Cryptocurrency regulation aims to integrate digital assets into the financial regulatory framework while prioritizing investor protection and preventing illicit activities. In the US, different federal agencies exert regulatory authority over different aspects of the sector. For example, the Securities and Exchange Commission (SEC) treats security tokens as securities and enforces compliance with applicable laws; the Commodity Futures Trading Commission (CFTC) classifies stablecoins as commodities and oversees derivative markets based on them; and the Office of Foreign Assets Control (OFAC) mandates anti-money laundering (AML) compliance for money services businesses that handle convertible virtual currencies.
States also have their own regulatory frameworks, with some adopting deregulatory approaches while others are more rigorous. New York’s BitLicense, for example, requires that crypto market participants meet comprehensive AML and KYC requirements, as well as capital requirements and regular reporting. However, its broad scope has been criticized for stifling innovation and making it too costly to operate in the state.
At the federal level, FinCEN issued guidance in 2013 that defines virtual currency businesses and wallet services as Money Services Businesses and requires them to comply with AML/CFT regulations. This includes registering with FinCEN and implementing KYC/AML protocols, as well as reporting to FinCEN on their activity. In addition, the SEC and CFTC host regular roundtables on crypto-related topics to promote transparency and foster collaboration with industry participants. Other federal bodies can regulate specific issues, such as the Internal Revenue Service regulating taxation of cryptocurrency transactions and the Office of the Comptroller of the Currency granting banks charters to custody and operate stablecoins under certain conditions.
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