Cryptocurrencies — and, by association, the blockchain — are often associated with the wilder side of the internet, from headline-grabbing heists to NFT meltdowns and meme coin frenzies.

But is 2025 the year that nefarious reputation is reformed?

Digital financial assets are in the sights of the new American president and his administration. Building on an election cycle fueled by crypto dollars and a well-organized lobby, President Trump issued an executive order in January declaring his intent to make the U.S. the “crypto capital of the planet” by “ensuring innovation thrives, regulatory frameworks are clear, and economic liberty is protected.”

His newly appointed White House crypto and AI czar, David Sacks, followed the Executive Order with a press conference to introduce a new bill to regulate stablecoins (a blockchain representation of fiat money like the U.S. Dollar), and the creation of a working group to draft digital asset legislation. Joining these efforts is the U.S. Securities and Exchange Commission (SEC), which has announced the formation of a Crypto Task Force to develop, regulate and enforce frameworks.

The urgency — and rhetoric — on the issue reflects pent-up demand for clarity, consistency and transparency in the space, says Andreas Park, Professor of Finance at the University of Toronto and Rotman. While the “crypto craze” is currently focused south of the border, he says it may be precisely what is needed to bring digital assets into the light and illuminate the potential of blockchain.

“The crypto space is rife with fraud and bad faith actors, which makes it difficult to see the positives,” he explains. “You want to enable those doing good and weed out the crooks.”

Park highlights two key areas being targeted for regulatory reform in the U.S. One is self-custody of digital assets. Self-custody — or the ability to hold your own assets without the participation of a third party, like an investment fund or bank — is a central tenet of the blockchain and cryptocurrencies like Bitcoin.

The blockchain, an encrypted digital ledger, requires digital “keys” to access it, which must be stored securely. Although users can store their keys on their desktops or phones, many would prefer a third party to do the safekeeping. Banks, the traditional safekeepers, however have been essentially prevented from providing custody services for digital financial asset for their customers since 2022. That year, the SEC implemented a new accounting rule requiring banks that custody crypto assets to treat them as liabilities, something not required for almost all other assets. This required them to have hold capital against these cryptoassets, and disincentivized institutional participation in crypto custody. As one of the first moves after Trump’s inauguration, the SEC rescinded the rule.

A second area of interest to U.S. regulators is the overall classification of different digital tokens. Although almost all are a financial instrument, even in traditional finance there are different categories, such as securities, commodities, and payments instruments. Separate regulatory agencies oversee different instruments and apply reporting and trading standards, often with far-reaching implications for the use and exchangeability of these assets. It is an ongoing debate whether and where the various blockchain-based tokens fit into these categories or whether there need to be new categories, Andreas says. “Critics say that until recently, U.S. regulators took a destructive stance, trying to put round pegs into square holes and creating barriers and confusion for businesses and consumers looking to contribute positively to the cryptocurrency sector.”

The common thread running through all of this is the blockchain, an open-source tool that can be “used to facilitate the movement of digital value” and use of it could significantly disrupt traditional financial services, Park explains.   

“[It] would allow businesses and financial institutions to make transactions, create assets, pledge assets, and handle all financial operations — essentially back-office operations — much more efficiently. It also has the potential to increase competition in financial services broadly, change the role of intermediaries, and transform gatekeeping functions into service-oriented functions. There is also the potential for significant efficiency gains in capital market operations.”

How will the rapid change in the U.S. impact Canada?

Park notes that in the short term, not much will change. But he warns that if we continue to treat blockchain and digital financial assets as fringe activities, we risk being left behind.

He also urges Canada to move quickly on developing a workable tokenization (the process of issuing a digital and anonymous representation of a real thing) framework. This would  allow for the creation of blockchain based representation of any other financial asset. In his view, lack of clarity on tokenization and hinderance to adopt new technology is a risk for Canada’s capital markets, whereas a well-designed regulatory regime will allow Canadian markets to thrive and expand.

On particularly pressing issue, in his view, is the regulation of stablecoins, a blockchain-based token pegged to a fiat asset like the U.S. dollar. The regulation of stablecoin is also a focus of Trump’s Executive Order, praised in the U.S. as a way to “promote and protect the sovereignty of the United States dollar.” Proponents also see them as an efficient tool for cross-border payments and advancing decentralized finance (DeFi) models.

In Canada, provincial regulators categorize and regulate stablecoins as securities. But because regulations for securities are unique to their jurisdictions and imply significant usage and exchange restrictions, it creates frictions between markets. The Canadian market is small, and most stablecoin issuers haven’t bothered to tailor their products to competing frameworks, Circle, the issuer of the stablecoin USDC being the only exception. If the U.S. surges ahead with mainstreaming and regulation, Canada — a small market heavily reliant on trade — may simply be left out.

In fact, Park says, without clarity on digital assets, “we could lose entire markets,” a perspective shared by lobby group Web3 Canada. It argues for classifying stablecoins as payments instruments and for Canada to align a new regulatory framework with the EU and U.S. to ensure Canada has the chance to play in the emerging stablecoin market.

“Without decisive action, Canada risks falling behind in the global digital economy,” the organization states on its website. “The absence of a coherent framework discourages investment and innovation while leaving consumers and businesses without effective payment solutions.”

For businesses and individuals, institutional adoption of the blockchain could open the opportunity for a digitally driven real-time rail (RTR) in Canada, a way to move money securely without relying on banks.

“We’re the only G7 country without a real-time rail,” Parks says, noting slow financial transfers “cost people real money and hinder business activity.” (RTR work has been proceeding in Canada, overseen by Payments Canada, which said in a January update that it is “more than halfway through the technical build of the RTR.”)

Park argues that clearer, reasonable regulation can benefit both traditional finance and digital assets. “Economic growth is hard to come by and we should cease every opportunity that presents itself. U.S. regulatory clarity is overdue and necessary — it pushes established financial firms to innovate and explore efficiencies. Yet, there is also a real risk that the U.S. goes to far and inadvertently enables excessive risk taking, undermining market integrity.”