The Pace of Institutional Adoption of Digital Assets

What are the biggest trends shaping the future of blockchain?

The biggest trends shaping the future of blockchain include:

• Stablecoin Adoption: Stablecoins are becoming integral to the financial ecosystem, enhancing the efficiency of cross-border transactions and reinforcing the U.S. dollar’s status as the world’s reserve currency since 98% of stablecoins are denominated in USD and the dollars used to obtain stablecoins are then pushed into U.S. treasury bonds. If stablecoins were a country, they would be the 15th largest buy of U.S. Treasuries, buying more U.S. debt than the country of Saudi Arabia.
• Regulatory Developments: The evolving regulatory landscape, particularly with the incoming administration’s pro-crypto stance, is set to influence blockchain innovation and adoption. Strategic bitcoin reserves will become a reality in 2025, thrusting bitcoin further into conversations about geopolitics and macro-economics.
• Integration with Artificial Intelligence (AI): The convergence of AI and blockchain technologies is poised to drive significant advancements across various sectors. AI compute and bitcoin mining compute are intersecting in interesting and, often, countercyclical ways. Data provenance and deepfake detection is something only solved with a combination of cryptography and clever software. Blockchain is at the center of that conversation as well.

Since his campaign, President-elect Donald Trump has signaled a more pro-crypto stance for his administration. With Trump’s pick of Paul Atkins to be Chair of the SEC, how do you expect the regulatory landscape to change?

With President-elect Donald Trump signaling a more pro-crypto stance and the appointment of Paul Atkins as SEC Chair, we anticipate a more favorable regulatory environment. This could include clearer guidelines and reduced regulatory hurdles, fostering innovation and investment in the blockchain space. The phrase institutional adoption is the most overused phrase in commentary around digital assets but it remains a prescient point that most institutions are just now taking the digital asset industry seriously. Structured financial products will bring about more mature markets and greater liquidity in the blue chip assets like bitcoin. The establishment of comprehensive regulatory frameworks that provide clarity for blockchain and digital asset operations will come in the form of a market structure bill likely to pass Congress in mid to late 2025. With Congressman French Hill at the helm of House Financial Services, this legislation will be a priority.

Over the past few years, AI has moved to the forefront of innovations across industries. How do think AI will impact the markets, and more specifically, the digital assets space?

The integration of AI into financial markets is enhancing data analysis, risk assessment, and decision-making processes. In the digital assets space, AI can improve security, optimize trading strategies, and facilitate the development of more sophisticated blockchain applications. Companies should invest in research and development to understand AI technologies, upskill their workforce, and explore partnerships with AI firms to integrate AI solutions into their operations effectively. The most important convergence of AI and Blockchain is actually upstream of all of the code, it’s the compute loads.

What are the biggest drivers shaping the convergence of the energy transition and digital infrastructure?  

The demand for data center rack space will continue to outstrip supply, but it is the flexible nature of bitcoin mining load that is most compelling since much of AI computation is inflexible. It remains to be seen how much of the AI computational load is inflexible but, at some level, flexible loads like bitcoin mining and green hydrogen will come into play to balance this tremendous surge in demand and the intermittency of renewable energy generation that characterizes the energy transition we are currently undergoing. Another known unknown is the extent to which the nature of AI computational loads change as the majority of the load transitions from training complex models to inference operations.

Do you have any unique predictions on the outlook on digital assets?

Bitcoin, and digital assets more broadly, represent the most significant technological advancement in value transfer technology since the invention of double entry accounting 500 years ago. The world has experienced multiple iterations of information transfer technology in that same period, most recently with the invention of the internet and then the app-based internet that is known as Web2. It is my belief that bitcoin will have a larger market cap than gold, and stablecoins will dominate payments all within this decade.