The Importance Of Cryptocurrency Regulation

"Let’s start with a fundamental question: how different is a #stablecoin from e-money or a #bank_deposit? At first glance, stablecoins appear to be a novel #technological_innovation, promising faster, cheaper, and more efficient payments.   However, their core functions—storing value and enabling payments—are not fundamentally different from traditional financial instruments.   A stablecoin backed by #high_quality_liquid_assets mirrors the structure of #e_money issuers. Similarly, a stablecoin issued by a private entity with claims on an issuer resembles a bank deposit.    Yet, despite these similarities, stablecoins often operate outside the #regulatory_frameworks that govern bank deposits and other products that are similar to bank deposits, like money market funds.   This highlights the importance of the principle “#same_activity, #same_risk, #same_regulation.” If stablecoins perform the same economic functions as traditional instruments, they should adhere to equivalent regulatory and supervisory standards. This is not about stifling innovation but about safeguarding financial stability.   Consider a stablecoin issuer promising 1:1 backing with high-quality reserves. Without strict oversight, could these reserves fund riskier ventures, with stablecoins acting as conduits for leveraging the financial system? This scenario is not hypothetical.   We have seen how loosely regulated financial instruments can amplify risks rather than mitigate them. The potential for runs on large stablecoins could have financial stability implications given their large-scale investments in the short-term funding markets. The interconnectedness between stablecoins and traditional financial systems has grown rapidly.   To address these risks, the #FSB has set guardrails for the regulation, supervision, and #oversight_of_stablecoins. These guardrails ensure robust standards for #transparency, #governance, and #risk_management. However, if we want to prevent regulatory arbitrage, consistent implementation across jurisdictions is critical. We should not allow stablecoins to exploit gaps in oversight to gain a competitive advantage or to introduce hidden risks into the financial system."   — From: Remarks by FSB [Financial Stability Board] Chair, Klaas Knot, at the Group of Thirty (G30) Plenary Meeting, Berlin, June 7, 2025.   The full speech is available here: https://lnkd.in/eg8H9Bgp

Ryan Salame just demonstrated that in FinTech/Crypto, “move fast and break things” can be very dangerous. Most of the media coverage about the former chief executive of FTX pleading guilty yesterday to multiple charges focused on the $1.5bn asset seizure order and the possible 10 year jail sentence he faces. But delving into the specific charges contains a valuable lesson for FinTech/Crypto companies. Specifically, one charge that Salame pled guilty to was the dry sounding “Conspiracy to Operate an Unlicensed Money Transmitting Business.” The background was FTX had no bank accounts to handle customer deposits/withdrawals. FTX tried to open one, but their bank (likely Silvergate) refused without FTX having the needed registration and licenses (money transmitter business license, primarily). Rather than let that slow them down, Salame and SBF pushed forward. Initially, they illegally used the bank accounts of Alameda (SBF’s trading businesses) for FTX customer deposits/withdrawals. Knowing that was not a durable solution, they then incorporated a new entity, misrepresented that entity’s business (not disclosing it would deal with FTX’s customers and was not licensed), and opened a bank account. That behaviour might have hewed well to the disruption ethos of many in tech (think the early days of Meta and Alphabet). But financial services is different as it is heavily regulated. This underscores the unique complexity of FinTech/Crypto. The need to balance the disruptive possibilities of new technology against a very well-established regulatory infrastructure. Many correctly cite the need for regulatory change for novel technologies Iike crypto. But they must also understand many foundational regulations in financial services are not up for debate: protection/separation of customer funds, KYC, anti-money laundering, anti-terrorism financing, sanctions compliance (to name but a few). Those FinTechs/Crypto companies that manage that balance between disruption and compliance will be successful. Those who don’t……. As Salame has aptly demonstrated yesterday, you can’t ignore financial regulations because it slows you down. In financial services, “move fast and break things” can easily land you in jail. Ex-FTX Executive Salame Pleads Guilty to Criminal Charges https://lnkd.in/eG2Vvytc

Most people think that a large wave of enforcement actions is a sign of a regulatory framework that is healthy and active. I disagree. A large wave of enforcement actions can also result from a regulatory framework that is unclear, inconsistent, and overly restrictive to the market. This is what is happening in the crypto market in the U.S. 1) Unclear regulations - The United States is struggling how to fit crypto into a regulatory framework from almost 100 years ago. The Securities and Exchange Act of 1936 never anticipated digital assets, cryptocurrency, or blockchain technology. Trying to apply this framework to a technology for which it was not intended is tough. Both regulators and the industry struggle to make sense of it all. 💡Solution: A digital assets-specific framework. For the crypto industry to have a clear understanding of digital asset regulations, a new regulatory framework is required. 2) Inconsistencies in decisions- Inconsistent application of regulations creates confusion. It remains unclear to many lawyers and Web3 founders what the exact threshold is for a digital asset as a security and how to ensure complete compliance. 💡Solution: No more regulation by enforcement. The industry learns very little when selective enforcement occurs. Instead, the U.S. Securities and Exchange Commission should issue circulars, rules, procedures, and regulations that enable effective compliance implementation. 3) Stifling innovation - All companies look for jurisdictions that provide the best environment for business - this includes considerations around transparent, clear, and implementable regulations. The United States is at risk of losing the best digital asset innovations to other markets that have prioritized setting up a digital assets framework. 💡Solution: Foster innovation through digital asset working groups and other B2G collaborations. The only way to make a regulatory framework that fosters innovation is to invite the industry to join in its creation. Regulations are meant to protect the market and only a deep understanding of how that market works can support that goal. As I engage in conversations with both regulators and the industry, I see that there is potential for a win-win. The only question is how long that will take. What are your thoughts on the current state of regulatory development in the digital assets space in the U.S.? https://lnkd.in/d5RdSPHz #cryptoregulations #legalcompliance #law

The first week of the new Administration has brought significant changes to US policy approaches towards digital asset and crypto financial markets. Policy formation, or lack thereof, has been a key impediment in the adoption of crypto financial capabilities. While execution of new policy agendas are still pending, the speed and scale of the shift in policy direction is significant. S&P remains dedicated to offering essential data, analytics, and benchmarks to enhance decision-making in markets. Key policy highlights from the week include: - The SEC rescinded SAB 121, eliminating the requirement for firms holding cryptocurrencies to list their customers' crypto holdings as liabilities on their balance sheets. - An Executive Order is establishing a Digital Asset Working Group tasked with proposing Federal regulatory frameworks within 6 months. The group will involve multiple regulators but will exclude the Federal Reserve and other banking regulators. - Commissioner Hester Peirce of the SEC is initiating a Crypto Task Force aimed at crafting a comprehensive regulatory framework for crypto assets. These developments mark a significant step in reshaping the regulatory landscape for digital assets and crypto markets. #PolicyChanges #DigitalAssets #CryptoRegulation #DeFi

I believe one of the most significant accomplishments of this administration is ensuring that financial regulators work closely together and are aligned on digital assets regulation. The EO on Digital Assets (EO 14178) and the White House Digital Assets Report directed regulators to coordinate under existing authorities to provide clarity for the digital asset ecosystem — even before Congress acts. Today we saw that direction put into practice. The SEC and CFTC issued a joint statement confirming that registered platforms under their supervision can facilitate trading of certain spot crypto assets. For an industry long facing jurisdictional ambiguity and turf battles, this joint action is significant. Here’s what it means in practice: ✅ Registered venues can move ahead: SEC-registered national securities exchanges (NSEs), CFTC-registered designated contract markets (DCMs), and certain foreign boards of trade (FBOTs) are not prohibited from listing and facilitating trades of approved spot crypto products. This means regulated entities can now handle actual crypto asset transactions — not just derivatives — within the same frameworks that govern equities and commodities. ✅ Direct engagement with staff: Firms are encouraged to engage directly with SEC and CFTC staff to determine how to apply existing requirements for transparency, surveillance, and investor protection — the “fair and orderly market” principles — to spot crypto trading. These discussions will guide how venues design compliance, reporting, and risk controls specific to digital assets. ✅ A bridge until Congress acts: Congress continues to debate wide-ranging market structure legislation. That process could take months. Today’s action provides a path forward now, signaling that U.S. regulators are aligned on how spot crypto trading can operate under current law. For years, one of the biggest gaps in oversight was the CFTC’s limited ability to regulate the spot market for crypto commodities, while the SEC asserted authority over crypto securities. The result was confusion and hesitation. Today’s announcement is the clearest signal yet that both regulators are prepared to supervise parts of the spot crypto market together, using existing law and coordinated oversight. To put it simply: think of two referees who once called different halves of the field, sometimes making conflicting calls. Players didn’t know which whistle to follow. Today, those referees are shoulder-to-shoulder, telling players: you can take the field, here are the rules, and we’ll enforce them together. This is exactly what the EO and the White House report envisioned. Regulatory clarity doesn’t just come from Congress passing new laws — it comes from regulators working in sync, applying their mandates consistently, and signaling to the market how to proceed.