Author: Alex Thorn, head of company-wide research at Galaxy Digital; Compiled by: White Water, Golden Finance

I discussed the intersection between public markets and cryptocurrencies with the team at Galaxy Digital, which led to a Interesting point - big changes are coming to regulators too.

A guest post from Alex Thorn, head of company-wide research at Galaxy Digital, explaining where we are, what’s changing now, and where he thinks we’re headed. I hope this is valuable information and perspective for everyone.

Guest post from Alex below:

Bitcoin is the biggest winner of the election so far. Bitcoin, the world's oldest and largest cryptocurrency, is up 40% since November 5, and there's reason to believe there's more gains to come.

Other crypto assets will also benefit. Investors anticipate a shift in the SEC’s attitude toward digital assets, and many have written about how a relaxation or rollback of the SEC’s classification of crypto assets as securities would support the crypto market and stakeholders.

Less discussed is how public markets will benefit from new practices in U.S. digital assets. Since Coinbase launched its direct listing in 2021, only Bitcoin miners and a few small SPACs have successfully tapped the public markets. Current SEC Chairman Gary Gensler took office on April 17, 2021, just four days after Coinbase’s direct listing, and the public markets have been largely closed to crypto companies since then. But that's all about to change. Public markets are about to get a taste of cryptocurrencies.

There may have been signs of this shift in the past few weeks. Japanese cryptocurrency exchange CoinCheck has announced that it has received approval to list via a U.S. SPAC. This will be the first cryptocurrency exchange to gain public market status in the United States since Coinbase, but it won't be the last. SPAC shareholder Thunder Bridge IV (ticker: THCP) will vote on the merger on Wednesday, December 5, with the merger expected to close around December 10.

Currently, investable cryptocurrency stocks in the United States include Coinbase, Bitcoin miners, balance sheet holders such as MicroStrategy, and a range of cryptocurrency-related fintech companies such as PayPal and Robinhood . But expected changes in the leadership and posture of the SEC could finally open up the public markets to crypto companies in a meaningful way, leading to a massive expansion of the crypto stock market.

Expansion of the crypto-stock space, including exchanges, brokerage firms, data companies, infrastructureproviders, etc., a boon to both venture capitalists and public market investors. By my count, at least 300 startups have received $50 million or more in venture financing since 2018, and more than 50 have received $100 million or more. Venture investors could help reinvigorate a venture funding environment that has been flagging for the past two years, while public market investors will gain more ways to invest in the growing industry.

Broadening access to public markets would also reinvigorate the U.S. cryptocurrency startup environment. The SEC’s current posture incentivizes venture investors to focus on complex token-based transactions rather than traditional businesses, which could harm the entire crypto ecosystem. Certain stock startups, especially those that deal directly with digital assets such as exchanges and brokerage firms, have mostly moved overseas. But changes in the regulatory environment and open public markets could lead to a resurgence of entrepreneurial activity in the United States, bringing more jobs and capital formation to the country.

Bitcoin and cryptocurrencies are not illegal in the United States, but over the past four years banks and market regulators have struggled to curb their growth or shut them down entirely. Jurisdictions such as the UK, Europe, the Middle East, Hong Kong and Singapore have taken advantage of this restrictive US posture to create clear regulations and entice companies to leave the US, but this is about to change.

The market expects a major shift in U.S. attitudes toward cryptocurrencies, which will support a range of industry areas such as stablecoins, token issuance rules, tax and compliance reporting, and more. But don't forget the public markets. This is a new dawn for digital assets in the United States, and the public markets may seriously join the party.