Trump's Crypto Policy Influence and Coinbase's Regulatory Power Struggle: Investment Implications of Regulatory Uncertainty and Market Structure Control in the U.S. Crypto Industry

The U.S. crypto industry in 2025 has become a battleground for regulatory control, with President Trump's pro-crypto policies and Coinbase's resistance to restrictive legislation reshaping market dynamics. These developments have profound implications for institutional capital allocation, market volatility, and the long-term structure of digital asset markets.

Trump's Pro-Crypto Agenda: A Double-Edged Sword

The Trump administration's 2025 executive order on digital financial technology and the subsequent GENIUS Act signaled a clear intent to position the U.S. as a global leader in crypto innovation according to the White House. By banning CBDCs, mandating 100% reserve backing for stablecoins, and establishing the President's Working Group on Digital Asset Markets, the administration sought to create a regulatory framework that balances innovation with consumer protection as detailed in the executive order. These policies initially spurred institutional adoption, with spot Bitcoin and Ethereum ETFs attracting over $50 billion in assets under management by year-end.

However, the administration's push for regulatory clarity has been complicated by internal contradictions. While the SEC's "Crypto 2.0" task force aimed to reduce enforcement-driven ambiguity, the proposed Digital Asset Market Clarity Act-a Senate bill dividing oversight between the SEC and CFTC-has introduced new uncertainties. Critics argue the bill's restrictions on stablecoin rewards and DeFi could stifle innovation, creating a regulatory "patchwork" that favors traditional banks over crypto-native firms. This tension highlights a critical risk: even well-intentioned policies may inadvertently fragment the market or delay meaningful progress.

Coinbase's Regulatory Power Struggle: A Case Study in Market Structure Control

Coinbase's withdrawal of support for the Digital Asset Market Clarity Act in early 2026 underscores the company's pivotal role in shaping the U.S. crypto market structure according to Forbes. CEO Brian Armstrong's public criticism of the bill's provisions-particularly its restrictions on tokenized equities and stablecoin rewards-triggered a market selloff, with shares of crypto firms like Circle and Gemini falling as a result. The standoff between Coinbase and traditional banks over stablecoin rewards exemplifies a broader power struggle: banks fear stablecoins could siphon deposits, while crypto firms view them as a tool for financial inclusion and cross-border efficiency.

Coinbase's institutional dominance further amplifies its influence. As custodian for 9 out of 11 Bitcoin ETFs and 8 out of 9 Ethereum ETFs, the company has become a gatekeeper for institutional capital flows as reported by Coinbase. Its expansion into derivatives, custody, and the COIN 50 index-tracking the top 50 digital assets by market cap-has positioned it as a bridge between traditional finance and crypto. Yet, regulatory battles threaten to disrupt this trajectory. If the Digital Asset Market Clarity Act passes in its current form, Coinbase's ability to innovate in DeFi and tokenized assets could be curtailed, forcing a retreat to more conservative models.

Investment Implications: Volatility, Capital Allocation, and Structural Risks

The interplay between Trump's policies and Coinbase's regulatory battles has created a volatile yet fertile environment for investors. On one hand, institutional adoption has surged, driven by the Strategic Bitcoin Reserve (SBR) and the repeal of SAB 121, which allowed banks to treat crypto as a traditional asset. By year-end 2025, corporate treasuries held over 257,000 Bitcoin, and DeFi lending platforms processed billions in tokenized assets. On the other hand, regulatory uncertainty has led to sharp price swings, with Bitcoin peaking at $126,000 in October 2025 before correcting to the mid-$80Ks.

For investors, the key risks lie in regulatory asymmetry and market structure fragility. The Digital Asset Market Clarity Act could either accelerate institutional adoption by clarifying roles for the SEC and CFTC or fragment the market by imposing conflicting rules on stablecoins and DeFi. Similarly, Coinbase's financial performance-marked by product expansions like the Base App and stock trading-remains contingent on resolving these regulatory disputes.

Conclusion: Navigating the New Crypto Normal

The U.S. crypto industry in 2025 is at a crossroads. Trump's policies have laid the groundwork for institutionalization, but Coinbase's regulatory battles reveal the fragility of this progress. Investors must balance optimism about ETF-driven adoption and DeFi innovation with caution regarding policy reversals or market fragmentation. As the administration's Working Group on Digital Asset Markets pushes for a unified framework, the coming months will test whether the U.S. can maintain its leadership in crypto-or cede ground to more agile, less regulated markets.