The Past, Present, and Future of Cryptocurrencies and Their Regulation

The emergence of cryptocurrencies

In 2008, a global financial crisis emerged primarily as a result of the collapse of the U.S. housing market, triggering failures in financial firms and the banking system. The resultant stock markets’ crash and need for serious government intervention led to what is known as the “Great Recession”. In 2009, although the idea of digital assets had been theorized in earlier decades, the first cryptocurrency Bitcoin was created by an anonymous individual or group known as Satoshi Nakamoto. A coincidence? Not quite–in fact, Bitcoin was built partially as a response to the 2008 crisis, and consequently out of growing distrust in traditional financial institutions and currencies and their reliance on banks and governments to function correctly.

To understand the political, social, and legal implications surrounding Bitcoin and other cryptocurrencies, we must first understand how they work. The term “cryptocurrency” originates from the idea of extensive encryption through complex coding to ensure the security and reliability of monetary transactions. Cryptocurrencies can be best understood as digital forms of money that operate without a central authority such as a bank or government, instead allowing direct transactions between individuals. They rely on blockchain technology, a decentralized public ledger that records all transactions across a network of computers. Ownership is maintained through cryptographic keys, which allow users to send and receive funds while maintaining a level of anonymity and security. Since Bitcoin, thousands of cryptocurrencies have been developed, each with their own distinct properties. 

Legal implications of the existence of cryptocurrencies

Many advantages and disadvantages surround cryptocurrency, and it is important to understand the legal issues, even theoretical ones, in order to understand its legal standing in the U.S. and Europe today.

The decentralized and unregulated aspect of cryptocurrencies poses many risks and challenges. Notably, these characteristics can be appealing for individuals seeking to conceal or move money obtained through illegal activities. In this sense, there are concerns about their intimate association with illicit and criminal uses, such as transactions involving weapons, drugs, human trafficking and terrorist financing. This risk stems from the pseudonymous and private structure of cryptocurrency systems, which can make such activities more difficult to trace.

The cross-border nature of cryptocurrencies is also a key legal issue, in that because blockchain networks operate through nodes distributed across multiple jurisdictions, a single transaction may fall under several legal systems at once, sometimes with conflicting rules. This is especially relevant in the United States, with different states having different legal rules, but also between countries. Moreover, since blockchain ledgers have no fixed physical location, it is difficult to determine where a transaction legally takes place or which jurisdiction applies. This lack of a clear territorial basis can make it challenging for regulators to enforce laws and resolve disputes, and showcases one of the issues of cryptocurrencies.

Many other legal implications surround cryptocurrencies, such as privacy issues, tax obligations, risks of data theft, and intellectual property issues. While cryptocurrencies are supposed to offer more privacy, this same feature raises concerns about data protection and the potential misuse of personal or transactional information. Taxation also presents challenges, as governments must determine how to classify and track crypto assets for reporting purposes. Intellectual property issues are especially challenging, especially in IP-intensive industries, as blockchain technologies and smart contracts raise questions about ownership and enforcement procedures when digital assets and automated agreements are happening across decentralized networks.

Regulation of cryptocurrencies and crypto-assets in the United States today

Now that we have seen how cryptocurrencies have emerged, how they function and what their main theoretical legal implications are, it is interesting to understand what their legal standing is in the United States today, especially as this is a very current issue.

Historically, cryptocurrency regulation in the U.S. has been fragmented across States and across different cases. However, on July 18, 2025, Congress passed into law the Guiding and Establishing National Innovation for US Stablecoins Act, or what is known as the GENIUS Act. This is a breakthrough act as it is the first comprehensive piece of legislation intended to provide regulatory clarity for crypto-assets, specifically stablecoins. The latter can be understood as a type of cryptocurrency designed to maintain a stable value by being pegged to a currency like the US dollar, which unlike volatile cryptocurrencies, are used for fast cross-border transactions in a “safer” way.

The GENIUS Act is long and complex, but its main components do seem to provide some efficient regulation of crypto transactions and cryptocurrencies in general. For example, it requires mandatory transparency through monthly public disclosures and audits of reserves and limits issuance to authorized entities subject to federal or state supervision. It also aims to improve the stability of stablecoins through requiring full reserve backing with low-risk assets (cash or short-term U.S. Treasuries). The GENIUS Act also subjects issuers to anti-money laundering sanctions and compliance rules and aims to support consumer protection through priority claims for stablecoin holders in case of the issuer going bankrupt. Critics do point out certain weaknesses of the regulation, notably that the regulation considers stablecoins issuers as banks, which implies high compliance costs that such issuers may not have considered as an obstacle for them.

Other relevant Acts include the CLARITY Act, which after being adopted by the House in 2025, is yet to pass in the Senate. This Act notably aims to reduce regulatory overlap, and makes it more clear as to how, specifically, digital assets are to be considered in light of laws related to federal securities and commodities. In this context, different agencies have different roles in cryptocurrency regulation, with the S.E.C. maintaining control over digital assets that are considered to be “securities”, and the C.F.T.C. maintaining authority over digital commodities.

Recently, it is interesting to also note that the S.E.C. used to be very strict, with several enforcement lawsuits against major platforms like Coinbase and with a strict classification of digital assets as securities. However, this has changed under the D. Trump Administration, with the SEC dropping such lawsuits and with policies that appear to be much more “crypto-friendly.” For example, Paul Watkins, the SEC chairman and a speaker at a crypto conference in March, sent out a 68-age document outlining how cryptocurrencies would be exempt from many rules, giving the industry more freedom. At the same time, the C.F.T.C., less strict than the S.E.C., seems to have more leeway in terms of regulating cryptocurrencies compared to the past. While many praise this on the basis of increased innovation and expansion of the crypto market, others pointed out the risks related to consumer protection, less strict enforcement of rules and “putting crypto over everything else.”

Brief comparison with Europe

We have given a brief overview of the status of cryptocurrencies in the U.S., which is different from Europe. In contrast to the United States, the European Union has adopted a more unified regulatory approach through the Markets in Crypto-Assets (MiCAR) regulation, implemented in 2023. MiCAR establishes a comprehensive legal framework aimed at increasing market transparency, protecting investors, and ensuring financial stability while still attempting to support innovation in the crypto sector. However, despite its broad scope and its ambitious goals, critics do mention that it is imperfect in that it does not fully cover areas such as decentralized finance (DeFi) and its strict compliance requirements may disproportionately benefit larger firms while limiting smaller actors that are essential for innovation.

All in all, cryptocurrency regulation remains a relatively recent and rapidly evolving field, with its full effects, particularly in the United States, still opaque. While the volatility and risks associated with crypto-assets justify the need for regulation to ensure financial stability and legal consistency, it seems as though policymakers should also make sure that innovation is not discouraged and consumer risks are minimized.

Image Source: Brittanica