The prospect of the U.S. government legislating bitcoin purchases is certainly intriguing, yet it is crucial to prioritize technical blockchain advancements for broader acceptance. As industry CEOs and U.S. legislators convene in Washington D.C. to push for the BITCOIN Act, the need for improved blockchain functionality and analytics is crucial for the ongoing adoption of blockchain and tokenized assets within traditional finance. Sen. Cynthia Lummis and Rep. Nick Begich are at the forefront of discussions and meetings aimed at advancing legislation that would formally create a federal bitcoin strategic reserve.
Additionally, a goal of this proposed legislation – which was not included in the executive order issued in March – would establish a pathway for the U.S. to acquire 1 million bitcoins over a 5-year period. While these discussions are undeniably thrilling and the advocates are brimming with enthusiasm, they represent just one facet of the broader on-chain landscape. Recent announcements underscore that, although tokenized assets capture headlines and spark social media discussions, the true key to broader adoption lies in the utilization and adoption of blockchain technology. One specific example that stands out is the recent guidance from the New York Department of Financial Services, which mandates that banks and other financial institutions incorporate blockchain analytics into their compliance programs, with the stated goal of enhancing oversight of digital assets. Simultaneously, while fintech companies are developing blockchains to facilitate the ongoing growth in the realm of digital assets, the execution speed for on-chain transactions remains slower than the expectations and demands of traditional finance firms.
Let’s analyze how these two blockchain-related yet opposing headlines will shape the business and policy landscape in the future. The announcement from the NYDFS regarding the requirement for banks to incorporate blockchain analytics into their compliance programs marks a pivotal advancement in the broader acceptance of on-chain transactions and analytics in the financial landscape. This guidance illustrates the broader policy shift among regulators towards a more pro-crypto approach, alongside the swift adoption of tokenized assets by various financial institutions. To date, these products and services have been developed and deployed in response to the increasing institutional investor demand for cryptoassets, making it logical for regulators to monitor these market trends closely. The guidance from the NYDFS reflects the regulatory clarity that has surfaced after the enactment of the GENIUS Act, the progress marked by the finalization of the Frontier token from Wyoming, and the increasing interest in stablecoins among traditional financial institutions. The demand for enhanced analytics and transparency is persistently fueling the growth of blockchain-based data analytics within financial institutions.
Despite the advancements of institutional blockchain and the deployment of Layer-2 solutions by firms such as Robinhood and Stripe, the fact remains that to handle the sheer volume and scale of transactions, the current disparities in performance must be addressed. A recent analysis of the Nasdaq closing auction during the annual Russell Index reconstitution highlights the significant amount of work that still lies ahead. This reconstitution entails matching 2.5 billion shares in just 0.871 seconds, leveraging the INET system, which is touted to manage over 1 million order messages per second, all while maintaining a latency of under 40 microseconds. In contrast, Ethereum handles roughly 15 transactions every second, with block times hovering around 12 seconds. Even Solana, often highlighted as one of the fastest large-scale blockchain networks, operates with a 400-millisecond block time and has the capability to manage several thousand transactions per second. Although they are sufficiently quick for retail traders and other non-institutional uses, even the top blockchains (considering L2 solutions as well) are not yet capable of managing mass market volume. This reality underscores the significant potential of innovations and efforts at fintech firms, such as the development of proprietary blockchains by Robinhood and Stripe, to draw increased institutional interest and investment.
Crypto remains at the forefront of discussions surrounding blockchain and tokenization, and rightly so; since the start of 2025, crypto prices have been trending upward in nearly every instance. The increasing demand has been bolstered by products, services, and a rising acceptance from institutions and policymakers. It’s important for both investors and regulators to remember that 1) advancements in blockchain technology are essential for the ongoing adoption of cryptoassets, and 2) there is still considerable effort needed before blockchain can serve as the foundation of financial market infrastructure.