Crypto Regulation in the United States: A Primer

A Multi-Agency Landscape

Unlike the European Union, which enacted MiCA as a single unified framework, the United States applies existing financial services law to digital assets through a collection of federal agencies that sometimes overlap and sometimes conflict. Understanding which agency claims authority over what type of asset is the starting point for any assessment of US crypto regulation.

The Securities and Exchange Commission (SEC) regulates securities, and its primary contention — advanced aggressively under Chair Gary Gensler from 2021 to early 2025 — is that most crypto tokens are securities under the Howey test, a 1946 Supreme Court standard that defines a security as an investment of money in a common enterprise with an expectation of profit from the efforts of others. The SEC brought enforcement actions against dozens of exchanges, token issuers, and intermediaries on this basis, arguing that they were operating unregistered securities exchanges or selling unregistered securities.

The Commodity Futures Trading Commission (CFTC) regulates commodities and commodity derivatives. The CFTC has consistently maintained that bitcoin and ether are commodities rather than securities, which places spot trading in those assets largely outside its jurisdiction under current law — the CFTC’s authority is primarily over derivatives. The agency has nevertheless brought enforcement actions against crypto derivatives exchanges and has pushed for expanded spot market authority.

The Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), applies anti-money-laundering and sanctions obligations to crypto businesses classified as money services businesses. The Internal Revenue Service treats cryptocurrency as property for tax purposes, meaning gains and losses on every transaction are in principle taxable events.

State-level regulation adds a further layer. New York’s BitLicense, introduced in 2015, was the first formal state licensing regime for crypto businesses and remains one of the most demanding. Other states have taken varying approaches, ranging from licensing requirements to more permissive frameworks explicitly designed to attract crypto companies.

The Securities Question and Its Consequences

The SEC’s broad assertion of jurisdiction over crypto tokens as securities has been the most consequential regulatory controversy in the US market over the past several years. The practical consequence of being classified as a security is significant: the issuer must either register the offering with the SEC — a costly and lengthy process — or rely on an exemption. Secondary trading in the token can only occur on registered securities exchanges. Most crypto exchanges are not registered as securities exchanges.

Courts have issued mixed signals. A 2023 ruling in SEC v. Ripple Labs found that XRP was not a security when sold on secondary markets to retail investors, even though it was a security when sold directly to institutional investors in private placements — a distinction that pleased neither side and left considerable uncertainty. Several other enforcement actions produced different outcomes on specific facts.

The composition of the SEC changed after the 2024 US presidential election, and the agency under new leadership took a noticeably different posture in early 2025, withdrawing or settling several pending enforcement actions and signalling a greater openness to engagement with the industry on how existing frameworks might apply. Whether this represents a durable shift in regulatory philosophy or a temporary accommodation depends in part on Congressional action.

Congressional Efforts and the Path to Clarity

Multiple legislative proposals aimed at creating a coherent federal framework for digital assets have been introduced in Congress since 2021. The most significant include the Financial Innovation and Technology for the 21st Century Act (FIT21) and various stablecoin-specific bills. FIT21 passed the House of Representatives in May 2024 with bipartisan support but did not advance in the Senate before the end of that Congress.

Stablecoin legislation has attracted particular bipartisan interest because the category is easier to define and the policy questions are narrower than for the broader crypto market. Multiple bills have proposed requiring stablecoin issuers to hold high-quality liquid assets, submit to federal or state licensing, and publish regular reserve disclosures. As of mid-2025, comprehensive stablecoin legislation remained under active negotiation.

The absence of Congressional action has forced market participants to operate in a framework defined largely by enforcement outcomes and agency guidance rather than statute. This creates legal uncertainty that affects decisions about where to locate operations, which products to offer, and which users to serve.

What Institutional Participants Watch Closely

Several developments have particular significance for institutional participants in the US market. Banking regulators — the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve — have issued guidance on whether banks may hold crypto assets, provide custody services, or issue stablecoin tokens, and that guidance has evolved over time.

The approval of spot bitcoin exchange-traded funds by the SEC in January 2024 was a landmark event that opened a regulated, familiar investment wrapper to investors who had previously been unable or unwilling to hold crypto assets directly. The subsequent approval of spot ether ETFs extended the same access to the second-largest crypto asset by market capitalisation.

Tax reporting requirements for brokers — provisions included in the 2021 Infrastructure Investment and Jobs Act — have been the subject of extended regulatory definition processes, with the IRS issuing proposed rules that generated significant industry comment. The scope of who qualifies as a broker for crypto tax reporting purposes has direct implications for the operational costs of exchanges, custodians, and decentralised protocols.