Hotcoin Research | The Great Regulatory Reversal: Progress in U.S. Crypto Policy in 2025, Market Impact, and Outlook for 2026

I. Introduction

2025 is widely regarded as a watershed year for cryptocurrency regulation in the United States.
Prior to this point, U.S. regulators had long taken an inconsistent approach toward digital assets. The absence of a clear regulatory framework led to the prevalence of “regulation by enforcement,” placing significant constraints on industry development.

In contrast, 2025 marked a series of breakthrough legislative and policy advances at the federal level. Congress passed the first federal stablecoin law, the GENIUS Act, the House of Representatives advanced comprehensive digital asset market structure legislation through the CLARITY Act, and lawmakers successfully repealed overly burdensome tax reporting rules targeting DeFi. While these measures helped clarify industry rules and restore market confidence, they also triggered sharp price movements and structural shifts across the crypto market.

Changes in the U.S. political environment further paved the way for a more crypto-friendly policy stance. Following Donald Trump’s return to the White House, the administration explicitly stated its intention to build the United States into a “global crypto capital.” Through executive orders, digital assets were elevated to a national financial strategy priority, and several officials supportive of crypto innovation were appointed to key regulatory positions.

As legislative and regulatory conditions improved, major crypto assets such as Bitcoin entered a new bull cycle in 2024 and reached record highs in early 2025. Although prices retreated later in the year amid macroeconomic volatility, regulatory tailwinds emerged as a key pillar underpinning market recovery.

This report provides a comprehensive review of U.S. crypto-related legislation and policy initiatives passed or actively advanced in 2025, examines market performance before and after their introduction, and looks ahead to regulatory trends and industry implications for 2026. As regulatory clarity improved, both short-term market sentiment and long-term industry structure underwent profound changes. In the short term, asset prices reacted rapidly to policy developments; in the long term, compliance frameworks strengthened, institutional capital accelerated its entry, and the industry regained momentum.

II. The First Federal Stablecoin Law: The GENIUS Act

Source: https://www.congress.gov/bill/119th-congress/senate-bill/1582/text

In June 2025, the U.S. Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, commonly known as the GENIUS Act, by an overwhelming margin. This marked the first federal-level stablecoin regulatory framework in U.S. history and became the first major crypto-related legislation enacted by Congress.

On July 17, the House of Representatives approved the bill by a vote of 308 to 122. The following day, President Trump signed the GENIUS Act into law. The speed and scale of this legislative process reflected bipartisan consensus on stablecoin regulation and signaled a decisive shift in the U.S. stance toward actively regulating dollar-denominated digital assets.

1. Key Provisions of the Act

The GENIUS Act establishes a comprehensive federal regulatory framework for payment stablecoins. Under the Act, a “payment stablecoin” is defined as a digital asset pegged to a fiat currency, used for payments and settlement, issued by a party that promises redemption at a fixed nominal value and claims to maintain price stability.

Issuer eligibility requirements:
Only qualified, regulated entities may issue payment stablecoins. These include federally insured depository institution subsidiaries, non-bank entities approved by the Office of the Comptroller of the Currency, and entities authorized by certified state-level regulators. This licensing framework ensures issuers possess sufficient financial strength and compliance capabilities. As a result, compliant issuers such as Circle gain a clear pathway to federal authorization, while unqualified entities are prohibited from issuing stablecoins, mitigating systemic risks arising from unchecked innovation.

Reserve requirements:
Stablecoins must be fully backed by safe, highly liquid assets on a one-to-one basis. Eligible reserves include U.S. fiat currency, Federal Reserve deposits, short-term U.S. Treasury securities, high-quality short-term repurchase agreements, and regulated deposits. The Act also allows tokenized representations of these assets to count as reserves, provided regulatory requirements are met. This provision leaves room for the on-chain circulation of traditional financial assets in the future.

Importantly, the Act explicitly prohibits issuers from paying interest to stablecoin holders, thereby preventing shadow-banking risks similar to those posed bydeposit-like products. Issuers must disclose monthly information on outstanding stablecoin supply and reserve composition on their official websites, with reports audited by independent accounting firms and certified by both the CEO and CFO.

Regulatory allocation and balance:
The GENIUS Act adopts a cooperative federal–state regulatory model. Non-bank issuers must obtain OCC approval and remain subject to federal oversight, while smaller issuers operating under state supervision must meet standards comparable to federal requirements. The Federal Reserve is granted authority to take enforcement action against state-regulated issuers under special emergency circumstances to address systemic risk. This dual-layer framework ensures that systemically important stablecoin issuers remain under central oversight, while smaller innovators can develop within state-level regulatory sandboxes.

Restrictions on commercial companies:
The Act prohibits certain non-financial commercial entities, particularly large technology firms, from issuing stablecoins. This measure aims to prevent platform-based corporations with massive user bases from bypassing financial regulation to issue private currencies, thereby avoiding risks related to “digital monopoly money” and threats to financial sovereignty and competition. This provision is widely viewed as a direct response to Facebook’s earlier Libra initiative.

Regulatory classification clarity:
Payment stablecoins are explicitly excluded from the jurisdiction of the SEC and the CFTC and instead fall under the banking regulatory framework. This resolves long-standing uncertainty over whether stablecoins constitute securities or commodities. Major U.S. dollar stablecoins such as USDC and USDT are treated as prepaid payment instruments rather than securities, avoiding the inappropriate application of securities laws.

2. Market Impact of the GENIUS Act

Source: https://defillama.com/stablecoins

The introduction of the GENIUS Act significantly strengthened market confidence in stablecoins. Following the announcement of the legislation, the stablecoin market responded positively. By December 2025, the total global stablecoin market capitalization exceeded 300 billion US dollars.

While part of this growth reflected the broader recovery of the crypto market, a more direct driver was investor expectation that regulatory clarity would legitimize stablecoins. Institutional investors became more comfortable using and holding stablecoins for trading and payments, and traditional financial institutions began exploring stablecoin-related businesses.

JPMorgan’s research division has projected that global stablecoin market capitalization could reach between 500 and 750 billion US dollars in the coming years, with some commentators describing 2025 as “the true first year of stablecoins.” With regulatory support in place, U.S. dollar stablecoins are expected to integrate more deeply into mainstream finance. Payment networks such as Visa and Mastercard have already launched pilot programs using stablecoins for cross-border settlement, while banks are considering issuing branded stablecoins or partnering with existing issuers to provide compliant digital dollar services.

III. Digital Asset Market Structure Legislation: The CLARITY Act

Source: https://www.congress.gov/bill/119th-congress/house-bill/3633/text

Following the passage of stablecoin legislation, Congress rapidly advanced broader market-structure reforms for digital assets. The centerpiece of this effort is the Digital Asset Market Clarity Act of 2025 (the CLARITY Act), proposed and passed by the House of Representatives. Jointly drafted by the House Agriculture Committee and the House Financial Services Committee, the bill is widely regarded as a comprehensive attempt to clarify regulatory boundaries for digital assets.

On July 17, 2025, the CLARITY Act passed the House with 294 votes in favor and 134 against and was subsequently sent to the Senate for consideration. However, only days after the House passed its version, the Senate Banking Committee introduced a parallel, competing draft of a crypto market structure. The Senate Agriculture Committee and Senate Banking Committee each held discussions and solicited public feedback within their respective jurisdictions, with plans to merge the two proposals into a unified Senate bill for a vote in 2026.

1. Core Framework: A Three-Category Regulatory System

The CLARITY Act seeks to resolve a long-standing industry question: which regulator oversees which types of digital assets. To address this, the Act establishes a three-category classification framework that clearly delineates the responsibilities of the SEC and the CFTC.

Digital commodities:
These are digital assets that are intrinsically linked to a blockchain system, with value derived directly from the functionality or services of that network. In practice, this includes functional tokens used for payments, governance, access to services, or network incentives, such as Bitcoin and Ether. The Act explicitly excludes securities and their derivatives, stablecoins, bank deposits, fund shares, collectibles, and similar instruments from this category. This classification formally recognizes the commodity-like nature of decentralized, non-profit-generating tokens.

Investment contract assets:
This newly introduced category refers to digital commodities sold or issued through an investment contract, such as tokens distributed via initial coin offerings. The Act introduces a “network maturity” certification mechanism, allowing project teams or decentralized communities to apply for regulatory recognition that a blockchain network has matured and that its token no longer constitutes a security.

Criteria for network maturity include the existence of functional services, open-source core code, transparent and predefined rules that cannot be unilaterally altered, and the absence of any single entity controlling more than twenty percent of the token supply. This framework resembles a post-IPO lock-up concept: early-stage projects remain subject to securities regulation to protect investors, but once sufficient decentralization is achieved, tokens may transition into freely tradable digital commodities.

Permitted payment stablecoins:
Consistent with the GENIUS Act, the CLARITY Act treats fiat-pegged payment stablecoins as a distinct category. These assets must be pegged to legal tender, issued by regulated entities, and redeemable at a fixed value. Under the CLARITY framework, stablecoins are neither securities nor commodities but are treated as regulated payment instruments.

Through this classification system, the CLARITY Act clarifies regulatory jurisdiction. Digital commodities fall primarily under CFTC oversight; investment contract assets are regulated by the SEC; and stablecoins are supervised by banking regulators. This division prevents the SEC from categorizing nearly all tokens as securities, while empowering the CFTC to address long-standing gaps in oversight of crypto spot markets, including market manipulation.

2. Compliance Pathways for Exchanges and Market Participants

Beyond asset classification, the CLARITY Act provides clearer compliance guidance for intermediaries and market participants.

Crypto exchanges:
Digital commodity trading platforms must register with the CFTC as digital commodity exchanges and comply with core principles, including listing standards, market surveillance, conflict-of-interest prevention, and customer asset protection. Exchanges must segregate customer assets from proprietary funds, use qualified custodians, provide adequate risk disclosures, and join a self-regulatory organization of the futures industry. Certain innovative services are permitted, subject to restrictions. For example, exchanges may offer staking services, but participation must be voluntary and clearly separated from trading activity to avoid conflicts of interest.

Brokers and dealers:
The Act encourages compliant broker-dealers and exchanges to expand into digital assets. Entities engaging in digital commodity brokerage must register with the CFTC and meet capital, reporting, and customer protection requirements. The SEC is directed to permit registered broker-dealers, exchanges, or alternative trading systems to handle trading and custody of digital commodities and stablecoins and may not deny registration solely because a platform offers both securities and digital asset services. The SEC is also granted discretion to apply existing exemptions to certain DeFi activities to avoid stifling innovation.

Technology developers:
The Act clarifies that individuals and entities engaged in non-custodial activities, such as blockchain development, node operation, and wallet development, do not require state or federal licenses. This provision is critical for preserving the U.S. blockchain development ecosystem, as it removes legal uncertainty for developers who do not control user assets.

3. Market Impact: Positive Expectations and Heightened Volatility

Source: https://coinmarketcap.com/currencies/bitcoin/

As the House designated mid-July 2025 as “Crypto Week” to vote on the CLARITY Act, anti-CBDC provisions, and stablecoin legislation, bullish investor sentiment intensified. Bitcoin rebounded to a high in July, market dominance increased, and several U.S.-listed blockchain-related equities recorded short-term gains. Industry participants broadly viewed House passage as a long-awaited breakthrough, boosting institutional willingness to re-enter the market. Major venues such as the New York Stock Exchange and Nasdaq began reassessing previously shelved digital asset trading and custody initiatives.

However, the slow and uncertain pace of policymaking also led to sharp, news-driven price swings. After the CLARITY Act passed the House and moved to the Senate, investors briefly anticipated rapid Senate approval, driving Bitcoin to an all-time high of approximately 126,000 US dollars in early October. Subsequent macro shocks reversed sentiment, triggering record leveraged liquidations and reinforcing the sensitivity of crypto assets to broader risk conditions. In 2025, Bitcoin’s correlation with the S and P 500 rose to 0.5, significantly higher than in 2024.

IV. Other Representative Crypto Policy Developments

In addition to major legislative initiatives, the U.S. government took several significant crypto-related policy actions in 2025 that further strengthened the compliance environment.

1. Anti-CBDC Legislation: Protecting Financial Privacy

Following the change in administration, U.S. policy toward central bank digital currencies underwent a complete reversal. In January 2025, President Trump signed an executive order prohibiting federal agencies from promoting, issuing, or supporting a CBDC. This stance was later reinforced legislatively through the Anti-CBDC Surveillance State Act, incorporated into the CLARITY Act.

The core objective is to prevent the Federal Reserve from offering retail CBDC accounts or products, emphasizing privacy and personal freedom. Given unified opposition from the administration and House leadership, the prospect of a U.S. retail CBDC has effectively been closed.

Supporters argue that banning CBDCs safeguards financial privacy and private-sector innovation. In this environment, private-sector stablecoins are well-positioned to dominate the digital dollar landscape, aligning with the GENIUS Act’s policy direction to encourage banks and compliant institutions to issue stablecoins.

2. Repeal of Stringent DeFi Reporting Rules

In 2025, Congress repealed Treasury regulations implementing Section 80603 of the Infrastructure Investment and Jobs Act, which had broadly defined “digital asset brokers.” The repeal clarified that purely automated DeFi protocols operating on-chain without fiat on-ramps are not required to collect user identity information or file transaction reports.

Centralized exchanges and custodial service providers remain subject to reporting obligations, while decentralized protocols such as Uniswap are exempt. This distinction materially reduced compliance uncertainty for DeFi developers while preserving reporting requirements for centralized intermediaries.

3. Regulatory Leadership Changes and Enforcement Shift

Beyond legislation, improvements in the U.S. crypto regulatory environment were driven by leadership changes and a shift in enforcement posture. Most notably, former SEC Commissioner Paul S. Atkins was appointed Chair of the SEC and launched initiatives to develop clearer token classification standards while applying enforcement more selectively.

Since early 2025, the SEC has reportedly paused or withdrawn approximately sixty percent of crypto-related investigations, easing pressure on the industry. High-profile cases, including actions against Ripple and Binance, showed signs of de-escalation. This shift allowed firms to refocus on operations rather than on litigation and contributed to a reduction in project outflows from the United States.

At the same time, banking regulators began relaxing their stance. In 2025, the Federal Reserve and the OCC withdrew several restrictive statements regarding banks’ crypto activities, shifting toward a case-by-case review approach. Conditions now appear poised to improve for crypto firms seeking access to basic banking services, following years of constrained access after the collapse of crypto-friendly banks.

4. Executive Orders and Exploration of a Bitcoin Reserve

On January 23, President Trump signed an executive order titled Strengthening American Leadership in Digital Financial Technology, declaring U.S. policy to support the responsible growth and use of digital assets, blockchain technology, and related innovations across the economy. The order established a Presidential Working Group on Digital Asset Markets, comprising senior officials, including the SEC Chair, the CFTC Chair, the Treasury Secretary, the Commerce Secretary, and the Attorney General, with authority to consult with private-sector digital asset leaders.

The working group was instructed to submit a report within 180 days proposing a comprehensive federal digital asset regulatory framework and evaluating the feasibility of a national “digital asset reserve.”

President Trump has shown particular interest in establishing a national Bitcoin reserve, potentially leveraging existing government-held Bitcoin obtained through law-enforcement seizures and exploring partial diversification of national reserves into digital assets. On March 6, he issued Executive Order 14233, directing the creation of a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile.

From a strategic perspective, the U.S. government’s formal embrace of Bitcoin reflects not only economic considerations but also geopolitical strategy—seeking to preserve dollar dominance in a future digital economy while countering the rise of rival digital currencies or gold-based alternatives. While controversial among traditional financial officials, the concept had moved from speculation to tangible policy discussion by 2025.

V. Looking Ahead to 2026: Implementation of New Rules and Industry Transformation

Looking ahead to 2026, U.S. crypto regulation is expected to continue to deepen and refine the framework established in 2025. Several key directions merit close attention.

1. Legislative Finalization and Rulemaking

Digital asset market structure legislation is likely to reach final passage in 2026. The two relevant Senate committees have announced plans to consolidate their drafts by year-end and advance a full Senate vote in early 2026. Given strong House support and alignment with the executive branch, market participants widely expect a high probability of Senate approval.

Once the House and Senate reconcile the final text, the CLARITY Act and related provisions, including anti-CBDC measures, could be formally signed into law in the first half of 2026. This would be followed by an intensive rulemaking phase led by the SEC and CFTC. During this period, industry associations and major market participants are expected to actively engage with regulators to influence the development of detailed implementation rules.

The final regulatory details will determine how firms adjust their business models. If exchange registration requirements are transparent and pragmatic, U.S.-based platforms such as Coinbase may be among the first to seek CFTC registration, while overseas exchanges could consider applying for U.S. licenses.

2. Formation of a Compliance Ecosystem and Accelerated Institutional Entry

As regulatory frameworks become clearer and supporting rules are implemented, a U.S. crypto compliance ecosystem is expected to take shape. Exchanges, custodians, broker-dealers, and stablecoin issuers operating legally are likely to obtain formal registrations or licenses, significantly increasing institutional participation.

Large asset managers such as BlackRock and Fidelity have already introduced traditional capital via ETFs and related products. With further regulatory clarity in 2026, these institutions may expand into additional services, including crypto hedge funds, custody, and derivatives trading. Wall Street banks such as Goldman Sachs could also launch digital asset trading and custody offerings. In the stablecoin space, qualified bank subsidiaries such as JPMorgan’s may issue payment stablecoins, while non-bank institutions like PayPal would have clearer issuance pathways through OCC approval.

The large-scale entry of traditional institutions is expected to bring incremental capital and more mature risk management, potentially reducing long-term market volatility while improving liquidity depth and pricing efficiency.

3. Industry Competition and Reshuffling

The transition to a compliance-driven era will likely trigger industry reshuffling. Firms willing and able to meet regulatory requirements are positioned to gain market share, while those unable or unwilling to comply may be forced out of the U.S. market. Compliance leaders such as Coinbase are well-positioned to consolidate their advantage, while platforms operating in regulatory gray areas may struggle to continue serving U.S. users.

A similar dynamic is expected on the project side. High-quality crypto projects may increasingly choose to issue tokens in the U.S. under compliant frameworks. If the SEC successfully establishes a token registration exemption regime in 2026, the market could see the first SEC-registered token offerings sold to the public under regulatory oversight. This would represent a structural shift, allowing crypto startups to raise capital in a manner more akin to traditional IPOs, while providing investors with stronger disclosure and legal protections.

At the same time, decentralized models are likely to expand further under developer safe-harbor provisions. Decentralized exchanges, lending platforms, and derivatives protocols could grow more rapidly once the boundaries of exemptions are clarified, gradually integrating with traditional finance.

4. Government Strategy and International Competition

At the government level, the Trump administration is expected to continue advancing the strategic objective of positioning the United States as a global leader in crypto and blockchain innovation, while shaping international standard-setting processes such as FATF digital asset guidelines and cross-border payment frameworks.

In 2026, the U.S. may seek closer regulatory dialogue with advanced jurisdictions, including Europe, the United Kingdom, and Japan, potentially moving toward partial regulatory equivalence or mutual recognition. This would facilitate cross-border operations for compliant crypto firms across major markets.

Crypto is also expected to play an increasingly important role in U.S. financial diplomacy. The government may promote the use of U.S. dollar stablecoins in developing economies to reinforce dollar dominance. In late 2025, Treasury Secretary Bessent highlighted that stablecoin growth is expanding demand for U.S. government debt, signaling growing official recognition of stablecoins’ strategic value to U.S. financial markets.

5. Risks and Challenges

Despite a constructive outlook, 2026 is not without risks. On the macro side, renewed uncertainty related to interest-rate cycles, geopolitical tensions, or external shocks could weigh on crypto markets.

Regulatory goodwill does not imply regulatory leniency. A major security incident or market failure could prompt regulators to tighten policies swiftly and impose severe penalties to set precedents. This places higher expectations on industry self-discipline, security practices, and risk management.

Political cycles are another variable. As 2026 is a U.S. midterm election year, shifts in political dynamics could affect regulatory momentum. However, during the 2025–2026 cycle, a bipartisan consensus has emerged on reasonable regulation and support for innovation, providing a degree of policy continuity.

VI. Conclusion

Looking back at 2025, the United States underwent a fundamental transformation in cryptocurrency regulation, moving from ambiguity to clarity and from passivity to proactive engagement. Congress and the administration jointly introduced a series of landmark initiatives, including stablecoin legislation and comprehensive market structure reforms.

In the short term, these developments influenced market sentiment and price movements amid ongoing macro volatility. More importantly, their deeper impact lies in reshaping industry structure and ecosystem dynamics. Clear rules lowered barriers to compliant operations, traditional financial institutions gained confidence to enter the market, innovators were no longer deterred by regulatory uncertainty, and the U.S. re-emerged as a hub for crypto entrepreneurship and capital.

As regulatory clarity increases, the industry must respond with stronger compliance and risk management to justify regulatory trust. Only through constructive interaction between regulators and market participants can crypto technology fully integrate into the broader economy and realize its transformative potential.

For investors, close attention to policy direction is essential, as regulation has become a key driver of crypto market dynamics. Regulatory tailwinds not only support price appreciation but also reduce long-term risk premiums, enhancing intrinsic asset value and sustainability.