The New Order of Crypto Regulation: Who Controls the Future, and Who Gets Left Out?
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The New Order of Crypto Regulation: Who Controls the Future, and Who Gets Left Out?
Cryptocurrency is transforming from a rebellious technology into a highly regulated asset, reshaping financial markets in the process.
Navigating Web3 tides with focused insightsAuthor: Vahan P. Roth
Translated and compiled by: BitpushNews
Summary:
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Governments worldwide are shifting from suppressing cryptocurrencies to embracing regulation
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New regulations increase control but threaten privacy and decentralization
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Compliant assets and "blacklisted" tokens may diverge significantly
Over the past decade, the cryptocurrency industry has undergone dramatic transformation. What began as a niche endeavor pursued by programmers and skeptics of governments and fiat currencies has evolved into an asset class on the verge of mainstream adoption. Bitcoin, once lurking at the fringes of the financial system, is now steadily moving toward center stage.
Bitcoin ETFs are now traded globally, pension fund managers are beginning to consider allocating to digital assets, and sovereign wealth funds are testing the waters. This year, even the U.S. federal government established a strategic Bitcoin reserve under President Trump’s administration.
This leap from the periphery to the mainstream has been enabled by shifts in regulatory approaches around the world.
The Rise of Crypto Regulation
Not long ago, government attitudes toward cryptocurrency were largely hostile or dismissive. As often happens, officials and regulators instinctively chose to “ban” what they did not understand. But once they realized that decentralized networks like Bitcoin could not be shut down without shutting down the entire internet, their approach shifted toward taxation and regulation.
While these measures run counter to the crypto ethos of “decentralization and freedom,” in practice they have actually accelerated industry growth. For many businesses and investors, regulation brings legal certainty and predictability. Before this, nearly every business decision carried legal risk, making it difficult for projects to operate.
Switzerland was one of the first countries to establish clear regulations, attracting numerous crypto entrepreneurs and creating the so-called “Crypto Valley” in Zug. There, founders no longer had to worry about whether their companies were legal or fear sudden office raids and frozen bank accounts. As more nations followed suit, crypto firms gained confidence in operating globally.
The Limits of Regulation
Of course, this wave of global regulation is far from uniform. Some countries have taken a more moderate stance, while others have been extremely strict. In 2021, China banned all cryptocurrency trading and related activities (though personal ownership remains legal), whereas the United States took the opposite path—establishing a national strategic Bitcoin reserve and digital asset repository.
Despite differing approaches, the trend is clear: regulations are tightening globally, directly challenging crypto’s core advantages—privacy, censorship resistance, monetary stability, and decentralization.
Take the European Union’s Markets in Crypto-Assets (MiCA) regulation, which aims to bring order to markets and protect consumers but imposes significant compliance burdens, especially on small, innovative startups. MiCA requires reporting of any transaction exceeding 1,000 euros—compared to the U.S. banking threshold of $10,000. Stablecoin issuers must also hold at least 30% of customer funds in banks, increasing costs and reintroducing traditional intermediaries, thereby adding new risks.
Modern anti-money laundering (AML) rules are increasingly rigid in practice. For example, if an asset was involved in a transaction linked to hackers several steps back, it may still be flagged, frozen, or even confiscated—even if the current holder acquired it legally.
This approach disregards an old legal principle. In the 1758 British case *Miller v. Race*, the court ruled that someone who unknowingly receives stolen banknotes in exchange for goods retains rightful ownership. Today’s crypto regulations often ignore such reasoning.
Two Possible Futures for Crypto Markets
Most likely: Continued regulation erodes crypto’s decentralized values
If current trends continue, the original ideals of cryptocurrency—privacy and decentralization—will be largely lost. Cryptocurrencies will offer little advantage over traditional securities, user accounts could be arbitrarily frozen, and assets seized by governments. The benefits of decentralization will diminish, increasing systemic risk.
This would split the market: on one side, “white-listed assets” that are highly compliant and tradable through banks and brokers; on the other, “blacklisted assets” developed by anonymous teams, prioritizing privacy and decentralization but incompatible with mainstream finance, limited to peer-to-peer or niche platforms.
Less likely: Blacklisted assets gain appeal
In some scenarios, blacklisted assets might attract investors due to their privacy features and sovereignty, commanding a premium. Technically skilled, privacy-conscious younger investors might prefer the hassle of self-custody for full control over their assets. However, realistically, this outcome remains unlikely.
More probable: Compliant assets gain value
Historical precedent suggests large-scale capital flows favor compliant assets. Just as standardized London gold bars command stable prices while unmarked gold trades at a discount, compliant crypto assets will likely become more desirable—and more valuable—in the future.
This will trigger a revaluation across the entire crypto asset class. Tokens emphasizing privacy and security may be deemed “junk bonds” due to non-compliance, while highly centralized tokens resembling central bank digital currencies (CBDCs) could be seen as AAA-rated “safe” assets, becoming the new favorites.
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