The world of cryptocurrency is changing rapidly, and the regulatory environment is no different. Recent developments suggest that we may be entering a new phase in crypto governance. Many of us in the shippers’ camp still believe a “regulatory reset” is coming. Does this mean a reclamation get-out-of-jail-free card for crypto companies? DeliciousNFT.com explores this shifting regulatory environment. It reviews important takeaways and focuses on the most crucial compliance areas that crypto firms should focus on to avoid running afoul of the law.
The industry has gone through decades of doubt and apprehension. Now, big names industry such as Coinbase, Kraken, and Ripple face years of costly litigation. Meanwhile, the Trump administration appears to be eager to further mainstream cryptocurrency. With new bills making their way through Congress that would largely bring crypto into the existing financial order, the tide may be shifting. A significant wave of change could be coming according to April 2025’s Finance Magnates Digital Asset Regulation Compliance Report. This relatively uncontroversial change can have profound effects, reshaping the industry for years to come.
It's crucial to understand that a change in regulatory approach doesn't equate to a free pass. While the Trump administration's SEC may be shifting away from aggressive crypto enforcement to clearer rulemaking, it doesn't mean compliance is optional. Rather, it represents an important step toward a clearly articulated, more predictable, regulatory framework that crypto firms will need to operate within.
The Challenges of Managing Risk in Crypto
The draw of the crypto world is its decentralized system and promise of major payoffs. This comes with built-in pitfalls that companies need to smartly navigate. The biggest barrier to success while the unmet demand is great, the biggest challenge is the market’s volatility.
Understanding the Volatility of Cryptocurrency
There’s a reason why cryptocurrencies are known for their wild price swings. These volatility spikes are propelled by events such as positive or negative market sentiment, regulatory news, and other technological developments. This extraordinary volatility poses an enormous risk for any company holding or transacting in the crypto asset space. They should be required to have strong risk management strategies sufficiently established to protect against losses.
Any company that receives Bitcoin to settle payments needs to understand the risk of holding that asset. After all, the price of Bitcoin could fall by several orders of magnitude before they manage to exchange it for fiat currency. An investing company—especially one investing in volatile crypto assets—has to be on its toes. They need to be prepared to accept the risk of large losses should the market move against them.
To combat this volatility, businesses have several tools at their disposal, including hedging, diversification, and stop-loss orders among others. In addition, they can invest in stablecoins, a type of cryptocurrency that is pegged to a stable asset (usually the US dollar). Even stablecoins are not risk-free, as demonstrated by the mid-2022 collapse of TerraUSD (UST).
The Role of Regulatory Oversight
Regulatory oversight is crucial in protecting our economy from the inherent dangers of cryptocurrency. Safety regulators can help protect investors by adopting clear rules and investment standards. This proactive approach aids in the prevention of illicit activities such as money laundering and fraud.
The regulatory landscape for cryptocurrency remains nascent and there is currently no harmonization between different jurisdictions. This unpredictability puts a huge burden on businesses in the crypto sector. Now, they need to worry about convoluted, at times contradictory, legislation from country to country.
On April 10, 2025, the SEC’s Division of Corporation Finance released a staff statement. This statement provides clarity on how existing disclosure requirements apply to crypto asset securities’ offerings and registrations. This is a welcome move in the right direction toward offering more guidance and certainty for companies wanting to operate in the US. More comprehensive and consistent regulations are needed to create a level playing field for all players in the crypto industry.
Worry is growing over how intimately tied crypto is getting with the traditional financial system. The recent 2022 crypto winter definitely illuminated these concerns. Collectively, this interconnectedness may further exacerbate how a crash of the crypto market will affect our overall economic well-being. It is now on regulators to monitor this trend very closely and act aggressively to ensure that it does not create systemic risk.
Can Regulation Drive Innovation in the Crypto Space?
To many crypto enthusiasts, regulation is simply a barrier to innovation. Some argue that the tax can help stimulate short- to long-term population and economic growth. Finding that balance of protecting smart investors versus creating an open environment for innovation is paramount.
The Potential Benefits of Clear Regulations
Good regulation With comprehensive, clear, and well-defined regulation, there are a myriad of benefits that await the crypto space.
- Increased investor confidence: When investors know that there are rules in place to protect them, they are more likely to invest in crypto assets. This can lead to increased capital inflows and greater market stability.
- Greater institutional adoption: Institutional investors are often hesitant to invest in unregulated markets. Clear regulations can provide the certainty and security that they need to enter the crypto space.
- Reduced risk of illicit activities: Regulations can help to prevent money laundering, fraud, and other illicit activities, making the crypto space safer and more trustworthy.
- Innovation and growth: By providing a clear framework for companies to operate within, regulations can encourage innovation and growth in the crypto space.
As a result, stable coins have exploded in growth with almost a quarter trillion dollars circulating worldwide. In 2024 alone, they moved an astounding $27.6 trillion in payments, more than the transaction volume of Visa and MasterCard combined. Perhaps no other statistic better illustrates the incredible promise of crypto to remake our entire financial system for the better. At the same time, it highlights all the more the necessity of establishing strong regulations, so we can have stablecoins that are safe and sound.
Balancing Innovation with Compliance
The difficulty for our regulators is in crafting rules that guard against the investment abuses and criminal uses of these products while not killing them through over regulation. This demands a more delicate and adaptable touch that recognizes the pioneering nature of the crypto environment.
One of the best strategies to do that is through a “sandbox” approach. This provides companies an opportunity to pilot new products and services in a low-risk environment, without the full weight of regulations. Regulators will get the chance to see how these innovations work in practice. That on-the-ground experience allows them to craft the most effective regulations.
A second model focuses on principles-based regulation. This approach sets high level guidelines that firms should adhere to rather than prescribing strict regulations. This allows companies to innovate and adapt to changing circumstances while still ensuring that they are meeting the underlying goals of the regulations.
It is equally important to tackle the negative environmental impacts linked with many cryptocurrencies. The blockchain that undergirds crypto has been widely slammed as a climate-change-exacerbating energy hog. Regulators can help spur development of more energy-efficient consensus mechanisms. Second, they can push for the use of renewable energy in crypto mining.
Ultimately, the success of crypto regulation will depend on regulators’ ability to protect investors and curb bad actors. At the same time, they need to encourage innovation across the industry. That is only achieved through a holistic, collaborative process, one rooted in the voices of those from industry, academia, and the community at large. The regulatory reset isn’t a get out of jail free card. It’s an opportunity to create a more sustainable and responsible crypto landscape.
