Digital Assets in 2025: What to Watch

Here are six Digital Asset themes to watch in 2025:

1.  Scale & standards

2024 has been momentous for issuance of digital securities by any statistical factor. Digital asset issuance growth will continue to accelerate in 2025, including through broader asset classes, wider issuer adoption, and repeat trades. Working through the entire 'lifecycle', including in particular repurchase and collateral solutions, will continue to accelerate at pace. 

There will be more focus on non-bespoke deals. The market will also re-double its efforts to tackle the lack of interoperability between digital asset systems/platforms and crucially, connectivity with legacy infrastructure. Both will facilitate growth and scale. 

The market will continue to be tempered by regulation. Regulators will strive to adapt and innovate so that the rules are fit for purpose and future proofed. (See also paragraphs 3, 4 and 5 below).

Standardisation will continue to challenge the market. Common rules, definitions and protocols must be developed and agreed for digital assets across jurisdictions and sectors. These will include prospectus & disclosure standards, common terminology, and contingency planning and expectations. Trade associations (including ICMA and AFME) will continue to drive and accelerate this work in 2025.

The UK will reassert itself as a centre of innovation and excellence and we expect this, together with seismic US policy shifts, to drive a tremendous amount of both infrastructure and issuance activity. 

2.  Uniform settlement

Digital registration and settlement systems are fragmented and inefficient. The lack of a uniform settlement process will continue to be a major market challenge in 2025.

A globally interoperable wholesale Central Bank digital currency (CBDC). is a question of when and how, not if. 2025 will see numerous Central Banks continuing their CBDC work (including live experimental structures). The first CBDC is not, however, imminent.

Whilst we await a CBDC, commercial banks and non-banks will compete to offer exchange of digital value. Their major issue will remain the lack of a Central Bank's full faith and credit. Banks will emerge as winners in the short and medium-term due to their far preferable credit and operational resilience.

3.  EU regulation

Regulation of digital assets is in its infancy. The EU is the first major jurisdiction to legislate. MiCA (the Markets in Crypto-Assets Regulation) became fully in force at the end of December 2024. It creates an EU-wide regulatory framework for crypto-assets, issuers of crypto-assets and crypto-asset service providers (CASPs). MiCA does not regulate assets which are already regulated under other EU frameworks, such as MiFID II. Non-fungible tokens (NFTs) are also generally not caught by MiCA.

EU member states can elect to implement a simplified authorisation process for entities which are already nationally authorised to provide crypto-asset services. They can also implement a 'grand-fathering' period of up to 18 months. EU member states have taken different approaches to transitional arrangements. For example, Ireland has implemented a 12 month ‘grand-fathering’ period, in contrast to France's 18 month period.

There will be increasing convergence between the regulated traditional financial sector and digitally native sector. Risk appetite will increase and so will the desire to have 'skin in the game' and which will give rise to strategic acquisitions and formation of alliances and partnerships across the two strands of the financial sphere. 

The EU DLT Pilot will morph into a more ambitious plan to redraw financial infrastructure regulation involving reassessment of the historical regulatory focus on roles and responsibilities.

4.  UK regulation

The UK Government has clearly signalled its aspiration to lead the world in digital asset adoption. In the post-Brexit UK, the Government has taken a different regulatory tack to the EU mostly to deter unwanted activity.

The UK's Digital Securities Sandbox is a live regulated environment to explore developing technologies and digital assets. Guardrails include a modified and flexible legal and regulatory regime. The UK Government intends to issue a pilot Digit Gilt Instrument through the Sandbox to explore the benefits of distributed ledger technology (DLT), as well as intending to stimulate UK DLT activity more generally. 

UK Regulators are consulting on the general regulation of digital assets, with go live targeted for 2026. The UK intends (unlike the EU) to fit digital assets into the UK’s existing financial services regulatory framework, using the principle of "same risk, same regulatory outcome" with new categories of items such as 'settlement asset' only where absolutely necessary. This approach will come under pressure if the UK ambition is as high as expressed currently. 

In 2025 we will start to see how market players perceive the Regulators’ differing approaches. Given its desire for growth, should the UK have been more ambitious and designed a bespoke digital assets regime from the ground up? Alternatively, will the UK's approach enable it to be more nimble than the EU's notoriously slow (but more certain) legislative process. Some market players will prefer the greater certainty (but cost) in the EU compared to the UK. At the other end of the spectrum, some market players have already shown an unwillingness to be regulated at all and so global regulatory arbitrage and variation remains a significant issue.

5.  AI

In 2024 firms rushed to procure and deploy generative AI tools. For example, 75% of UK financial services firms now use artificial intelligence. AI uptake will continue rapidly, and in 2025 the focus will shift to understanding and integrating AI’s true capabilities to unlock its full potential. 

As AI becomes embedded into critical business processes, utilising AI policies for AI governance and risk management will no longer be sufficient. In 2025 firms will need to ensure that holistic AI governance frameworks are developed, and that there are adequate governance structures and oversight mechanisms in place to identify, escalate, and monitor AI risks effectively. We expect litigation and enforcement to start emerging as weaknesses in AI governance and outcomes start emerging. 

AI regulation will continue to develop in 2025. Whilst the EU has adopted a more interventionist approach, the UK looks to be adopting a comparatively light-touch, principles-based and sector led regulatory approach, which we should see crystalise in 2025. 

Notwithstanding this, we also expect to see more regulatory scrutiny both domestically and internationally on AI use cases within the digital assets market. Regulators have been very active in 2024 setting up AI labs, sandboxes and free experimental spaces - this trend will continue. This also reflects the reality that, for law and policy makers within financial services, AI regulations may need to be more than “broad brush” governance. AI/FS policy and laws will need to tackle actual consumer user harms arising from specific products and services derived from or involving GenAI. Some of this may come from existing principles-based approaches, such as consumer duty; other protections may still need to be developed as technology advances.

6.  M&A Activity

We anticipate an increase in deals involving 'FIG adjacent' assets, such as non-regulated technology and back-office services that support financial services businesses. This is part of a broader industry trend towards digital transformation and operational optimisation, with financial institutions recognising the value of integrating advanced technology and specialised services to drive growth, improve efficiency, and stay ahead in a competitive market.