Cryptocurrency regulation refers to the rules governments use to define how digital assets can be issued, traded, stored, and integrated into financial systems. Governments impose these rules to mitigate risks, promote innovation, and protect consumers and investors. They can cover a wide range of activities and may include payment systems, securities offerings, taxation, and anti-money laundering compliance. Regulations vary widely by country and continue to evolve as lawmakers respond to technological advances and market risks. The global regulatory environment for crypto is complex and fragmented, with different international organizations and countries taking differing approaches.
In the United States, the SEC and CFTC have both weighed in on how to regulate crypto and have vowed not to work together. As a result, businesses are required to comply with a fragmented system of overlapping and at times conflicting federal and state regulations.
A major challenge for regulators is defining which digital assets are securities and which are commodities. While some regulators have tried to formulate detailed, technology-agnostic definitions, most have wisely opted for more flexible and broadened regulatory categories. This approach will better position them to adjust the rules as the technologies and market evolve.
Many crypto-related services are regulated under existing money transmission laws and require licensing, registration, and authorization. To reduce risk, service providers that offer storage, exchange, and trading or wallet services should be required to segregate customer assets and comply with anti-money laundering and countering the financing of terrorism standards. Stablecoin issuers should be required to register with FinCEN and establish robust sanctions compliance programs that include risk assessments, sanctions list verification, and customer identification.
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