On November 6, I wrote a memo to the EY blockchain leadership team. The headline was simple: “All Private Blockchains Just Died.” Since November 2022, the cryptocurrency and blockchain markets have been defined by caution and gradual recovery. The direction has been consistent and positive, but slow, especially in 2023.
In 2024, we are witnessing a gradual but sustained acceleration. The year began with the Bitcoin exchange-traded fund (ETF) and continued to accelerate through an Ethereum ETF and the adoption of the EU’s Markets in Crypto Assets (MiCA) legislation.
We were on a path of constant global regulatory convergence, including rules for major types of digital and crypto assets. We were also on the path to public blockchains. Bitcoin is a kind of digital gold and Ethereum is a platform for developing digital assets and services.
The path may have been consistent, but the pace was measured. It was common to hear people from large financial institutions tell me that they would love to move to public Ethereum but that “the regulators won’t allow it.” On the night of November 5 (after the US elections), the prospect of substantial regulatory change became a reality. Any certainty about what regulators will or will not allow was suddenly gone, and one clear direction of travel was the radical acceleration of public networks.
There is no absolute certainty in life, but if I am to make predictions about 2025, it is that we will certainly have a radical change in the US regulatory environment and that, in turn, will cause a collective global shift in the same direction. although not necessarily at the same pace. However, since the United States is by far the largest financial market in the world, that counts for a lot.
Bitcoin is already a big winner here. It is cementing its place as the digital version of gold and, sometime in 2025, could officially take on that role with countries and governments dipping their toes into strategic reserves of bitcoin. My own previous prediction was that Bitcoin was likely to continue growing until it reached the size and market capitalization of gold, which is currently around $14 trillion. In many ways, Bitcoin is much more attractive as a scarcity-based asset. Higher Bitcoin prices do not increase supply, something that cannot be said for real gold.
Ethereum will be the second big winner. Ethereum has seamlessly transitioned to proof-of-stake, reducing carbon output by >99%, and has also grown massively. The combined Ethereum network (Layer 1 mainnet and Layer 2 networks) has several hundred times the capacity it had during the last bull market. Transaction fees are low and are likely to remain that way for some time. Massive scalability, low costs, and an excellent security and uptime track record will make Ethereum the choice for most digital asset issuers.
Beyond cryptocurrencies, the biggest boom we are likely to see in 2025 is likely related to stablecoin payments. The value proposition and business case for stablecoin payments is already strong. Around the world, users want access to US dollars, particularly for international remittances. The use of dollar stablecoins was already popular among cryptocurrency users, but access and use cases are expanding rapidly. Circle works with Nubank in Brazil, for example, so that all account holders can directly access USDC payments. Celo, an Ethereum network, has partnered with Opera to put stablecoin payments in Opera’s web browser, which is optimized for low-cost smartphones popular in emerging markets. As a result, Celo stablecoin transaction volumes have grown rapidly.
Stablecoin payments are also reaching the business sector. EY, PayPal and Coinbase have worked with SAP to enable fully automated payments from within enterprise ERP systems. Now, the same automation in the system that works for bank accounts also works for crypto payments. This is particularly important for enterprise use where processes that cannot be automated at scale have no chance of adoption. When combined with improved privacy tools (and better regulatory treatment of privacy systems), cryptorails look like much lower cost options for enterprise users.
2025 is also likely to be a watershed year for decentralized finance (DeFi). DeFi relies on software applications that run on-chain to replicate key functions in financial and banking services.
Throughout 2024, DeFi was the only area of the crypto ecosystem that did not see any real movement in terms of regulatory clarity and, thanks to high real-world interest rates, was not a hugely attractive option. The regulatory environment is likely to be much more favorable for DeFi in 2025, and if interest rates decline, a more aggressive pursuit of incremental on-chain yield could take off. DeFi tools that allow people to lend their assets to liquidity pools and other services in exchange for an additional return on the asset (and higher risk) could become popular again.
So the revolution will not be about something new or different, but simply about everything moving forward at once. And overall, the competitive intensity in every sector of the blockchain ecosystem is about to be turned up to 11 (my “Spinal Tap” reference). Companies, banks, brokerages, insurance firms and more that stood by and watched with horror in 2023 and caution in 2024 and would probably take the plunge in 2025. I’ve already lost track of all the big companies that have announced plans . offer a stablecoin, a real-world asset or start selling bitcoins and eth to your customers.
The competitive intensity within the blockchain ecosystem has already been turned up to 11, and 2025 will be a difficult year within the market. People who run blockchain networks and services should be forgiven for wondering if these are good times, is it worth it? Within the Ethereum ecosystem, there are now over 40 different Layer 2 networks. Transaction fee competition is brutal, differentiation between Layer 2 networks is low, and more and more competitors are entering the market.
As difficult as it is inside Ethereum, it may be worse outside, as “alt-L1s” face a combined Ethereum ecosystem that appears scalable, secure, and reliably low-cost. Some networks, like Celo, have already gone from competing with Ethereum to being part of it. I hope more will follow in 2025.
The only worse place to be than facing furious public blockchain competition may be running a private blockchain. When your value proposition is “it’s as close to Ethereum as regulators allow” and all those regulators are being removed, the outlook is especially bleak. I’ve already received calls from private network companies asking me how to pivot and how quickly it can be done.
Finally, I predict that 2025 could be a great year for fraud. A carnival and casino atmosphere in online commerce combined with rapid regulatory easing could attract the same scammers who appeared in the last cryptocurrency boom. What’s harder to predict is exactly where this fraud might appear. People are usually pretty good at locking the barn door after the horse has bolted. Therefore, things that worked in the past, such as hacking exchanges or borrowing depositors’ funds, will be harder to repeat. Audits, regulators and better security technology all contribute to this. That doesn’t mean the risk will go away, just that it will arrive in a new package.
Happy New Year and have a great 2025!
Disclaimer: These are the personal views of the author and do not represent the views of EY.
