We are on the cusp of a major shift in financial, political, and social power from Baby Boomers toward Millennials that, combined with digitization and monetary policy shifts, will continue to drive regulatory changes supporting the adoption of cryptoassets.
Regulation is often cited as a key factor hindering adoption of this under-owned asset. A recent Campden Wealth survey cited the lack of regulation as the second-highest impediment to investing in crypto among family offices. This is understandable, given the regulatory landscape in the United States since the collapse of crypto exchange FTX.
Gary Gensler’s Securities and Exchange Commission (SEC) came down on the crypto industry with an iron fist, executing enforcement actions against Coinbase, Kraken, and many other credible companies. In addition, Martin Gruenberg at the Federal Deposit Insurance Corporation (FDIC) made life difficult for the crypto industry by weaponizing the banking sector. It has been challenging for crypto businesses like ours to get the basic banking services we require to function.
The good news is conditions have improved markedly in the last year, opening the door for the power of changing demographics to accelerate the adoption of cryptoassets.
Removing Regulatory Obstacles
Conditions began to change in June 2023 with a constructive judgment in the court case against Ripple (XRP), providing much-needed clarity on the application of securities law to crypto. It also showed that the courts could stand up to the SEC, holding the institution accountable for its judgments.
In August 2023, the US Court of Appeals for the D.C. Circuit called the SEC “arbitrary and capricious” after its decision to reject Grayscale’s Bitcoin ETF. This decision led to the approval of 11 bitcoin ETFs in January 2024 and laid the groundwork for Ethereum ETF approval in May 2024. ETFs have proven important, not merely for flows but for institutional credibility, creating broad-based support. Some of the world’s largest asset managers with entrenched relationships in Washington have built Bitcoin products and are marketing the value proposition to their clients.
Bipartisan Support
The approval of Bitcoin ETFs was monumental, but uncertainty over crypto regulation remained in Washington. Regulatory actions by the Department of Justice against Tornado Cash and Samourai Wallet in 2024 suggested persistent regulatory resistance. Events in May, however, have firmly affirmed the pendulum is shifting more positively.
In May 2024, the House of Representatives passed a resolution, H.J. Res. 109, which overturned the SEC’s Staff Accounting Bulletin (SAB) 121. SAB 121 introduced unfeasible actions on digital asset custodians, threatening their viability. President Biden subsequently vetoed the actions of Congress. But the more important news is the bipartisan support for the bill in Congress including from key Democrats like Nancy Pelosi.
In addition, FDIC chairperson Gruenberg is set to resign, potentially ending Operation Choke Point. Although Gruenberg’s decision is related to his misconduct charges, it certainly contributes to a significantly more positive regulatory landscape than a few months ago.
It now appears that the harsh regulatory actions against the crypto industry are more idiosyncratic, coming from specific lobby groups. A broader number of Congressional members including Democrats, are adopting a more pragmatic view of the crypto industry and the technology that underpins it.
The Unstoppable Market Forces
I have long argued that three powerful market forces — digitization, monetary shifts, and changing demographics — make crypto adoption inevitable:
- Digitization: The world is increasingly digital, yet banking and finance haven’t been heavily impacted. Bitcoin represents the advent of digital scarcity. Bitcoin and crypto are taking money and finance into the digital age.
- Monetary shifts: Monetary regimes don’t last forever. The US dollar global reserve system has been around since the 1970s and is creaking under excessive debt and ultra-low interest rates, suggesting it cannot persist indefinitely. An alternative monetary system is required, and there are not many viable alternatives.
- Demographics: Baby Boomers have dominated global economics, politics, and culture for the last 50 years. They account for approximately 70% of US disposable income and 50% of wealth.
However, old age implies that the reins will pass from Boomers to Millennials in the next 10 years. By 2025, Millennials are projected to comprise 40% of the US workforce, driving changes in work culture, job expectations, and career trajectories.
Millennials are far more tech-savvy and favorable toward crypto than Boomers. Some Millennials will have grown up spending a significant portion of their time online. Digital ownership and online security may be second nature to them.
The Campden Wealth 2023 survey of family offices affirms this general shift, revealing “change in culture” as a key finding. Nearly half (46%) of family offices expect a leadership transition to the next generation to occur within the next decade.
Crypto Will Ultimately Prevail
“Truth will ultimately prevail where there is pains to bring it to light.”
George Washington
As these trends unfold, aggregate perceptions of crypto will evolve, driving adoption beyond mere allocation. Politicians will need to adopt more crypto-friendly stances to appeal to an increasingly influential constituency. The recent appointment of J.D. Vance and Vivek Ramaswamy to key roles in the Trump presidential campaign reflects the early stages of this trend. If Trump is elected, these two pro-Bitcoin officials would be the first Millennials in the White House.
Companies will consider crypto as a cost of doing business to remain relevant in the digital age like PayPal. Investment managers will be forced to consider allocation as they assess underperformance potential.
A Nomura 2023 investor survey suggested allocators expect to have between 5% and 10% in digital assets in the next three years, and that traditional finance (Tradfi) backing of crypto products is important. We now have that backing through ETFs. Nearly half (45%) of the survey respondents said their and/or their clients’ total percentage exposure to digital assets will be between 5% and 10% over the next three years, and just 0.5% say they will have no exposure. Notably, $150 billion flows are expected by the end of 2025.
Money is a technology to facilitate trade and savings. Bitcoin and crypto are merely an iteration in the development of monetary technology — a powerful, perhaps revolutionary iteration. As the winds of time blow, the truth prevails. Computers and algorithms bring integrity into the financial system, creating a fairer platform for businesses. New technologies always face resistance, but demographic shifts imply there is a fierce tailwind behind crypto adoption, politically, economically, and financially.