Crypto venture capital (VC) funding is expected to recover this year as regulatory clarity and more crypto-friendly policies emerge during the tenure of President Donald Trump, JPMorgan (JPM) said in a research report Wednesday.

The Wall Street bank noted that venture funding for the industry has been subdued in recent years. This may have been due to enforcement actions by the U.S. Securities and Exchange Commission (SEC) and the climate of regulatory uncertainty during the previous administration, analysts led by Nikolaos Panigirtzoglou wrote.

The start of the EU’s Markets in Crypto Assets (MiCA) regulations, which came into force at the end of December, is expected to “further bolster VC engagement,” the report said.

Still, the level of funding is unlikely to match previous peaks seen in 2021/22, JPMorgan said, as crypto venture capital firms face a number of challenges.

Giants of traditional finance (TradFi) such as Blackrock (BLK) and Franklin Templeton are increasing their participation in the crypto market, and this leaves less market share for VC firms in stablecoins, tokenization and decentralized finance (DeFi), the bank said.

Nascent crypto projects are avoiding large token sales to VCs and are increasingly turning to community-driven platforms to raise money, the report noted.

High interest rates also present a challenge for VC funding, JPMorgan said.

The growth of cryptocurrency exchange-traded fund (ETF) products is “inducing a trend towards passive investing,” and this could be diverting capital away from VC firms, the report added.