On November 6th, I wrote a memo to EY’s blockchain leadership team. The headline was simple: “All private blockchains are gone.” Since November 2022, the crypto and blockchain market has been defined by caution and gradual recovery. The direction is consistent and positive, but slow, especially in 2023.
2024 will see a slow but sustained acceleration. The year started with Bitcoin Exchange Traded Funds (ETFs) and continued to accelerate through Ethereum ETFs and the adoption of the EU’s Market in Cryptocurrency (MiCA) law.
We are on a path of steady global regulatory convergence, including rules of the road for all major crypto and digital asset types. We were also on the path to public blockchain. Bitcoin is a type of digital gold, and Ethereum is a development platform for digital assets and services.
The path may have been consistent, but the pace was measured. It was common to hear people at large financial institutions say they wanted to move to public Ethereum, but the regulators wouldn’t allow it. On the night of November 5th (after the US election), the prospect of significant regulatory changes became a reality. Confidence about what regulators would and would not allow suddenly disappeared, and the clear direction was a sharp acceleration in public networks.
There are no absolute certainties in life, but if I had to make a prediction for 2025, it would be that there will certainly be major changes in the U.S. regulatory environment, which in turn will lead to collective global changes in the same direction. It means bringing. However, it doesn’t necessarily have to be at the exact same pace. But it’s very important because the United States is by far the world’s largest financial market.
Bitcoin is already the big winner here. It is solidifying its position as the digital version of gold, and countries and governments may focus on strategic preparations for Bitcoin and formally take on that role sometime in 2025. My own past predictions were that Bitcoin would likely continue to grow until it reaches the size and market capitalization of gold (currently around $14 trillion). In many ways, Bitcoin is much more attractive as a scarcity-based asset. An increase in the price of Bitcoin does not increase its supply, but this cannot be said for physical gold.
Ethereum will be the second big winner. Ethereum has smoothly transitioned to proof-of-stake, reduced carbon emissions by over 99%, and scaled up massively. The combined capacity of the Ethereum network (Layer 1 mainnet and Layer 2 network) is hundreds of times greater than the previous bull market. Transaction fees are low and likely to remain that way for some time. Ethereum will be the choice for most digital asset issuers due to its superior scalability, low cost, and excellent security and uptime record.
Beyond cryptocurrencies, the biggest boom we see in 2025 is likely to be around stablecoin payments. The value proposition and business case for stablecoin payments is already strong. Users around the world want access to US dollars, especially for international money transfers. While the use of dollar stablecoins was already popular among cryptocurrency users, access and use cases are rapidly expanding. For example, Circle is working with Nubank in Brazil to give all account holders direct access to USDC payments. Ethereum network Celo has partnered with Opera to bring stablecoin payments to Opera’s web browser, which is optimized for low-cost smartphones popular in emerging markets. As a result, Celo’s stablecoin trading volume is rapidly increasing.
Stablecoin payments are also making inroads into the corporate sector. EY, PayPal, and Coinbase have teamed up with SAP to enable fully automated payments from within enterprise ERP systems. Today, the same in-system automation that works for bank accounts also works for crypto-rails payments. This is especially important for use in companies where there is no possibility of adopting processes that cannot be automated at scale. Combined with improved privacy tools (and improved regulation of privacy systems), encryption rails look like a much lower-cost option for enterprise users.
2025 could be a landmark year for decentralized finance (DeFi). DeFi relies on software applications running on-chain to replicate key functions of financial services and banking.
Throughout 2024, DeFi was the only area in the cryptocurrency ecosystem that didn’t see any real movement in terms of regulatory clarity, and thanks to high real-world interest rates, it wasn’t a very attractive option. . The regulatory environment in 2025 is likely to be even more favorable for DeFi, and lower interest rates could lead to more aggressive exploration of on-chain revenue growth. DeFi tools that allow people to lend their assets to liquidity pools and other services in exchange for additional returns (and additional risk) on their assets may become popular again.
In other words, the revolution will not be something new or different, but everything moving forward at the same time. And overall, the competitive intensity in every sector of the blockchain ecosystem is about to be cranked up to 11 (see my Spinal Tap). After sitting on the sidelines in 2023 and watching cautiously in 2024, corporations, banks, securities companies, insurance companies, etc. are likely to take drastic action in 2025. All major companies that have announced plans have already lost sight of it. You can offer stablecoins, which are real-world assets, or start selling Bitcoin and Ether to your customers.
The intensity of competition within the blockchain ecosystem has already reached 11x, and 2025 will be a tough year within the market. Those running blockchain networks and services should be forgiven for wondering if now is a good time and if it’s worth it. There are currently over 40 different Layer 2 networks within the Ethereum ecosystem. Competition for transaction fees is fierce, differentiation across Layer 2 networks is low, and more competitors are entering the market.
While the situation is tough inside Ethereum, it could be even worse outside, as “alt-L1” faces a composite Ethereum ecosystem that appears to be scalable, secure, and reliably low-cost. Some networks, like Celo, have already pivoted from competing with Ethereum to becoming part of it. We expect more to follow in 2025.
The only thing worse than facing fierce competition from public blockchains may be operating a private blockchain. If your value proposition is “as close to Ethereum as regulators will allow” and all regulators are removed, the outlook is particularly bleak. I’ve already fielded calls from companies in my private network asking about how to pivot and how quickly they can do it.
Finally, I predict that 2025 could be a great year for fraud. The carnival-like, casino-like atmosphere of online transactions, combined with rapid deregulation, could attract the same scammers that emerged during the last crypto boom. Even more difficult to predict is where this fraud will occur. People are generally pretty good at bolting down barn doors after a horse escapes. As a result, it will be difficult to repeat what has worked in the past, such as hacking exchanges or borrowing from depositors’ funds. Audits, regulators, and better security technology all contribute to this. That doesn’t mean it’s risk-free, just that it arrives in a new package.
Happy New Year! Have a wonderful 2025!
Disclaimer: These are the personal views of the author and do not represent the views of EY.
