US Economy Opens 2025 With a Contraction; Tariffs Taking Hold?

By: blockhead co|2025/05/02 18:45:01

In the month of extreme fluctuations in US equity markets, stocks associated with cryptocurrency experienced a significant rise, propelled by the surge in Bitcoin's value.Market sentiment fluctuated significantly as stock prices reacted to President Trump's global trade war. They initially declined, then rebounded when he paused those stringent tariffs, only to dip again amidst increasing economic uncertainty.Still, Wall Street stocks ended April only slightly lower after historic swings.The market is seeking more information on Trump's trade policy and corporate America's growth forecasts. The present environment is characterized by ambiguity.The market's nervousness was on full display during Wednesday's trade.Reports of a slowdown in hiring at US corporations and an economic contraction in April sent the S&P 500 Index tumbling at the open, plummeting as much as 2.3%.However, it recovered during the day and finally surged into the green around five minutes before midnight, capping off the month with a winning run of seven sessions.However, for crypto stocks, a 15% increase in Bitcoin's value reignited discussion about crypto's potential as an investment safe haven. Stocks linked to digital assets tend to be more volatile than the tokens themselves, meaning that value increases are often amplified when prices go up.However, April showed a different side.Still, despite a strong second quarter, many crypto equities are down in 2025. This year has seen a significant decline in the stock prices of crypto miners, as token mining loses profitability and tariffs threaten to increase hardware costs.Companies that intend to replicate Strategy's Bitcoin buying frenzy recorded the most spectacular monthly gains. In April, Upexi's stock price increased by almost 400% after the company announced plans to raise $100 million to acquire the Solana token for its treasury.A Bitcoin vehicle linked to industry heavyweights was in the works, and as a result, shares of blank-check firm Cantor Equity Partners nearly doubled. Large companies, such as the conglomerate Galaxy Digital Holdings, were at the forefront.Permission to list on the Nasdaq and increased artificial intelligence computing business from CoreWeave boosted its shares, which climbed over 40% last month.What Analysts Are Whispering: Sell in May?More importantly, bets of a recession are starting to take hold again. While Trump asserts that his presidency has started strongly, the economy speaks a different language.As importers rushed to bring in goods before tariffs kicked in, the US GDP shrank in the March quarter. Along with worsening economic morale, higher inflation has fueled the stagflation narrative and reduced the Federal Reserve's ability to intervene.In 2020, a pandemic recession hit the United States hard, but it famously recovered. Rapid economic recovery allowed the country to surpass its competitors quickly, thanks to a large government rescue program that injected enormous sums of money into the economy.While COVID-19 killed over a million people in the United States, the economy was able to avoid a slump and finally attain a level of employment that was on par with a record set fifty years before under Richard Nixon.But that was then.In Donald Trump's thinking this week, it's Gerald Ford rather than Nixon.At the end of his first 100 days in office, his policies have caused an 8% drop in the S&P 500 Index. Since Gerald Ford replaced his infamous predecessor in 1974, the market has never had a worse first 100 days.And it gets worse.Under Trump's watch, the US economy has contracted for the first time since 2022, in contrast to the tumultuous second half of Biden's presidency.In the March quarter, an annualized 0.3% decline in inflation-adjusted GDP was recorded, far lower than the 3% average growth seen over the previous two years.Just a few months ago, investors were singing Trump's praises.Now, they're nervous about his chaotic tariff strategy, his radical push to deport undocumented workers, legal immigrants, and international students, his mass firings of federal employees, and his occasionally overt contempt for the US Constitution.The S&P 500 has experienced its seventh-fastest correction since 1929 due to a confluence of factors.Numerous studies of consumer sentiment, including one on Wednesday, have failed to find any signs of optimism. High costs are already a burden for low-income Americans, and the decline in stock prices this year has only made things worse.An indicator of core inflation frequently followed by policymakers reached a one-year high of 3.5% in the first quarter.Worse, Trump is at it again against the Fed chair.The truce between Donald Trump and Jerome Powell was brief — just one week.Speaking at a rally outside of Detroit, he asserted his superior knowledge of interest rates compared to the head of the Federal Reserve, who is evidently "not really doing a good job."The president also vigorously defended his tariff regime and economic policies, even as business activity and sentiment suggest otherwise.May looks to be another rollercoaster month, with cryptos expected to continue their outperformance.ElsewhereEthereum’s Pectra Upgrade: What These Changes Mean for Your BusinessSlated for next week, this dual-pronged update promises tangible improvements that warrant the attention of any enterprise exploring or already leveraging blockchain technology.BlockheadJonathan LiuRipple Made $4-5 Billion Takeover Bid for Stablecoin Rival Circle, Rejected as Too LowWith Circle currently focused on its IPO plans, the future of any potential deal remains uncertain.BlockheadBlockheadWall Street Giants Morgan Stanley, Charles Schwab Gear Up for Direct Crypto TradingThis move by Wall Street’s leading brokerages signifies a growing embrace of digital assets by traditional financial institutions, spurred by a more favorable regulatory environment in the United States under the Trump administration.BlockheadBlockheadHow a Potential Recession Could Create a Major Opportunity for Digital AssetsYour daily access to the backroom.BlockheadBlockheadRobinhood’s Q1 Earnings Beat Expectations Despite Crypto Trading Diphe company’s strategic focus on diversification suggests a move towards a more balanced revenue model in the future, especially as traditional financial giants like Morgan Stanley and Charles Schwab prepare to enter the direct crypto trading space.BlockheadBlockheadOSL, Ant Digital Partner on RWA Tokenization, Eye Institutional AdoptionOSL, Ant Digital Partner on RWA Tokenization, Eye Institutional AdoptionBlockheadBlockheadConsensus 2025, TorontoWe're a media partner for Consensus 2025, held in Toronto, Canada on 14-16 May. Coinbase, BlackRock, Google & The White House Will Be There – Will You? Use the code BLOCKHEAD20 for 20% off tickets!

Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:

To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:

Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:

I. Clarify the essential attributes of virtual currency, Real-World Assets tokenization, and related business activities

(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.

The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.

A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.

（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.

Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.

II. Sound Work Mechanism

(III) Inter-agency Coordination. The People's Bank of China, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.

The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.

(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.

III. Strengthened Risk Monitoring, Prevention, and Disposal

(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.

(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.

(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.

(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.

（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.

（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.

（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.

（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.

IV. Strict Supervision of Domestic Entities Engaging in Overseas Business Activities

（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.

（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.

(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.

V. Strengthen Organizational Implementation

(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.

(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.

VI. Legal Responsibility

(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.

(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.

This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.

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