Posted by Mike Dellavalle and John Domingo
The digital asset space continues to captivate us with every nuance and (rev)evolutionary moment. For 2025, we believe there will be even more excitement and energy to both monitor and experience. Below are the five trends topping our radar:
The new crypto-friendly administration in the U.S. under President Trump and Paul Atkins, the anticipated incoming SEC chair, coupled with the extremely successful launch of the January 2024 spot bitcoin ETFs means additional ETF products could be approved by the SEC and launched this year in the regulated markets. These include additional single token ETFs (of larger market capitalization tokens), many of which currently have applications pending with the SEC.
Additionally, we expect to see variations of existing products launched in the near term, such as:
This new administration has signaled it intends to provide a runway for innovation in blockchain to occur in the U.S. Providing retail investors with easy and safe access to digital assets is viewed as an exciting step in the right direction.
Over the last few years, we have seen solid traction with projects aimed at tokenizing real-world assets (RWAs). Products include tokenized real estate, art, private investment funds, and stablecoin — the longest-living RWA and a product that tokenizes the U.S. dollar. More recently, we observed Blackrock’s BUIDL as well as other issuers achieve great success in their launch of what functions as tokenized money market funds. A similar process has been followed to tokenize funds that invest in other types of assets, such as private equity, public equities and debt, as well as any others that have traditionally been held by private investment funds.
Tokenized funds are created by combining traditional investment fund frameworks with blockchain technology. The process generally involves the creation of a legal structure suitable for an investment fund, which serves as the vehicle for pooling investor capital. Next, the fund issues digital tokens that represent ownership of the fund, with these tokens being backed by the underlying assets held by the fund. These tokens are issued on a blockchain, ensuring ownership and transaction records are securely recorded and easily transferable within regulatory guidelines. These fund structures must still comply with applicable securities regulations for traditional investment funds (Reg. D, etc.).
While the setup costs can be high, these structures unlock a significant amount of flexibility for investors to increase or divest their positions in private investment funds without the inherent restrictions present in legacy structures (liquidity risk in illiquid closed-end funds, etc.). Tokenized structures also provide compliance enforcement and operational efficiency benefits. With existing traction in these products, we expect a fund tokenization trend to continue with more launches in 2025.
Numerous members of U.S. Congress have expressed an urgency and interest in drafting and passing stablecoin legislation in 2025. These remarks are also aligned with the president’s agenda. Such legislation is necessary for institutions and corporations to both adopt stablecoins and build infrastructure to use this technology. The benefits of stablecoins over legacy systems are thought to greatly outweigh the risks, mainly pertaining to transaction speed and costs. Infrastructure has been in development for years to tackle some of the higher risk areas of stablecoins, which primarily exist due to novelty of the technology.
If the U.S. is successful in passing legislation, it is probable we will see further adoption of stablecoins being used for payments, cross-border transactions and multiple other use cases. The adoption of stablecoins — specifically those pegged to the U.S. dollar, which comprise most of the stablecoin market — helps strengthen the dollar as the world’s reserve currency and offers citizens of emerging market countries the U.S. dollar as an alternative to their historically unstable currencies.
Artificial intelligence (AI) growth has been significant over the past year. Various AI solutions have been introduced that leverage blockchain technology and are currently working to achieve product-market fit. For example, decentralized AI networks represent an alternative to traditional, tech-company-created AI systems. Whereas AI systems created by technology companies focus on designing systems the business can control and offer to users, a solution created by a decentralized AI network is a network of validators/miners contributing computing power to the network in an effort to provide a similar service, but without any single person in control.
Many decentralized AI networks issue tokens to serve as the incentive for participating in the network, whether through validation, mining or staking to secure the network or usage. Token structures for these products share characteristics with Bitcoin and others that have used an economic incentive structure on their network for validation, such as Chainlink. Creating economically incentivized, decentralized AI systems may help address concerns technology experts have warned about regarding the potential misuse of AI. The industry will have to find the right balance to ensure AI is not used maliciously and to mitigate the risks associated with decentralized AI systems.
Over the coming years, we expect to see AI and blockchain demonstrate a strong and compatible relationship leading to the realization of many benefits.
Memecoins are effectively financializing social trends and the attention economy by combining the viral nature of internet culture and memes with an economic value mechanism. These tokens, often created as playful or satirical takes on popular figures, events or internet memes, gain value through community engagement and social media buzz rather than traditional economic fundamentals.
Various platforms have launched, enabling the average user to create a token and effectively financialize their social community or trend. While these tokens have long been considered to be lacking in any long-term value, they have, over time, proven to be sticky with respect to continuing community growth and growth of the various social trends.
With coins like Dogecoin and Shiba Inu holding multi-billion-dollar market caps for many years now (and most recently with President Trump officially launching his own memecoin), the market has made it clear memecoins are not going away. We saw a similar trend in 2021 with non-fungible tokens (NFTs). From this point once again, it will be interesting to see other creative ways in which the industry innovates on these existing financialization mechanisms.
The digital asset space is poised for a transformative year in 2025, driven by these five key trends. As they unfold, the digital asset space will likely see increased regulation, innovation and broader adoption, making 2025 a pivotal year for both industry participants and those looking to enter the space.
Contact Mike Dellavalle or a member of your service team to discuss this topic further.
Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.