Cryptocurrency Regulation

Cryptocurrency regulation is an emerging, and highly complicated, field. The growth of crypto assets has pushed the boundaries of what governments have been able to regulate. As a result, regulatory efforts have grown rapidly. Governments are trying to find a balance between encouraging innovation and safeguarding investors. The global nature of crypto markets makes it difficult to regulate effectively. Some regulators have focused on anti-money laundering and other illicit activities, while others are working to promote financial stability and market transparency.

The emergence of blockchain technology has created a complex and dynamic market for digital currencies, or “crypto assets.” They can be used as speculative investments, hedges against weak currencies, or even payments instruments. This development has shifted the focus of regulation from a question of whether to allow or prohibit them to one of how best to supervise and regulate them.

In the United States, state-level regulations are in place for crypto businesses. However, these laws are often overlapping and conflicting. Money transmitter licensing rules, for example, vary widely from one state to another. These rules may be friendly or restrictive, making compliance costly and difficult.

The international regulatory community is working to develop a framework for global regulation of digital asset markets. Several prominent global standard-setting bodies have taken on the challenge, including the BCBS, FSB, and FATF. The FSB has also developed reports on stablecoin arrangements and Central Bank Digital Currencies (CBDCs). In 2022, the FDIC began requiring supervised banks to notify their lead supervisory contact when engaging in crypto-asset business.