tokenization, and blockchain infrastructure are increasingly ready for significant retail and institutional users, compared to mostly proof of concepts in previous market cycles. The industry is now better equipped to capitalize on growing interest and address barriers like scalability and compliance.”
The election of Donald Trump, a self-proclaimed “Crypto President,” as the next U.S. President, and America’s “most pro-crypto Congress ever” is causing wild excitement in Bitcoin circles.
Many expect to see new measures to boost cryptocurrency use and adoption, starting with the removal of long-time crypto nemesis Gary Gensler as head of the U.S. Securities and Exchange Commission (SEC).
Meanwhile, the EU’s Markets in Crypto-Assets (MiCA) regulation came into force on Dec. 30, drawing mixed reactions. The law is expected to usher in “a comprehensive regulatory structure that will help develop markets and strengthen the approach of crypto firms.”
But the EU will also “introduce complex requirements, including areas such as market abuse and trade surveillance, which will be expensive and challenging to implement in crypto markets,” experts previously told Cryptonews.
Bitcoin ETFs Paved the Way for More Products
Alexandr Kerya, VP of product management at crypto exchange CEX.io, noted that the SEC’s approval of Bitcoin and Ethereum exchange-traded funds in 2024 has spurred interest from several financial institutions.
He points out that for traditional finance investors, exchange-traded funds represent a bridge to crypto investment within familiar frameworks.
As the products gain traction, they are expected to pave the way for more ETFs focusing on altcoins like Solana (SOL), Kerya tells Cryptonews.
“Digital asset funds around the world have been recently showing record inflows, indicating increasing adoption and growing demand for crypto from institutional investors,” he said.
“The biggest driver for [altcoin-focused ETFs] could be the acceptance of Bitcoin by governments. Many are closely watching the U.S. government for signs of Bitcoin being adopted as a federal reserve asset,” he added.
According to Kerya, the MiCA regulation in Europe will likely bring more attention to crypto from both institutions and retail investors, stating:
“By enhancing trust from a regulatory perspective, MiCA could make the cryptocurrency market more attractive to retail investors.”
Issuers are already starting to show interest in ETFs involving altcoins. In October, crypto asset manager Bitwise and Nashville-based firm Canary Capital filed applications to issue ETFs based on the XRP cryptocurrency.
The push for alternative exchange-traded funds follows the successful launch of spot Bitcoin ETFs in January and Ethereum ETFs in July. The SEC had repeatedly rejected the funds, worried about investor protection.
But the regulator lost a lawsuit brought by Grayscale Investments, forcing it to approve the ETFs. In approving the funds, SEC Chair Gary Gensler warned Bitcoin remains a “volatile asset” and investors should be careful.
Since their debut, Bitcoin ETFs have attracted more than $37 billion in capital from institutional and retail investors, according to Sosovalue data, making them the “most successful ETFs in history.” Total Ethereum net inflows reached $2.8 billion, as of Jan. 6.
Bridge To Wider Crypto Adoption
According to Anish Mohammed, the co-founder of DeFi protocol Panther, crypto “ETFs…represent a crucial bridge, potentially encouraging broader exploration of decentralized applications and digital assets.”
Speaking to Cryptonews, Mohammed said:
“The groundwork laid in 2024 sets the stage for expanded crypto adoption in 2025…Growing enterprise blockchain integration, user-friendly DeFi apps, and stablecoins for cross-border payments signal a maturing market. Increasing regulatory clarity is expected to lower entry barriers for both retail and institutional investors.”
Pellicer, the IntoTheBlock senior analyst, said with more than $116 billion of total net assets locked in Bitcoin exchange-traded funds alone, “it’s clear that institutional investors are paying attention.”
He said “this confidence boost” validates the place of crypto in diversified portfolios, “signaling to both retail and institutional investors that digital assets are here to stay.”
For Adam Bates, chief marketing officer at decentralized apps platform MultiversX, the most important factor is the incoming pro-Bitcoin Donald Trump administration in the United States. The pro-crypto legislature, too.
“It has signaled that the days of restrictive over-regulated oversight of the crypto and blockchain are in the past and the more business-centric approach to cryptocurrencies will be embraced,” Bates told Cryptonews.
“This does not mean relaxation of all regulations but an understanding that cryptocurrencies, especially Bitcoin, should be considered and will be considered as digital gold,” he added.
Bates expects that Trump’s Cabinet will be business-friendly and open-minded about ways to grow the U.S. economy, and this may include embracing cryptocurrency more.
“The particular relevance for the cryptocurrency industry is that Elon Musk, so closely associated with DOGE, brings huge reputational endorsement to cryptocurrency as an industry,” he detailed.
Uphill Task
Despite the change in political will in the U.S. and elsewhere, experts say there are still several issues that can limit widespread crypto adoption.
Georgii Verbitskii is the founder of the web3 platform Tymio and the former managing director of investment company eToro’s Russian operations.
He told Cryptonews that the challenge for adoption in 2025 “is to find the right approach to crypto project regulation, [as well as] introducing transparent and fair conditions with consideration of industry specifics.”
Verbitskii said:
“It’s important to correctly integrate DeFi [projects] into the existing legal framework, determine how they will interact, and define the boundaries of legal protection for the users of smart contracts and decentralized protocols.”
Pellicer said DeFi is the “obvious next step” for institutions in crypto. He highlighted initiatives like BlackRock’s Build Fund and PayPal’s stablecoin as the first signs of this.
But he also warned that scaling this adoption could be derailed by issues of “liquidity fragmentation and risk management.”
“Fragmented liquidity across blockchains and decentralized platforms complicates large-scale transactions, increasing slippage, market impact, and operational inefficiencies,” Pellicer explained, adding:
“On Layer 2 solutions, these issues are amplified by underdeveloped infrastructure, making it difficult for institutions to move capital seamlessly. Institutions face governance risks, tokenomic instability, and challenges in economic risk, for example regarding the exiting large positions without disrupting markets.”
Muhammed, the Panther Protocol co-founder, said harmonizing regulations across states in the U.S. will be one of the major obstacles.
“Regulatory frameworks vary across jurisdictions, creating challenges for achieving seamless global interoperability,” he detailed.
“However, as more regions establish clear and consistent guidelines, opportunities for streamlined collaboration and broader adoption are likely to grow.”
CEX.io exchange’s Kerya foresees a complication in balancing regulatory demands and user freedoms.
The post Regulation Will Make or Break Crypto Adoption in 2025—Analysts appeared first on Cryptonews.
