The 2024 elections have brought about a significant shift in the crypto industry, with 287 ‘pro-crypto’ members of Congress and a president-elect who has pledged to make the U.S. the "crypto capital of the planet." This development is poised to accelerate mainstream adoption and usher in a new era of regulatory clarity.

From Regulation by Enforcement to Regulatory Clarity

For too long, the crypto industry has operated under a regime of "regulation by enforcement," where unclear rules and lack of transparency have stifled innovation. However, with the election of pro-crypto leaders, this paradigm is set to shift. A regulatory environment that prioritizes clear, transparent, and predictable rules will be a major catalyst for growth.

The Inevitable Regulatory De-Risking

As the regulatory landscape evolves, the industry can expect a significant reduction in regulatory risk. This de-risking will create opportunities for new markets, products, and applications to emerge. It will also pave the way for institutional investors to enter the market with confidence.

Verticals Poised to Thrive in this New Environment

Decentralized Finance (DeFi)

DeFi is one of the most exciting innovations in the crypto space, leveraging smart contracts to offer universal access to financial services. However, regulators have previously undermined DeFi’s fundamental innovation by insisting on intermediaries. A favorable regulatory climate will change this.

• Clear Regulatory Framework: A clear regulatory framework will enable token holders to share compliantly in protocol revenue, something long sought by industry participants.
• Increased Adoption: With the regulatory uncertainty lifted, DeFi is poised for increased adoption and growth.

Artificial Intelligence

The integration of crypto and AI has the potential to drive responsible innovation across both technologies. The openness, transparency, scale, and even "proof of personhood" achieved by integrating crypto and AI could pave the way for groundbreaking advancements in AI.

• Responsible Innovation: By reducing regulatory risk, innovators will be able to focus on developing AI solutions that benefit society.
• Increased Adoption: As AI becomes more mainstream, its adoption will accelerate, leading to increased growth and innovation in the crypto space.

Fixed Income Markets

Interest rates are the backbone of traditional financial markets. With regulatory resistance decreasing, fixed income markets are poised for growth as financial institutions enter global crypto markets.

• Benchmark Yields: Benchmark yields like the composite ether staking rate (CESR) and perpetual swap funding rates will bring the utility of the $500 trillion interest rate swap market to the crypto space.
• Increased Adoption: As fixed income markets grow, they will appeal to hedgers and speculators alike.

Utility Tokens

During the SEC’s regulation by enforcement regime, tokens that demonstrated utility were often targeted for enforcement. With a favorable regulatory climate, the focus of the market is likely to shift towards utility-based tokens.

• Increased Adoption: As regulators prioritize utility, memecoins with no utility will lose favor, and mainstream adoption is expected to increase.
• Innovation: The focus on utility will drive innovation in token development, leading to more effective and useful applications.

Decentralized Physical Infrastructure (DePIN)

DePIN uses tokens to incentivize mass community participation, creating large, decentralized physical networks. These networks are providing scalable and cost-efficient solutions across telecommunications, mapping, computing, and geolocation industries.

• Increased Adoption: As regulatory clarity increases, DePIN is expected to see increased adoption and growth.
• Innovation: The focus on decentralized infrastructure will drive innovation in token development, leading to more effective and useful applications.

Conclusion

The election of pro-crypto leaders has brought about a significant shift in the crypto industry. With a regulatory environment that encourages innovation rather than stifling it, institutions will have the confidence to enter the market, and entrepreneurs will be free to focus on building. The future could not be brighter for the crypto industry.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., or its owners and affiliates.