Navigating Political Risk in Crypto: Regulatory Shifts and Presidential Influence on Valuations (2023-2025)

Political risk has long been a defining factor in cryptocurrency markets, but the period from 2023 to 2025 has underscored how regulatory and presidential actions can directly shape asset valuations. As governments worldwide grapple with the dual imperatives of fostering innovation and safeguarding financial stability, investors must now parse a complex web of policy signals to assess risk and opportunity.

The U.S. Regulatory Reboot: Clarity or Chaos?

The United States emerged as a pivotal player in 2025, with the passage of the GENIUS Act and CLARITY Act, which established a federal framework for stablecoins and non-stablecoin digital assets, respectively. These laws provided a licensing pathway for non-bank issuers under the Office of the Comptroller of the Currency (OCC) and allowed insured depositories to issue stablecoins under Federal Reserve oversight. Concurrently, Executive Order 14178 emphasized the U.S. dollar's role in digital finance, advocating for technology-neutral rulemaking.

The market response was mixed. While the SEC's rescission of Staff Accounting Bulletin 121-which had previously restricted banks from offering crypto custody services- spurred institutional adoption, the SEC's continued reliance on the Howey Test to classify crypto assets as securities created volatility. Studies show that asset returns plummeted by up to 12% in the week following SEC announcements, with persistent declines over a month. This duality-regulatory clarity for stablecoins versus ambiguity for broader tokens-highlighted the tension between innovation and oversight.

The EU's MiCA Experiment: Harmonization at a Cost

The European Union's Markets in Crypto-Assets (MiCA) regulation, implemented in late 2024 and early 2025, aimed to harmonize crypto rules across member states. While MiCA simplified licensing for crypto-asset service providers and mandated white papers and AML compliance, its initial rollout triggered significant market volatility. Event studies revealed negative abnormal price changes in the EU as participants adjusted to the new legal landscape. However, the regulation's focus on transparency and investor protection is expected to stabilize markets in the long term.

MiCA's impact was not isolated. Global regulatory coordination-exemplified by the FATF's Travel Rule adoption by 85 of 117 jurisdictions-underscored the importance of cross-border alignment in preventing arbitrage and mitigating risks like the 2025 Bybit hack, where $1.5 billion in Ethereum was stolen.

Global Coordination and the Role of Presidential Leadership

Presidential influence extended beyond the U.S. The Trump administration's Executive Order on digital financial technology in 2025 redefined the global policy tone, prioritizing dollar-backed stablecoins and responsible innovation. This shift aligned with broader trends, as jurisdictions like Singapore, Japan, and the UAE introduced progressive licensing systems to attract crypto innovation.

However, the absence of a unified global framework remains a risk. For instance, the SEC's no-action letters for projects like DTC's tokenization pilot and DePIN tokens offered localized relief but did little to resolve cross-jurisdictional uncertainties. Investors must weigh these fragmented approaches against the potential for systemic shocks, such as the Bybit incident, which exploited unregulated infrastructure.

Valuation Implications: Stability or Speculation?

Regulatory clarity has driven institutional adoption, with 70% of jurisdictions advancing stablecoin frameworks and 80% of markets witnessing financial institutions launching digital asset initiatives. Yet, the SEC's securities-based approach has created a "regulatory drag" on smaller tokens, exacerbating liquidity challenges. The market capitalization of stablecoins, particularly U.S.-dollar-denominated ones, has benefited from the GENIUS Act's licensing framework, while non-stablecoin assets remain vulnerable to policy-driven volatility.

Conclusion: A New Era of Political Risk

The 2023–2025 period has demonstrated that political risk in crypto is no longer confined to macroeconomic factors or geopolitical tensions. Instead, it is increasingly tied to regulatory design and presidential leadership. For investors, the key lies in distinguishing between jurisdictions that prioritize innovation (e.g., Singapore, UAE) and those that impose restrictive frameworks (e.g., the EU's MiCA in its early stages). As global standards evolve, the ability to navigate this shifting landscape will determine the resilience of crypto-related portfolios.