Ahead of our Digital Assets Summit 2025, Hedgeweek® spoke with Elise Soucie Watts, Executive Director of Global Digital Finance, Policy & Regulation & Board Member, on how to navigate the macro landscape and geopolitical forces.
What tangible regulatory changes for digital assets have we already seen in Trump’s first months in office, and how are markets responding to these initial signals?
We’ve seen a few notable developments – most significantly, the repeal of SAB 121 and implementation of SAB 122. The accounting bulletin SAB 121 – made it too expensive for banks to hold crypto assets on their balance sheets. Having it repealed means that institutional firms and banks can actually engage in this space.
We’ve also seen the beginning of positive pieces of legislation, like the STABLE and GENIUS Acts, along with the establishment of the Bitcoin Reserve and the Crypto Task Force, which were well received by the market. That said, this has been a bumpy road. The US may still be held back if it it does progress and pass a comprehensive federal regulatory framework. I’m hopeful though that we may see some stablecoin legislation pass before the midterms.
What’s encouraging overall though is the change in tone from regulators, with Hester Peirce and Caroline Pham leading the charge. They get the markets and want things to advance.
However, it’s important to draw a line between tangible positive outcomes and true legislative changes and noise. At the end of the day, hype isn’t going to move the markets in the direction they need to go.
How are geopolitics influencing institutional appetite for crypto investments? Are we seeing new patterns in capital flows?
Complete regulatory harmonisation is never something we will have in financial services. It’s just not realistic. But with digital assets, distributed ledger technology, and stablecoins, there’s a lot to gain: faster cross-border settlement, better post-trade processes, and improved global financial connectivity.
The challenge is that rising geopolitical tensions and a resurgence in national sovereignty often lead to protectionist policies. If regulatory approaches remain fragmented, we risk losing the benefits of these technologies before they have a chance to scale.
We don’t need perfect equivalence, but we do need to reframe regulatory harmonisation as a growth strategy. Reciprocity and regulatory alignment aren’t acts of charity – there’s something to be gained for both sides of these bilateral agreements, if you can have these technologies scale across borders.
The jurisdictions that recognise this and work towards functional equivalence will establish themselves and scale these markets.
Digital assets operate globally while regulations remain local. What practical solutions are gaining traction to address this fundamental tension?
It is a fundamental tension. These technologies are inherently global, while regulation is still very much local. But we’ve dealt with this in other areas of finance – dispute resolution, for example – through bilateral and multilateral frameworks.
There are two practical steps to be taken. First, regulators and jurisdictions have to get their local frameworks in place. Without a bilateral agreement, there is nothing to make that agreement about.
Second, if you’re operating a cross-border business model, proactively engage the regulators within the jurisdictions. Bring them to the table. The bringing together of regulators can be powerful, especially when you have a specific use case that you’re trying to deliver.
The Middle East, EU, and other regions are taking distinctly different approaches. Which model do you believe will be most influential in setting global standards, and why?
Global standards are typically shaped by bodies like FATF, IOSCO, and the FSB. Historically, the US, UK, and Singapore have held significant influence.
But, the Middle East is emerging as a serious player, taking a fast approach to evolving their digital frameworks. They’re able to do so because of the unilateral agency that various regulators have, which are also less encumbered by legacy frameworks. The regulators also have a genuinely innovative approach, not just to the markets and engaging with firms, but to making sure that they’re able to use these new technologies themselves.
VARA, for instance, was set up as a purpose-built regulator, and has undertaken a cooperative partnership with the DLD to bring land registries in Dubai online and have them tokenised – it’s in a pilot phase now but it’s about to be rolled out.
So, while traditional jurisdictions will likely continue to lead in standard-setting bodies, there’s a lot to be learned from the Middle East.
With recent market volatility, are institutions increasingly viewing Bitcoin and select digital assets as legitimate safe havens? What metrics should we watch over the next two quarters?
Bitcoin has long been touted as “digital gold,” immune to market volatility. Unfortunately, that is not proven nor true. Over the past few months, traditional markets have been volatile and there was a strong correlation with crypto markets being volatile as well – they’ve not been immune to the tariffs, for instance.
As a caveat, I’m more of a crypto holder than a crypto trader. However, the metric to watch over the next couple of quarters has to be the regulation which will determine how various assets will evolve and where they will be permitted to operate.
Beyond the headlines, what under-discussed developments in the digital asset landscape deserve more attention from sophisticated investors?
Sophisticated investors should be paying close attention to infrastructure, not just assets – I would point to the broader financial services infrastructure transformation taking place. For institutions like asset managers or family offices, there are two key areas to explore.
First, consider strategic acquisitions that could allow you to scale quickly into these markets. Second, look at connectivity – identify the platforms and service providers that can bridge TradFi with the new world.
If you’re a professional investor, don’t just focus on the coins. Look for the companies building the foundational layers – especially those in Series A or Series B rounds – that are poised for scale.
For more on Watts’ panel ‘Global Shifts and Digital Assets’ and the event itself, click here.
