The United States is a dominant force in the global financial sector, not just because of the Dollar’s status as the default medium of exchange but also due to its efficient and extensive regulatory mechanisms. For every financial product offered within its borders, there are specific laws and dedicated enforcers. Cryptocurrencies, however, remain the glaring exception.
Over the past decade, the crypto industry has transformed from a niche experiment into a significant force within global finance. Yet, U.S. lawmakers and regulators are still playing catch-up. Compared to their global peers, they have struggled to balance investor protection, financial stability, and the promotion of innovation. Despite numerous legislative and regulatory efforts, the U.S. has yet to craft a unified framework for managing cryptocurrencies.
Instead, regulators have largely attempted to apply old rules to a new paradigm—a strategy that has yielded mixed results. However, it’s not all doom and gloom. The country has made notable progress in certain areas, even if it’s yet to deliver the clarity that stakeholders crave.
This article examines the progress made so far in shaping a coherent cryptocurrency regulatory framework in the United States and what the future looks like.
The Current State of Crypto Regulations in the United States
The U.S. government’s approach to cryptocurrency reflects its struggles in determining what to do with the asset class.
Many officials view digital assets as a double-edged sword: while they hold transformative potential, they also pose risks to financial stability, consumer protection, and national security. Cryptocurrencies’ use in illicit activities further complicates the narrative, prompting regulators to respond reactively rather than proactively.
Yet, at the same time, there’s a recognition that failing to establish a cohesive regulatory environment risks pushing the U.S. behind global competitors. Other regions have already established crypto-friendly regulatory landscapes, creating a sense of urgency for the U.S. to define its stance.
For now, the government’s measured approach has bred uncertainty, leaving stakeholders unsure whether future regulations will support or stifle industry growth. And this is one of the biggest frustrations for crypto businesses in the country. A recurring question is whether cryptocurrencies fall under the oversight of the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). This jurisdictional conflict has become a major hurdle in achieving regulatory clarity.
The SEC, led by Chair Gary Gensler, views many digital assets as securities, applying the Howey Test to determine whether an asset qualifies. If an investment offers profit expectations based on others’ efforts, the SEC considers it a security—and thus subject to its oversight. Meanwhile, the CFTC primarily oversees commodities like Bitcoin and Ether, focusing on derivatives markets but lacking direct authority over non-derivative crypto transactions. CFTC Chair Rostin Behnam has openly expressed interest in expanding the agency’s role in response to the growing demand for digital assets.
This “tug-of-war” between the SEC and CFTC continues to create an uneven playing field, frustrating industry participants and investors alike. Until Congress intervenes to clarify jurisdictional boundaries, the stalemate will likely persist, prolonging uncertainty in the market.
Adding to the complexity is the patchwork of state-level regulations. Some states, like New York, enforce stringent requirements such as the BitLicense, which imposes significant consumer protections and reporting standards. On the other hand, states like Wyoming have embraced crypto-friendly legislation to attract blockchain businesses. This inconsistency creates compliance headaches, particularly for smaller firms that lack the resources to navigate multiple regulatory frameworks.
Without a unified federal approach, some crypto companies have begun looking overseas to operate in jurisdictions with clearer and more supportive rules. This highlights the urgent need for a streamlined regulatory framework that balances federal oversight with states’ ability to address unique market conditions.
Progress Amid Challenges
Despite these challenges, there have been meaningful steps forward. One of the most significant developments came in January 2024, when the SEC approved the first spot Bitcoin ETFs. This move marked a watershed moment for the industry, opening up new opportunities for institutional investment while signalling a softening of the agency’s historically hardline stance.
RELATED: Unpacking the Impact of Spot Bitcoin ETFs on the Crypto Market Since January 2024.
Another milestone is the Financial Innovation and Technology for the 21st Century Act (FIT21).
FIT21 has only passed its Second Reading in Congress. Source: Congress.gov
Introduced in 2023 after considerable industry lobbying, FIT21 aims to clarify the roles of regulatory agencies by categorizing digital assets into three groups: digital commodities, restricted digital assets, and permitted payment stablecoins. This classification is designed to bring structure to the chaotic regulatory landscape, allocating oversight responsibilities based on the nature of the asset. For instance, Bitcoin and Ether—categorized as digital commodities—would fall under the CFTC’s jurisdiction, while restricted digital assets akin to securities would remain under the SEC’s watch.
Beyond jurisdictional clarity, FIT21 includes measures to enhance transparency and consumer protection. It requires digital asset developers to disclose key project details, such as ownership structures and operational plans, to prevent fraud. Additionally, it mandates that exchanges segregate customer funds from their operational assets, reducing the risk of conflicts of interest and enhancing investor trust.
While FIT21 represents a crucial step forward, its fate remains uncertain. Should the act pass, it would mark a significant milestone in U.S. crypto regulation, providing businesses and consumers alike with a clearer and more predictable path.
Industry Resistance and Advocacy
The U.S. crypto industry has responded to regulatory challenges with a mix of resistance and advocacy. Major players like Coinbase, Ripple, and ConsenSys have lobbied aggressively for clearer rules, arguing that the lack of regulatory clarity stifles innovation and drives businesses offshore. Coinbase, in particular, has led public campaigns, including legal challenges against the SEC, emphasizing the need for a regulatory framework that encourages growth without compromising investor protection.
Smaller companies, however, often lack the resources to fight protracted regulatory battles. This has created a divide within the industry: larger firms advocate for tailored regulations that support innovation, while smaller firms often call for reduced regulatory burdens to remain competitive. This dynamic has underscored the urgency of a clear, unified approach that levels the playing field for businesses of all sizes.
Another factor shaping the advocacy landscape is the broader tech sector’s recognition of crypto’s potential. Partnerships between blockchain companies and major tech firms have amplified calls for regulation that fosters, rather than stifles, innovation. As AI and blockchain technologies increasingly intersect, the case for a cohesive regulatory framework grows stronger. This interplay is expected to shape the crypto industry’s future, further emphasizing the need for clear rules.
Global Competition: The Pressure to Regulate
The international race to regulate digital assets is intensifying, and leading economies are setting precedents that the U.S. cannot afford to ignore.
Crypto regulation around the world. Source: ComplyAdvantage
The European Union, for instance, has implemented the Markets in Crypto-Assets (MiCA) framework, which provides a unified regulatory structure across its member states. MiCA’s emphasis on clear rules for crypto assets has positioned the EU as a hub for blockchain innovation. By offering legal clarity and investor protections, the framework is attracting companies that might otherwise operate in regulatory uncertainty.
In Asia, countries like Singapore and Japan have established comprehensive regulatory systems emphasizing transparency, consumer protection, and anti-money laundering (AML) compliance. Singapore, in particular, has become a global leader by combining a pro-innovation stance with robust safeguards against fraud and misuse.
This global momentum underscores the competitive disadvantage faced by the U.S. in the absence of clear regulations. If the U.S. fails to act decisively, it risks losing its leadership position in financial innovation as capital and talent migrate to regions with more supportive environments.
A Path Forward: What Needs to Happen
Creating a unified regulatory framework for cryptocurrencies is essential for the U.S. to maintain its competitive edge. Such a framework must strike a balance between fostering innovation and addressing risks to financial stability and consumer protection.
Key priorities should include:
- Clarifying Jurisdictional Boundaries: Congress must define the roles of the SEC and CFTC to eliminate overlapping mandates and reduce uncertainty for businesses. A clear division of responsibilities will streamline compliance and provide a foundation for consistent enforcement.
- Promoting Transparency and Accountability: Mandatory disclosures for digital asset projects, as proposed under FIT21, could prevent fraud and build investor confidence. Requiring exchanges to segregate customer funds would further safeguard users against financial risks.
- Encouraging Public-Private Collaboration: Regular dialogue between regulators and industry stakeholders can ensure that regulations remain adaptive and relevant. Collaborative efforts can also address emerging challenges, such as the integration of AI and blockchain technologies.
- Standardizing State and Federal Rules: While states should retain some autonomy, a federal framework must establish baseline standards to reduce the compliance burden on businesses operating across multiple jurisdictions.
Can the U.S. Lead the Way?
Donald Trump’s potential return to the presidency in 2025 could significantly impact U.S. crypto regulation. Trump’s newfound love for crypto means he would be more open to pushing for proper regulations, even if there is the risk of his unpredictability.
However, regulating cryptocurrencies effectively is about more than just managing a new asset class. It’s an opportunity for the U.S. to reaffirm its leadership in financial innovation and technology. A well-crafted regulatory framework could unlock the full potential of blockchain technology, driving advancements in areas such as DeFi, supply chain transparency, and digital identity verification.
The stakes are high. Missteps in regulation could stifle innovation, push businesses offshore, and undermine trust in the system. If the U.S. can rise to the challenge, it may not only secure its position as a leader in blockchain innovation but also set the standard for the global digital economy. The alternative—falling behind more agile competitors—would carry far-reaching consequences for the nation’s financial and technological future.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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