As the cryptocurrency landscape continues to change, so too do the regulatory frameworks being established in order to govern its use. Meanwhile, in the United States, regulators are taking a different approach to address the challenges and benefits presented by digital assets. The European Union and Singapore are adopting their own distinctive approaches. Here’s a closer look at the landscape of crypto regulation in the most important jurisdictions worldwide. It provides insights into the central figures, the regulations they’re administering, and what that means for companies and investors.
U.S. Regulatory Landscape A Multi-Agency Approach
The United States is taking an inter-agency approach in regulating cryptocurrency. The Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), and Financial Crimes Enforcement Network (FinCEN) each have very distinct roles to play. This fragmented regulatory environment only adds to the confusion and uncertainty for companies building in the crypto space. What’s remarkable is the distinct lines of responsibility each agency is outlining.
The CFTC has consistently classified virtual currencies as commodities and allowed them to be traded as commodities under existing statutory authority and regulation. This distinction enables the CFTC to oversee digital assets like Bitcoin and Ether that are considered commodities. The CFTC’s jurisdiction covers derivatives trading with cryptocurrencies, where the agency works to maintain fair market conditions and shields investors from fraud and manipulation.
For federal tax purposes, the IRS treats cryptocurrency like property. They’ve provided some important information on how to treat the tax implications of crypto-related activities like mining, staking, and airdrops. You will have to pay capital gains taxes on cryptocurrency trades. Profits made from the sale or trade of such assets are subject to tax at either short- or long-term capital gains tax rates based on how long you’ve held these assets. Taxpayers are expected to report each and every one of their crypto transactions on their annual tax returns. The IRS has stepped up its enforcement activities to ensure.
Recognizing the tremendous power and responsibility entrusted to it, the SEC regulates the entire securities industry, including key segments of the crypto market. In its lawless expansion of authority, the SEC claims jurisdiction over all crypto assets that are securities. This covers ICOs and other token sales in which participants contribute funds under the expectation of profit primarily from the efforts of others. The SEC has made it clear that any cryptocurrency company that deals in securities needs to register or be subject to the SEC’s frameworks.
The SEC has also pursued crypto projects over their unregistered security offerings, such as the ongoing enforcement action against Ripple Labs. In 2024, they further began to consider Ethereum as a security, causing a major uproar industry-wide. This investigation has brought a critical light to the ongoing battle over whether many altcoins are considered securities. Depending on the outcome, it could meaningfully determine the future of the entire crypto industry.
As the U.S. government’s regulator of anti-money laundering (AML) and counter-terrorism financing (CFT) efforts, FinCEN is the agency responsible for this regulation. FinCEN even requires that cryptocurrency companies report their transactions to the IRS. This requirement is a powerful deterrent against the use of digital assets for money laundering, drug trafficking, and human trafficking. In fact, cryptocurrency exchanges and other businesses that transact in virtual currency already are subject to the BSA. They need to be required to have strong AML programs to identify and report any bad activity.
Singapore Embraces Crypto Innovation with Regulatory Oversight
Singapore has become a strong leader as a global hub for fintech innovation, particularly in cryptocurrency. Periodically, it has enacted quite defensive regulatory guardrails specifically designed to protect investors and maintain financial stability. The Monetary Authority of Singapore (MAS) regulates crypto under the Payment Services Act of 2019. This piece of legislation brings surety to the industry by establishing a framework for licensing and supervision of cryptocurrency exchanges and other digital payment token service providers.
The MAS also requires cryptocurrency exchanges to register and comply with AML standards. Importantly, these standards are in line with international best practices. In doing so, they play a critical role in preventing cryptocurrencies from being used to facilitate money laundering or terrorist financing. The MAS further requires exchanges to protect customer assets and maintain the integrity of their trading platforms.
Singapore’s regulatory approach aims to find a balance between encouraging innovation while reducing risk. The MAS has been proactive in engaging with the crypto industry, issuing guidance and consultations to clarify its expectations and address emerging issues. This iterative process builds transparency and predictability into the regulatory space. As such, it serves as a major drawland for crypto businesses looking to set hoof in Singapore.
The MAS had previously cautioned investors on the speculative dangers involved with purchasing cryptocurrencies. They note these assets are extremely volatile and speculative. More recently, the regulator has moved to crack down on the promotion and advertising of cryptocurrencies to retail investors. This move is intended to protect retail investors from being drawn into risky investments without an understanding of the risks involved.
EU's MiCA Law Harmonizing Crypto Regulation Across Member States
The European Union has set the standard for a holistic approach to crypto regulation with the recent passage of their MiCA law. This legislation would introduce clear, consistent rules across each of the EU’s 27 member states so that crypto companies understand what’s required of them. MiCA’s overall goal is to create a level playing field for crypto service providers across the EU. Simultaneously, it hones in on protecting consumers and ensuring financial stability.
Through the MiCA law, Europe creates a licensing regime for non-securities crypto-asset service providers (CASPs). These providers have to obtain prior authorization from national competent authorities before they are allowed to provide their service in the EU. CASPs will have to adhere to prudential standards, such as capital adequacy, robust risk management practices, and cybersecurity standards. These requirements are intended to make sure CASPs are well capitalized and capable of protecting customers' assets.
MiCA introduces predictable and practical regulation to counteract market abuse. Its purpose is to protect the crypto market from insider trading, market manipulation, and other illegal behavior. The legislation requires CASPs to monitor their trading platforms for suspicious activity and report any instances of market abuse to the authorities. These are admirable, though overdue, measures to improve overall market integrity and restore investor confidence.
As it stands, the MiCA law does not apply to decentralized finance (DeFi) or non-fungible tokens (NFTs). It takes many beneficial steps, but it fails to stop new regulations for them from coming in the future. The EU is currently at the forefront of figuring out how to regulate these new aspects of the crypto market. Look for more policy development to follow in short order, aimed at the particular dangers and challenges they pose. We are facing real challenges in regulating decentralized and novel crypto assets. It is precisely for this reason that DeFi and NFTs were excluded from the original scope of MiCA.
