As recently as three or four  years ago, if you were a central bank,  financial institution or large enterprise wanting to experiment with blockchain technology, it would be a no-brainer to choose a private, permissioned network. Public permissionless blockchains were - and in many cases still are - viewed as a Wild West of DeFi lawlessness and NFT-driven hedonism. However, the tide is rapidly turning, and in the past couple of years we’ve seen increased interest from banks in building on public blockchain. Even the Bank for International Settlements - the ‘central bank of central banks’ - has started to run projects built on public blockchain!  In this article we’re going to explain what public permissionless blockchains are, the benefits they can bring, and some examples of how financial institutions are already building on them. We’ll then look at why so many people in both the public and private sectors  have historically been inherently against public permissionless blockchains, what’s changing in terms of both technology developments and public perception, and how the barriers previously perceived by regulators and regulated entities are being broken down. But first, let’s start with a few definitions.  What do we mean when we say "public" and "permissionless"? Public blockchains are open and accessible to anyone. Anyone can join the network, view the ledger and validate transactions, without any restrictions. In this respect, they’re fully decentralized and self-governing, and have a high degree of autonomy and resilience.  Permissionless means that there are no gatekeeping requirements associated with access to and participation in the blockchain, and nobody needs special permission in order to join, validate or develop applications on the network.   While these terms often overlap, they are not entirely synonymous. A blockchain can be public but not entirely permissionless if, for example, only authorized nodes can validate transactions (as in some ‘hybrid’ models, like Hedera). Conversely, a permissionless blockchain is typically public, as it relies on open participation to maintain its decentralized ethos. But taken together, these qualities underpin the trustless and open nature of many blockchain systems, enabling broad participation. What are some of the benefits of public permissionless blockchains? Public permissionless blockchains don’t rely  on a central authority exercising power and control to create trust between unknown counterparties. The ‘trust’ in this instance comes from the combination of decentralization, robust consensus mechanisms and economic incentives, cryptographic security, transparency and immutability of public blockchains. This decentralization eliminates single points of failure, making these networks more resilient against outages or cyberattacks. Open access allows global participation, enabling a broad range of developers and institutions to build and integrate applications, driving innovation, liquidity, and diverse use cases through composable ecosystems. Network effects also play a role. The larger and more established a blockchain's user base, the more secure and trustworthy it becomes. This is because a larger network typically has more nodes validating transactions, making attacks less feasible. Public blockchains also often rely on open-source software, allowing the best developers and security experts globally to test, audit and improve the code. This open scrutiny helps identify vulnerabilities and maintain robustness. For the blockchain community, it’s axiomatic that all this is better: safer, more reliable, more universal. Permissioned networks are still great for certain applications, particularly those in which there are a limited number of participants who all need to be on-boarded and known to each other,  implementing a very specific use case and with no need to interact with a broader range of participants or assets. But there’s an increasing recognition of the benefits that public permissionless blockchains bring for asset tokenization: distribution and liquidity, the benefits of a diverse ecosystem, and other network effects.  Why and how are regulated financial institutions starting to use public blockchain? Issue an asset on a private permissioned network and it’s available only for the use case implemented on that network, and to the participants in that network. Issue onto a public permissionless blockchain, and your tokenized asset can be accessible to any participant. It can be exchanged bilaterally between wallet-holders, picked up and integrated into decentralized exchanges or used as collateral in lending protocols.  Users can pay for them in any stablecoins available on the network, or swap them directly for other tokenized assets. It can also be composed with other tokenized assets into use cases and applications that you as an issuer might never have foreseen. It can be bridged onto other public permissionless blockchains and made available to their ecosystems. All of this distribution capability drives greater liquidity and innovation - and that’s evidenced by the growing trend towards tokenized fund issuance on public chains.  A growing recognition of these benefits - alongside all the other benefits of the technology - is fueling more experimentation and a growing cohort of live projects on public chains. Some high-profile examples include: A set of institutional players, including T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland, partnering to tokenize assets and build trading and other applications on Avalanche Spruce.  Citi’s FX pricing and execution solution for Project Guardian. Citi’s exploration of tokenized private market funds. Membrane Finance’s launch of the first Mica-compliant Euro stablecoin.   Franklin Templeton’s tokenized money market fund, BENJI.  DTCC’s Digital Asset Launchpad sandbox, as well as its Smart NAV pilot.  JP Morgan’s Kinexys blockchain infrastructure for tokenized investments and cross-border payments.  Standard Chartered and Ant International blockchain-based settlements infrastructure.  What are the regulators’  concerns about public permissionless blockchain? Regulators often start from some assumptions that challenge the benefits or need for public permissionless blockchains. Essentially, because of the way regulation works in the traditional financial sector, this initial mistrust comes out of  how different institutions and parts of the financial, regulatory and technology ecosystems look at the world. They see the words ‘public’ and ‘permissionless’ and conflate these with a lack of control over activities that should be regulated, and an inability to apply concepts like AML and KYC to participants. There’s a clash between worldviews. Are these concerns justified? A public blockchain typically isn’t a single application. It’s a network-based technology platform on which a range of applications and protocols can be built. These protocols themselves can have on-boarding requirements. Permissioning can also be implemented at the token level, so that tokens can only be transferred in accordance with predefined requirements.  Nevertheless, public blockchains are increasingly recognizing the importance and value of supporting different permissioning mechanisms. Multichain blockchains, such as Avalanche and Cosmos, enable the creation of specialized blockchains, sometimes referred to as subnets or app-chains, that can be compliant by design. In these systems, developers can create chains with custom rule sets, execution environments, and governance regimes tailored to their needs. These custom blockchains unlock use cases previously not possible on blockchains with single rule sets, and isolate traffic and data into environments purpose-built for a given use case. They can also be natively interoperable with their mainnets and with other custom chains in the same network, enabling more of a balance to be struck between control and distribution of tokenized assets.  Why go public and permissionless? Just as we don’t try today to control who has access to the internet and who can build on it, regulators and governments don’t need to try to control public blockchains to mitigate potential risks from them. They come with significant, in-built benefits in terms of robustness, security and resilience. Additionally, public and permissionless at the blockchain technology level is not synonymous with public and permissionless at the application level, and this is where regulators should focus their attention. There are many mechanisms available to implement robust compliance at the protocol and token level, while still benefiting from the network effects of a diverse, innovative ecosystem.   As we’ve seen, there are valid use cases for both private, permissioned and public, permissionless blockchains, and both will continue to exist, and co-exist, into the future. Which one you use for your business will depend on the outcomes you wish to achieve, and how that aligns with the relative attributes of different blockchains. More and more actors both in the crypto space and traditional financial system are realising that public, permissionless blockchains can be a strong foundation for new ways of doing business.

Looking ahead, 2025 will be a pivotal year for blockchain, digital asset, and cryptocurrency-related legislative and regulatory policy across the Federal government. With Republicans now controlling both chambers of Congress and President Trump in the White House for a second term, this ‘trifecta’ will be integral in shifting the approach the United States takes towards policies impacting blockchain, cryptocurrencies, and other emerging financial technologies. Last year, the Financial Innovation and Technology of the 21st Century Act (FIT-21) was the first ever joint House Financial Services and Agriculture bill designed to bring some structure to the cryptocurrency market. It garnered bipartisan support in the House, with 71 Democrats voting for the bill, showcasing broader Democratic support for these issues. Stablecoin legislation also drew bipartisan and bicameral interest, which will continue to be a priority this Congress. Coupled by an unparalleled number of pro-digital asset candidates winning election or reelection to Congress, lawmakers will show–and already have shown a commitment to prioritizing these issues this year moving forward.  Key Figures in Congress  In Congress, the House Financial Services Committee and the Senate Banking Committee, as well as the House and Senate Agriculture Committees, are at the forefront of crafting policy surrounding digital asset regulation.  Newly appointed House Financial Services Committee Chairman French Hill (R-AR) is known for his supportive stance on cryptocurrency and blockchain technology. Rep. Hill played a key role in the drafting, development, and ultimate passage of FIT-21 and will continue to advocate for policies that promote innovation in the digital asset space while ensuring consumer protection and market stability. We also expect him to align digital asset policies with the broader GOP agenda under the Trump Administration. With such tight margins in the House this year, Democratic support for any framework will also be necessary, as with FIT-21. Democratic Members on the Financial Services Committee, including Reps. Josh Gottheimer (D-NJ), Jim Himes (D-CT), and Richie Torres (D-NY), have been forward leaning on these issues and worked with the Majority to add amendments to the bill during mark-up. Ranking Member Waters (D-CA) had worked closely with former Chairman McHenry (R-NC) on stablecoin legislation in the last Congress including a last-minute push at the end of last year. That work will continue this year with Rep. Waters staying stablecoin legislation remains a top priority for her.  With Republicans now controlling the majority in the U.S. Senate, Senate Banking Committee Chairman Tim Scott (R-SC) has already indicated he plans to move forward on digital asset issues and has created a  new subcommittee on digital assets which will be chaired by Sen. Cynthia Lummis (R-WY), a longtime cryptocurrency and digital asset supporter. Senator Sen. Elizabeth Warren (D-MA) is the new Ranking Member of the Senate Banking Committee and has been vocal about her concerns with the industry over consumer protection issues and illicit finance and the need to regulate. However, in the 119th Congress the Committee will also include several newly appointed Democrats whose approach to policies in the crypto space are expected to differ from their Ranking Member. Senator Warren has named Senator Ruben Gallego (D-AZ) to be the Ranking Member of the Digital Assets Committee, showcasing an interest in having new Members take a leadership role on an important set of issues for the Committee.   The House and Senate Agriculture Committee will also continue to be active on these issues as they were in the 118th Congress. The House Agriculture Committee, led by Chairman G.T. Thompson (R-PA), returned to his position and took a leadership role in working closely with the House Financial Services Committee on FIT-21, the first ever joint HFSC and Agriculture bill. The Committee has a new Ranking Member, Rep. Angie Craig (D-MN), who won a contested race amongst House Democrats to take over this role.  In the Senate, Sen. Boozman takes over as the Chairman of the Agriculture Committee and with the retirement of former Sen. Stabenow (D-MI), Sen. Amy Klobuchar (D-MN) takes over as Ranking Member. Both have stated publicly they plan to fully engage on these issues and to work closely with the House Agriculture Committee.  The Trump Administration: New AI/Crypto Czar and an Executive Order on Digital Assets In the White House, President Trump is taking a significantly different approach to digital assets compared to his first Administration. He has established a new position within the White House, appointing former PayPal executive David Sacks as the “AI and Crypto Czar.” This role is designed to spearhead the administration's efforts in the rapidly evolving fields of artificial intelligence and cryptocurrency. Sacks, a prominent venture capitalist and co-founder of an AI company, is expected to bring a pro-industry stance to the position, which aligns with the administration’s broader goals of fostering innovation and reducing regulatory barriers. On January 23, 2025, President Trump issued an Executive Order (EO)  focusing on digital assets, stablecoins and CBDCs, entitled “Strengthening American Leadership in Digital Financial Technology.” The EO outlines the Administration’s policies on digital assets, financial technologies, and blockchain, such as ensuring open access to public blockchain networks, fair access to banking services, and prohibits any establishment of a CBDC. Notably, the EO establishes a working group within the National Economic Council to be chaired by Sacks to propose a federal regulatory framework for digital assets focusing on market structure, oversight, consumer protection, and risk management. The appointment of Sacks coincides with other significant changes in the regulatory landscape, such as the anticipated confirmation of Paul Atkins to be Chairman of the SEC. Atkins’ predecessor, Gary Gensler, took a very aggressive ‘regulation by enforcement’ approach to emerging digital assets. This alignment suggests a concerted effort by the administration to overhaul existing policies and focus on clearer guidance to industry on how the SEC views securities in the digital assets and cryptocurrency industry. Soon after being named Acting Chair, Commissioner Mark Uyeda announced the creation of a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets. Under Uyeda, the SEC has already rescinded Staff Accounting Bulletin 121, which created onerous reporting requirements on banks and crypto companies.   Legislative Focus on Blockchain and Fintech The House Financial Services Committee, under Chairman Hill’s leadership, is expected to work on policies that integrate digital assets into the broader financial system, while also potentially addressing regulatory clarity and consumer protection. Both the House Financial Services Committee and the House Agriculture Committee have indicated that they will focus on updating FIT-21, working with industry and the new Trump Administration, all of which will be a primary focus in the first six months of the year. Meanwhile, the Senate Banking Committee, led by Sen. Scott, aims to champion legislative changes that support the crypto industry's growth, addressing concerns about innovation being stifled by existing regulations. Stablecoin legislation, which had bipartisan support in the House is likely to be moved more quickly early in 2025, while efforts will continue on updating FIT-21.  The collaboration between Congress and Administration officials will be crucial in shaping a comprehensive approach to fintech and digital assets. While the legislative efforts will likely focus on creating a balanced regulatory environment that fosters innovation and includes consumer protection issues  while ensuring the stability and security of the financial system; the Administration is likely to focus on issues such as the SEC and the CFTC working in lockstep with Congress to pass a legislative and regulatory framework for digital assets that includes consumer protections and clearer “rules of the road.” This alignment and a broader focus by more Members in a bipartisan and bicameral fashion appear to showcase an optimistic 2025 for consumers and the industry.  Authors: Norma Krayem (VP & Chair, Cybersecurity, Privacy and Digital Innovation, Van Scoyoc Associates) Scott Mason (Senior Policy Advisor at Holland & Knight LLP)