Crypto
Cryptocurrency laws and regulations
Overview of regulations, how they’re regulated, key challenges, and more resources for legal professionals
Legal terms · Securities law · Cryptocurrency laws
The expansion of virtual currencies like Bitcoin and Ethereum has put U.S. regulators in a dilemma between encouraging innovation and safeguarding investors.
The evolution of cryptocurrency is primarily due to the rise in technology worldwide. It has pushed financial boundaries, leaving with the possibility that cryptocurrencies may become the central element of the global economy.
The significance and impact of the use of cryptocurrency in the U.S. highlights the need to regulate it. However, there is a challenge in establishing a clear policy framework. With the digital revolution taking place through cryptocurrency, the state and federal governments are trying to determine how to define their role in regulating this new asset class in the best way possible.
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What is cryptocurrency?
What is cryptocurrency regulation?
How is cryptocurrency regulated?
State regulations
International Standard-Setting Bodies
Challenges in the US crypto regulation
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What is cryptocurrency?
Cryptocurrency is a type of digital money that is a decentralized digital asset designed as a medium of exchange, utilizing cryptographic protocols to regulate the creation of new units. It exists only online and is not controlled by any government, central bank, or authority.
A digital or virtual currency that is not issued by any central authority, is designed to function as a medium of exchange, and uses encryption technology to regulate the generation of units of currency, to verify fund transfers, and to prevent counterfeiting.
(12th ed. 2024)
Cryptocurrency uses a secure technology called cryptography to keep transactions safe and verify fund transfers to prevent fraud. It operates on a decentralized system and transactions are recorded on a public ledger called blockchain. The regulatory treatment of cryptocurrency varies across jurisdictions, with legal considerations encompassing anti-money laundering compliance, securities laws, taxation, and consumer protection frameworks.
What is cryptocurrency regulation?
Crypto regulations are the legal rules and guidelines that are present and issued by governments to shape how digital assets such as virtual currency operate. These laws have varied approaches across nations.
In the U.S., there are various states wherein some are friendly towards market participants embracing crypto with clear regulations, while others ban it outright.
Around 60 percent of U.S. citizens lack confidence in cryptocurrency trading or investment, considering the existing systems to be unreliable or unsafe. One primary reason for this distrust may be the absence of a single, consistent set of laws to regulate cryptocurrencies.
The existing regulations range from covering everything about how cryptocurrencies are to be created and traded to how they interact with traditional financial systems. Well-defined rules can help the crypto market in the following ways:
- Help in protecting investors from scams and market manipulation
- Ensure that there is transparency in the transaction, along with accurate information
- Help prevent illegal activities like money laundering, fraud, misleading information, etc
- Clarify the tax rules that apply to digital currencies
- Encourages market participation and confidence in the investors while encouraging blockchain innovation
- Regulates the risks that are or may be associated with the transactions
How is cryptocurrency regulated?
No defined regulation is used to regulate cryptocurrency in the U.S. as of 2025.
However, a major crypto legislation was introduced in 2024, i.e. the Financial Innovation and Technology for the 21st Century Act (or FIT21), that has been passed by the U.S. House of Representatives but has not yet been enforced. The legislation is aimed at emphasizing the role of the Commodity Futures Trading Commission (CFTC) as a lead crypto regulator in the U.S.
In the absence of one framework for cryptocurrency, the authorities try to regulate and enforce the already existing laws both at the federal and state levels, which are as follows.
Federal regulations
At the Federal level, regulations have predominantly dealt with various administrative agencies and bureaus.
The Securities and Exchange Commission (SEC)
The SEC primarily deals with securities such as convertible notes, stocks, debentures, etc. They aim to protect investors through mandatory registration of the securities that qualify for it.
The SEC brought lawsuits against major platforms such as Coinbase, Binance, Kraken, etc, for violation of regulations.
Due to the difference between the cryptocurrency and securities, a judicial split emerged in 2023, with Southern District of New York (SDNY) Judge Torres ruling in SEC v. Ripple Labs that only the institutional sales of XRP were securities, while Judge Rakoff in SEC v. Terraform Labs held that Terraform’s UST stablecoin was a security.
Courts remain divided on this issue at the time of this writing.
Commodity Futures Trading Commission (CFTC)
CFTC is a federal agency that is tasked with regulating U.S. commodities and derivative markets.
The CFTC regulates cryptocurrencies as commodities under the Commodity Exchange Act and has developed jurisdiction in derivative markets, all of which are set forth in decisions such as CFTC v. McDonnell (2018) and CFTC v. My Big Coin Pay (2018), etc.
In 2017, the CFTC introduced a self-certification process for bitcoin futures which allowed exchanges to launch crypto derivatives. For enforcement measures, the CFTC has engaged in high-profile enforcement matters against Uniswap, Binance, Celsius, Ooki DAO, and secured an order against defaulted FTX to pay a penalty of $12.7 billion.
Internal Revenue Service (IRS)
Since 2014, the IRS has treated cryptocurrency as a digital representation of value which is different from a representation of the U.S. dollar or any other real currency. It functions as a unit of account, a store of value, and a medium of exchange.
Being categorized as property makes each sale, trade, or buying of cryptocurrency taxable under capital gains taxes like stocks or property. Regardless of whether one incurs profit or loss, correct reporting of the same must be done according to the IRS.
US Department of the Treasury’s Financial Crimes Enforcement Unit (FinCEN)
FinCEN was the first U.S. federal regulator to address cryptocurrency, by issuing guidance back in 2013.
It governs virtual currency businesses and wallet services as Money Services Businesses and mandates them to have anti-money laundering and counter-terrorism financing regulations, specifically on Money Services Businesses dealing with Convertible Virtual Currency.
US Department of the Treasury’s Office of Foreign Assets Control (OFAC)
OFAC is a regulatory agency that administers and enforces U.S. economic and trade sanctions to maintain national security and foreign policy interests.
These sanctions target countries, terrorists, narcotics traffickers, and other threats including those involved in cryptocurrency activities. OFAC applies the same sanctions compliance standards to transactions involving digital assets as it does to those involving traditional currency.
U.S. Department of Justice (DOJ)
In October 2021, the DOJ created the National Cryptocurrency Enforcement Team (NCET) to enhance its investigative resources to control criminal activity in the crypto environment.
The DOJ has been involved in several high-profile cases and has even charged the crypto market with insider trading, including against former Coinbase exchange employees.
Federal Deposit Insurance Company (FDIC)
After issuing joint prudential crypto releases in November 2021, the FDIC instructed all FDIC-supervised institutions in April 2022 to notify if they were conducting crypto business or intended to engage in it. This was required so the FDIC could review the information provided.
Federal Reserve Board (FRB)
FRB supervises the banking institutions and banking activities.
It issued reports on stablecoins and central bank digital currency in January 2022. After that jointly in 2023, with FDIC and OCC, the FRB released two statements on the risks that are associated with crypto assets and the participants.
The FRB also issued supervisory guidance requiring banks under its oversight to notify their lead supervisory contact before engaging in crypto-asset activities.
State regulations
Financial regulators for cryptocurrency at the state level are as follows:
New York State Department of Financial Services (NYDFS)
In contrast to other crypto regulations that have been prominently adopted by other states, New York has a different regime that is focused on customer protection.
It was the first comprehensive crypto regulatory regime among major U.S. states which led the way by introducing the concept of BitLicensees — used to self-certify the listing or adoption of new virtual currencies. However, it is generally considered to be prohibitive and burdensome by the market participants.
California Department of Financial Protection and Innovation (DFPI)
On one hand, the DFPI has shown a friendly approach to the crypto market participants providing a narrow reading of state licensing requirements. On the other hand, it has implemented a comprehensive state crypto regulatory framework.
State attorneys general, including the New York State Attorney General (NYAG)
NYAG is one of the crypto regulators in the U.S. that has actively participated in filing charges and settling with the crypto platforms and market participants of all sizes.
International Standard-Setting Bodies
There is a constant rise in the involvement of digital currency transactions around the world, which often lightens the line between the borders as well.
Now, given the evolving complexities of digital asset markets, several prominent international financial standard-setting bodies have undertaken initiatives to regulate cryptocurrencies and make sure that they are regulated across jurisdictions.
Bank for International Settlements (BIS)
BIS acts as the central bank, and therefore it plays a role in shaping the regulatory framework for Central Bank Digital Currencies and stablecoins. BIS has issued various reports on stablecoin arrangements.
Basel Committee on Banking Supervision (BCBS)
BCBS is the primary global standard-setting body for prudential bank regulation, which has developed a framework to govern the exposure of banks to crypto assets.
Financial Stability Board (FSB)
The FSB contains the regulatory, supervisory, and oversight recommendations for crypto-asset markets which establishes high-level global standards for crypto regulation.
Financial Action Task Force (FATF)
FATF is a global authority on anti-money laundering and counter-terrorist financing, it has issued extensive guidance on mitigating illicit finance risks in the crypto sector.
3 Key challenges
Cryptocurrency regulation in the U.S. presents significant challenges due to its fragmented nature, requiring businesses to comply with a complex framework of overlapping and, at times, conflicting federal and state laws.
- Since each state has different regulations, it makes nationwide operations difficult.
- Money transmitter licensing rules differ across states, which may be friendly or strict, making compliance restrictive and complex.
- There is a lack of clear crypto-specific laws which forces businesses to interpret existing financial regulations in different ways, leading to uncertainty and misinterpretation.
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MILWAUKEE – The Wisconsin Assembly passed a bill that aims to rein in cryptocurrency scams, creating new consumer protections around kiosks that can be found at gas stations and convenience stores.
What they’re saying:
Criminals are known to trick victims into depositing money into the kiosks under the guise of protecting their money or paying a fine. Once the money is sent, it’s almost impossible to get back.
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The amended bill that passed Thursday sets a daily transaction limit of $1,000 per person. AARP Wisconsin said the bill protects against large-scale losses.
“We know these are essentially major scam machines, and while they look like a regular bank ATM, they are not,” said AARP’s Erin Fabrizius. “People are being directed there under duress.”
What’s next:
The bill now heads to the Wisconsin Senate.
The Source: FOX6 News reviewed the bill and referenced information from AARP Wisconsin.
“Client demand for risk management in the digital asset market is at an all-time high, driving a record
Beginning Friday, May 29 at 4:00 p.m. CT, CME Group Cryptocurrency futures and options will trade continuously on CME Globex with at least a two-hour weekly maintenance period over the weekend. All holiday or weekend trading from Friday evening through Sunday evening will have a trade date of the following business day, with clearing, settlement and regulatory reporting processed the following business day as well.
Cryptocurrency futures and options continue to reach record volumes at CME Group in 2026. Year-to-date highlights include:
- Average daily volume (ADV) of 407,200 contracts, up
46% year-over-year, and average daily open interest of 335,400 contracts, up7% year-over-year - Futures ADV of 403,900 contracts, up
47% year-over-year
As the world’s leading derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, cryptocurrencies, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing.
CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and
CME-G
View original content:https://www.prnewswire.com/news-releases/cme-group-to-launch-247-cryptocurrency-futures-and-options-trading-on-may-29-302692346.html
SOURCE CME Group
A growing share of young, affluent investors now hold part of their net worth in cryptocurrency — and many are reluctant to liquidate those positions to buy a home. Non-QM lenders are beginning to adjust.
Newrez has formally integrated eligible cryptocurrency holdings into its non-agency underwriting framework, allowing borrowers to use digital assets for qualification without selling them. The move places crypto alongside traditional securities accounts within the company’s Smart Series product suite, reflecting a shift in how borrowers structure their wealth.
Other non-QM lenders are moving in the same direction. Newfi Lending recently expanded its Sequoia DSCR program to allow borrowers to count a portion of Bitcoin and Ethereum toward reserve requirements without liquidation. Under Newfi’s guidelines, up to 25% of Bitcoin and Ethereum held in a Coinbase account and up to 50% of crypto ETFs or mutual funds held at institutions such as Fidelity or Schwab may be applied toward reserves, with total crypto capped at 50% of required reserves.
How It Works
Under the updated framework, eligible cryptocurrency holdings may be considered as part of the asset analysis when qualifying a borrower. Crypto is not accepted as currency for down payments, and borrowers must still close in U.S. dollars.
“The suitability is the same,” said Baron Silverstein, president of Newrez. “All we’re doing is accepting crypto assets to qualify, so it would be no different from looking at somebody’s securities account.”
Silverstein described the rollout as a measured first step within the non-agency channel, structured around established underwriting discipline rather than a new risk model. “We felt that, at least in the non-agency space, that this was an appropriate first move for us,” he said.
He noted that the approach mirrors how the GSEs treat other volatile assets held in securities accounts. “The GSEs are very prescriptive about the haircuts that they allow or require for assets in an individual’s securities portfolio account,” Silverstein said, pointing to holdings such as gold futures that also fluctuate in value.
Newrez evaluated crypto using a similar framework. Silverstein emphasized that the program does not alter core underwriting standards. “When you benchmark it in that manner, it really just becomes evaluating a price regression analysis and then what haircuts you feel are appropriate from a risk perspective on consumer-owned crypto,” he said.
Why Now?
Silverstein said demand among younger investors, ages 18 to 40, helped drive the decision, noting that borrower balance sheets increasingly include digital assets. “When we have conversations with clients — you hear it more and more — customers say they have crypto as part of their investment strategy,” he said.
The company’s press release cited the expanding global cryptocurrency market and noted that an estimated 45% of Gen Z and Millennial investors (also considered future homebuyers) own crypto.
Survey data from Coinbase shows nearly half of young investors own cryptocurrencies and rank crypto second only to real estate as a top growth opportunity. A YouGov investment trends report found Millennial and Gen Z investors are more likely to own crypto than a retirement account and are as likely to own cryptocurrency as they are to own real estate.
“My kids own crypto; I don’t,” Silverstein said. “I’m an old dog, and they have grown up in the digital age. They’re a lot more comfortable with the digital experience and using digital tools with what they do every single day.”
At the same time, Silverstein acknowledged that traditional agency programs have not yet adapted to recognize crypto assets for mortgage qualification. He framed Newrez’s move as a response to generational change.
“I think that the new customer is likely going to have crypto as part of their investment,” he continued. “That’s why I felt like this was a really good first step into the approval process for when they decide to buy a home.”
What It Means for Loan Officers
For loan officers, the update expands the range of borrowers who may qualify without restructuring their balance sheets.
“I think this will be a really big benefit for loan officers to support their customers,” Silverstein said. “If a customer comes to them and says, ‘look, 50% of my assets are in crypto,’ then they absolutely will have an option to say, ‘yeah, that can work for this type of mortgage.’”
Reaching those borrowers may require different referral strategies. A November survey from crypto infrastructure company Zerohash found that 35% of wealthy young Americans earning between $100,000 and $1 million annually had moved money away from advisors who do not offer crypto exposure. More than half of those reallocations involved between $250,000 and $1 million. The study found many younger investors rely on friends, family and online platforms such as YouTube for financial information.
Silverstein said he expects both advisors and competing lenders to adapt. “I would be surprised if you don’t see others follow suit,” he said. “That’s just my guidance and gauge on how competitive our industry is.”
The Bottom Line
Crypto is no longer a fringe conversation. For a growing segment of borrowers, it’s a meaningful line item on the balance sheet.
For loan officers, that shifts the initial discovery conversation. Instead of asking whether assets exist, the better question may be where they are held — brokerage account, retirement fund, or digital wallet. Borrowers who appear liquidity-constrained on paper may be asset-strong, but unwilling to trigger a taxable event or exit a volatile position to qualify.
Non-QM lenders are beginning to structure policy around that reality. Originators who understand which investors will recognize crypto, how haircuts are applied, and where caps apply can turn what looks like a declined file into a viable approval.
The opportunity remains limited by volatility and investor overlays. But as more wealth migrates into digital assets, the ability to navigate crypto within underwriting guidelines may become a competitive advantage rather than a niche skill.
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