Compared to traditional assets like cash and bonds, cryptocurrency is still in its infancy — which means that the regulatory landscape surrounding it is rapidly changing and evolving. As new cryptocurrencies emerge and are used in different ways, the need for strong regulatory frameworks becomes increasingly obvious. With frameworks for oversight in place, it’s possible to increase investor confidence, stabilize financial markets, and make crypto more accessible to all.
So, what does the current regulatory framework of crypto look like in the United States and globally? What might it look like in the future, and what are some challenges regulators may face along the way? Whether you're already working in wealth management/financial services or have plans to break into this industry, having an in-depth knowledge of crypto and digital commerce regulation can be very useful.
The Evolution of Cryptocurrency in Digital Commerce
When Bitcoin first hit the market in 2009, it was hard to imagine a world in which it could be used to make a digital transaction. Today, however, more than 15,000 businesses accept Bitcoin across the globe. So, how did we get here?
Early Adoption and Milestones
Cryptocurrency (and specifically Bitcoin) may not have seen widespread adoption overnight, but when tech experts started pushing the trend as a real means of doing business online, it began to take off.
Perhaps one of the most notable milestones in crypto history occurred on May 22, 2010, when a programmer used Bitcoin to purchase pizza online. Now known as Bitcoin Pizza Day, this event proved significant as more retailers began to accept the payment.
As of 2025, major companies like PayPal and Mastercard have started offering users the option to instantly convert and purchase cryptocurrency, demonstrating its growing relevance.
Impact on Online Transactions
Although adoption of crypto is far from universal, the increased use of cryptocurrency in online transactions has had some notable impacts on ecommerce. Not only can crypto facilitate lower transaction fees for merchants and consumers alike, but it also offers improved security and privacy while expanding potential markets for global businesses.
At the same time, the lack of widespread cryptocurrency regulation has resulted in some volatility and uncertainty across the board.
Key Regulatory Concepts in Cryptocurrency
If concepts of cryptocurrency and regulation seem complicated, that's because they can be. With a basic breakdown of some key regulatory concepts, you may have an easier time understanding state, federal, and global approaches.
Securities vs. Commodities Classification
In the United States, cryptocurrency may be classified as either a security or a commodity. The challenge is that this definition can differ depending on who you ask. For example, the Securities and Exchange Commission (SEC) views cryptocurrency as a security, meaning it functions like an investment contract. In other words, people buy it expecting to profit from the efforts or success of others (much like bonds or stocks).
Meanwhile, the Commodity Futures Trading Commission (CFTC) classifies cryptocurrency as a commodity, or something that has inherent value and can be traded or exchanged (like gold or oil). Because of these differing definitions, there can be confusion over cryptocurrency regulation and what rules apply.
Know Your Customer (KYC) and Anti-Money Laundering (AML)
When it comes to cryptocurrency and regulation, international bodies (like the Financial Action Task Force) have implemented Know Your Customer (KYC) and Anti-Money Laundering (AML) standards. These standards require businesses to take practical measures to prevent money laundering, including monitoring for suspicious transactions and verifying the identity of users.
U.S. Federal Regulatory Landscape
What does cryptocurrency regulation look like in the United States specifically? Here, both the SEC and CFTC play a major role in overseeing how cryptocurrency is handled and taxed.
Role of the SEC and CFTC
Key regulatory bodies, including the SEC and CFTC, oversee different aspects of cryptocurrency and digital assets. Specifically, the SEC is responsible for deciding how digital assets are regulated as securities based on the Howey Test, a four-step test that classifies a transaction as an "investment contract."
Meanwhile, the CFTC oversees all digital assets that have been classified as commodities. Other regulatory bodies affecting crypto in the United States include:
- Financial Crimes Enforcement Network (FinCEN)
- Office of Foreign Assets Control (OFAC)
- Internal Revenue Service (IRS)
IRS Taxation Guidelines for Crypto
The taxation of crypto is generally treated in the same manner as property, with property tax principles applying to transactions. When cryptocurrency is sold or exchanged for U.S. dollars, for example, users may be subject to capital gains taxes. When workers receive crypto as income, meanwhile, it's taxed at fair market value. The same rules apply to those who mine or stake crypto.
In fact, since 2020, the IRS has included a question on Form 1040 that asks about cryptocurrency transactions over the past year.
State-Level Approaches to Crypto Regulation
In addition to digital commerce regulations at the federal level, individual states may have their own requirements and laws.
Crypto-Friendly States and Initiatives
Some states have taken proactive measures to make the use of cryptocurrency more accessible and welcoming. Wyoming, for example, was the first state to issue its own stablecoin (the Frontier Stable Token) — with profits used to fund education and other public services.
Variances in Licensing and Compliance
In certain states, businesses may be required to hold a license that allows them to accept and deal in cryptocurrency. For instance, in New York, businesses must apply for and receive a “BitLicense” to deal with cryptocurrency.
Even in states where a license isn't required, businesses may need to take certain measures to remain within compliance standards. For example, Texas requires crypto providers to provide ongoing proof of reserves in an effort to protect consumers and stabilize the financial market.
Stablecoins and Their Regulatory Challenges
In recent years, a new cryptocurrency known as stablecoins has been introduced to mitigate some of the volatility the market has seen with traditional crypto. However, this cryptocurrency has come with its own inherent challenges and risks — particularly from a regulatory standpoint.
Defining Stablecoins Under U.S. Law
A stablecoin refers to one of several cryptocurrencies whose value is based on a stable asset, such as the United States dollar. The idea behind stablecoins is that they offer more predictability and stability because they are backed by fiat currencies or assets (like gold) that aren't as volatile.
Consumer Protections and Risks
From a consumer standpoint, stablecoins offer some inherent protections — but not without potential risks. For starters, stablecoins are more predictable than other types of crypto (such as Bitcoin), giving consumers some added peace of mind. And because they're available 24/7, they allow for seamless online transactions that can bypass typical intermediaries (such as banks).
On the other hand, stablecoins pose some risk when it comes to cryptocurrency regulation and uncertainty, particularly since they are still in development.
Central Bank Digital Currencies (CBDCs) and Policy Developments
Today, we're beginning to see the increased use of central bank digital currencies (CBDCs), or cryptocurrencies based on a country's national currency and issued by a central bank. The purpose of CBDCs is to improve the speed and efficiency of digital transactions while reducing the risk of financial crimes and enhancing access to digital currency for all.
U.S. Digital Dollar Explorations
In the United States, the development of a CBDC for the American dollar was halted due to an executive order issued by President Trump. The administration has expressed concerns over the government having access to Americans' digital asset information and that a CBDC could affect the stability of the market overall.
It is possible that this rule will be overturned down the road. This is especially true as the United States continues to promote the development of stablecoins and open blockchain technologies.
Implications for Payments and Privacy
In general, the implementation of CBDCs results in more efficient and streamlined payment systems. At the same time, there are some potential privacy risks that consumers should be aware of (and that the Trump administration has expressed concern over).
When a CBDC is released by the government, it means that the government can collect and store detailed consumer financial data. This could result in a lack of privacy for consumers, as well as the potential for misuse. Some even have fears that the programmability of CBDCs could allow governments to restrict access to funds or make decisions about what funds can (and cannot) be spent on.
International Comparisons: Global Regulatory Approaches
As the United States strives to figure out its own laws and digital commerce regulations, it can be useful to consider what some other nations have done and how different approaches have worked out for them.
European Union’s MiCA Framework
The European Union's Markets in Crypto-Assets (MiCA) is a framework that was formally adopted in 2023 and has been implemented in phases since. It establishes strict cryptocurrency regulations across the EU, with the primary goal of protecting consumers and ensuring market stability. Some key components of the MiCA framework include:
- Transparency laws that require providers to publish clear and non-misleading information about crypto.
- Requirements for companies to maintain strong IT and cybersecurity safeguards against hacking and other threats.
- Liability requirements that ensure consumers maintain a right of withdrawal at all times.
Strategies in Asia-Pacific and Latin America
Both the Asia-Pacific and Latin American regions have their own regulatory policies when handling cryptocurrencies. For example, areas like Hong Kong and Japan have some anti-money laundering laws and counter-terrorism measures in place. However, in other areas (such as India and China), digital commerce regulations are less developed.
In Latin America, countries like Brazil and Mexico have been relatively proactive in developing cryptocurrency regulation. For instance, Brazil established a legal framework for handling virtual assets under the Cryptoassets Act in 2023.
In other countries, like Panama and Colombia, there has been less proactivity. Some Latin American countries (including Bolivia and Honduras) have even banned crypto transactions entirely.
Emerging Risks and Future Trends
As we begin to see more widespread cryptocurrency regulation across the globe, regulators and those in the financial services industry must continue to stay on top of new trends and risks.
DeFi, NFTs, and Evolving Regulatory Needs
With decentralized finance (DeFi) continuing to evolve, the gap between traditional currency and cryptocurrency will need to be bridged. This may be achieved with improved digital commerce regulation, as well as the application of utility-focused non-fungible tokens (NFTs) that have more practical applications across industries.
Balancing Innovation and Security
As cryptocurrency becomes more innovative (and consumers inherently do more with it), there is a growing need to balance this rapid innovation with greater security measures for consumer protection. More than ever, businesses need to establish security controls to reduce risk, with options ranging from verifiable controls to solvency audits.
Discover More in an Online M.L.S. Program
Cryptocurrency regulation is complex, but it is up to future generations of financial services experts to stay on top of the latest rules and drive decision-making to improve consumer protection and reduce market volatility. If you're in the financial services industry and want to gain a better understanding of crypto and its regulatory status, it may be time to pursue an Online Master of Legal Studies from the University of Miami School of Law.
In this fully online program, you can explore a dedicated Wealth Management and Financial Services Law track to further specialize your knowledge in the legal side of the field. Get in touch to request more information about this program today or apply now to get started.
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