Understanding Digital Currencies: An Overview of Cryptocurrencies, with a Focus on Bitcoin Operation
In a significant development for the cryptocurrency industry, the U.S. has seen a surge in regulatory clarity and investment opportunities. This shift, spearheaded by President Donald J. Trump, has led to a resurgence of investor interest in digital assets.
The landscape changed dramatically in July 2025 when the U.S. House passed landmark crypto legislation. The bills, known as the GENIUS Act, CLARITY Act, and CBDC Anti-Surveillance State Act, aim to establish a federal regulatory framework for stablecoins, clarify agency jurisdiction over digital assets, and prohibit the Federal Reserve from issuing a central bank digital currency without Congress's approval, respectively.
One of the most significant outcomes of this legislation is the ability for 401(k) pension funds to invest in cryptocurrencies like Bitcoin. An executive order signed on August 7, 2025, explicitly allows these funds to invest in alternative assets, including cryptocurrencies, private equity, and real estate. This opens the roughly $12.5 trillion pension market to digital assets, bridging traditional finance with crypto markets.
The CLARITY Act is currently awaiting Senate consideration and has faced criticism for potentially allowing regulatory gaps or favoring crypto industry business models over stringent compliance. However, the SEC under Chair Gary Gensler’s successor has signaled a shift, stating that most crypto assets are not securities and is developing clearer guidelines to distinguish securities from commodities.
The momentum in cryptocurrency ebbed in late winter, with the price of Bitcoin bottoming along with stocks and other risk assets on April 7, 2025, following President Trump's Liberation Day tariff announcement. However, Bitcoin, the world's first and largest cryptocurrency, crossed the $100,000 milestone on December 4, 2024, and reached a high of $108,265 on December 16, 2024. Since then, Bitcoin has traded above $100,000 and reached a new all-time high around $123,000 in July 2025.
The widespread adoption of cryptocurrencies is driven by several factors. Faster transaction speeds, transparency, and security are key benefits. Transactions are public, traceable, and permanently stored in the network, ensuring transparency. Bitcoin miners keep the network secure and are rewarded for their efforts, ensuring that all transactions are valid and keeping the bitcoin network secure from fraud.
Cryptocurrencies, such as bitcoin, are also considered an investment that can serve as a hedge against inflation. The scarcity of bitcoin may make it more expensive as the limit draws closer, but this is purely hypothetical. Currently, approximately 19.9 million bitcoins are in circulation, with a capped limit of 21 million.
Another significant benefit of cryptocurrencies is their accessibility. Cryptocurrency markets are open 24 hours a day, seven days a week, making it accessible for trading at any time. They are effective for transferring funds across borders quickly and efficiently to people living in countries with volatile currencies or significant cross-border restrictions.
Moreover, the seizure rate for cryptocurrency used in criminal activities is 27%, compared to around 0.1% in the traditional financial system. This high seizure rate is due in part to the open-source code that provides real-time, accurate results for auditors, which is essential for regulators seizing cryptocurrency used in criminal activities.
In summary, U.S. cryptocurrency regulation is moving towards clearer federal oversight frameworks with new laws that permit 401(k) plans to invest in Bitcoin and other crypto assets, establish stablecoin regulations, and delineate agency jurisdiction over digital assets. However, some legislative details are still pending Senate approval, and regulatory enforcement and compliance rules are actively being refined.
- The GENIUS Act, CLARITY Act, and CBDC Anti-Surveillance State Act, passed in July 2025, aim to establish a federal regulatory framework for stablecoins, clarify agency jurisdiction over digital assets, and prohibit the Federal Reserve from issuing a central bank digital currency without Congress's approval, respectively.
- An executive order signed on August 7, 2025, allows 401(k) pension funds to invest in alternative assets, including cryptocurrencies, private equity, and real estate, opening the roughly $12.5 trillion pension market to digital assets and bridging traditional finance with crypto markets.
- The SEC under Chair Gary Gensler’s successor has signaled a shift, stating that most crypto assets are not securities and is developing clearer guidelines to distinguish securities from commodities.
- Bitcoin, the world's first and largest cryptocurrency, reached a high of $108,265 on December 16, 2024, and has traded above $100,000 since then, reaching a new all-time high around $123,000 in July 2025.
- Cryptocurrencies, such as bitcoin, are accessible for trading 24/7 and are effective for transferring funds across borders quickly and efficiently to people living in countries with volatile currencies or significant cross-border restrictions.
- The seizure rate for cryptocurrency used in criminal activities is 27%, compared to around 0.1% in the traditional financial system, due in part to the open-source code that provides real-time, accurate results for auditors, which is essential for regulators seizing cryptocurrency used in criminal activities.
