Beneath the cryptocurrency market’s optimism that arose from Donald Trump’s re-election and the associated bull run, there is no shortage of confusion about what his re-election will mean for the industry and the economy more broadly.

While there is little doubt that the incoming administration is vocally far more favorable to digital assets than the outgoing one, the exact policy – and the exact effects of the hypothetical policies – remain uncertain.

In this climate, the fate of the Federal Reserve’s FedNow system, a potential U.S. central bank digital currency (CBDC), and Ripple Labs has again come to the forefront.

What will happen to Fed and Ripple under Trump

Something of a double narrative has emerged in November. On the one hand, Donald Trump pledged to prevent the creation of an American digital currency, seemingly adopting the view held among some Republicans that such a development would be part of an enhanced financial surveillance system.

Simultaneously, years-old rumors that Ripple’s XRP and XLM are being considered as the systems that could power the blockchain aspects of FedNow are resurfacing, frequently with the ‘breaking’ qualifier.

These two stories already represent something of a paradox since the wishful thinking that Ripple will expand its government contracts to home turf – and thus likely send XRP ‘to the moon’ – clashes with the pledge that there will be no national digital currencies.

Furthermore, it is worth pointing out that there has been no official source discussing a partnership between the Fed and XRP or XLM in years, and the article that appears to have been the source for the dubious rumor itself seems highly speculative.

Another nail in the coffin of the rehashed news is that the Fed itself clearly distinguishes between FedNow – an instant transfer service for banks and credit unions – and a potential CBDC and other possible digital currencies.

Additionally, while the fate of FedNow under Trump is unclear, it isn’t necessarily uncertain. The service was launched in July 2023, and gutting one of the Federal Reserve’s payment systems is not a logical priority.

Still, given the Trump campaign’s more pro-crypto nature, FedNow may eventually receive a blockchain component. Simultaneously, the government may target it if it becomes a popular talking point for some politicians for some reason.

Can Ripple still benefit from the second Trump administration

As for Ripple and XRP, the fact they are unlikely to benefit from a partnership with the U.S. does not mean they will not benefit from the second Trump administration – in fact, they already are.

Though the legal battle between Ripple and the Securities and Exchange Commission (SEC) is not over, XRP has managed a massive rally since November 5 and is up 169.45% in the last 30 days to its press time price of $1.43.

XRP 30-day price chart. Source: Finbold

The source of this rally was not lost on Ripple’s CEO Brad Garlinghouse who tweeted on November 21 that he is thankful for Gary Gensler’s announced January 20 resignation.

This outlook that with or without a partnership with the Federal Reserve, the coming years will be good for XRP is prevalent across the crypto community. For example, Ali Martinez, a prominent digital assets on-chain analyst on X, opined that Gensler’s departure could propel the token to $2, as reported by Finbold earlier on November 22.

Could the Trump administration backfire on crypto investors?

Finally, it is worth pointing out that all the rhetoric and the expectations – which are, by all accounts, optimistic – could still be a road to nowhere. 

While Donald Trump has promised to make the U.S. a cryptocurrency capital, the track records of various actors in the legislative and executive branches of the government – including prominent digital assets advocates – could be described as hypocrisy and maliciousness at worst and incompetence and naivety at best.

Representative Tom Emmer, who in approximately six months went from shielding FTX from an SEC probe to bashing Chair Gensler for not investigating earlier, is the first to come to mind.

While past performance is no guarantee of future success, examples such as the gentleman from Minnesota highlight the underlying uncertainty and warn that bullish rhetoric need not translate into bullish outcomes.

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Today stablecoin issuer Paxos said it acquired Finnish e-money institution Membrane Finance, the issuer of EURe. The deal gives Paxos a licensed e-money institution (EMI) enabling access to all EU states, subject to regulatory approval.

Paxos and its affiliates are already regulated in New York, Abu Dhabi and Singapore. Under Europe’s MiCA regulations crypto legislation, registration in one state is passported to all other member states.

Paxos is the issuer of the PayPal stablecoin (PYUSD) and its own Paxos dollar (USDP). Its UAE affiliate has issued a yield bearing stablecoin. And in Singapore it recently launched the Global Dollar Network, which will share interest revenues on the USDG stablecoin with distribution partners.

“Stablecoins offer a global solution to challenges that countless people and companies feel when it comes to money movement and payments. Stablecoins are becoming increasingly more prevalent throughout the market as more use cases emerge for everyday users, “ said Walter Hessert, Head of Strategy at Paxos.

 

“With Membrane, we expect to extend our reach to EU customers looking to benefit from stablecoins.”

Stablecoins in the EU

In terms of other stablecoin players, Circle historically had a strong presence in Europe (Ireland). It chose France as its base for MiCAR, directly registering as an EMI.

MiCA regulations require a high proportion of reserves to be held at banks – 30% for smaller stablecoins and 60% for significant ones. Tether claims this is the reason it has not registered in the EU. However, so far it has chosen to remain offshore, avoiding jurisdictions that require it to be regulated. A large part of Tether’s stablecoin balance is on TRON, a blockchain that’s popular in Africa.

Meanwhile, MiCAR also has some quite complicated rules limiting the scale of foreign currency stablecoins in the EU. However, this is widely misunderstood, so we previously provided a deep dive on the topic.

Bank issued stablecoins are also explored as part of our Research report on tokenized deposits and DLT payments.

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A new asset and wealth management survey by PwC appears to show differences in appetite between asset managers and the institutional investors that they serve. That particularly relates to digital assets and tokenization.

One of PwC’s questions explored which sectors institutional investors are interested in when it comes to tokenization. The biggest gap was money market funds, despite the topic grabbing plenty of press headlines. While 40% of institutional investors hold or plan to hold tokenized money market funds, only 24% of asset managers offer or intend to offer them.

In two other areas, asset managers may have overestimated investor interest: the tokenization of hedge funds and private debt. Asset managers consider private debt as a desirable area (31%) for tokenization, but it looks like there’s less interest from investors (24%). Both asset managers and investors agreed that the most attractive sector for tokenization is private equity.

Another of PwC’s questions was less clear cut because of different time frames. It asked asset and wealth managers which digital assets were in the highest demand in the past 12 months. Whereas it asked investors which digital assets they are most interested in over the next two to three years.

Crypto dominates

Asset managers said crypto (57%) was slightly ahead of investing companies in the sector (54%), with security tokens in fourth place at 41%. Looking forward, investors are far more interested in crypto (62%) compared to any other type of digital asset. Investments in digital asset companies came second at 46%, with security tokens in sixth spot at 25%.

With some surveys, the devil is in the detail, such as who the pollster classifies as an institutional investor? If a large proportion are crypto specialists, then it can bias the results. PwC said that 264 asset managers took part and 257 investors. More than half managed assets of over $10 billion.

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