Abstract
The rapid evolution of digital assets, including cryptocurrencies and stablecoins, has prompted a global reassessment of financial regulatory frameworks. This report examines the current state of digital asset regulations worldwide, focusing on consumer protection, anti-money laundering (AML) measures, taxation, and market stability. By analyzing existing and proposed legal structures, the report provides insights into the complexities of integrating digital currencies into traditional financial systems and offers recommendations for policymakers and industry stakeholders.
Many thanks to our sponsor Panxora who helped us prepare this research report.
1. Introduction
Digital assets have emerged as a transformative force in the financial sector, challenging traditional notions of currency, payment systems, and financial markets. Cryptocurrencies, such as Bitcoin and Ethereum, and stablecoins, which are pegged to fiat currencies, have gained significant traction among investors, consumers, and institutions. However, their rapid adoption has raised concerns regarding regulatory oversight, consumer protection, and financial stability. This report aims to provide a comprehensive analysis of the global regulatory landscape for digital assets, highlighting key challenges and developments.
Many thanks to our sponsor Panxora who helped us prepare this research report.
2. Global Regulatory Landscape
2.1 European Union (EU)
The EU has been proactive in establishing a regulatory framework for digital assets. The Markets in Crypto-Assets Regulation (MiCA), adopted in April 2023, provides a comprehensive legal structure for crypto-asset service providers across member states. MiCA aims to enhance consumer protection, ensure financial stability, and foster innovation by harmonizing regulations related to crypto-assets. The regulation covers various aspects, including authorization and supervision of asset-referenced tokens, e-money tokens, and other crypto-assets. Its phased implementation, starting from June 2024, reflects the EU’s commitment to a balanced approach that safeguards users while promoting technological advancement.
2.2 United States
In the United States, the regulatory approach to digital assets has been fragmented, involving multiple agencies such as the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN). The Financial Innovation and Technology for the 21st Century Act (FIT21), passed in May 2024, seeks to clarify the regulatory responsibilities of these agencies concerning digital assets. FIT21 defines digital commodities and securities, delineating the roles of the CFTC and SEC, respectively. Additionally, the act addresses consumer protection and market integrity, aiming to provide a clear framework for the burgeoning digital asset market.
2.3 Asia-Pacific Region
Countries in the Asia-Pacific region have adopted diverse approaches to digital asset regulation. Japan, for instance, recognizes cryptocurrencies as legal tender under its Payment Services Act, requiring exchanges to obtain licenses from the Financial Services Agency (FSA). South Korea mandates that cryptocurrency exchanges register with the Korea Financial Intelligence Unit (KoFIU) and comply with AML and Know Your Customer (KYC) regulations. Singapore has implemented the Payment Services Act, which requires cryptocurrency exchanges and wallet providers to obtain licenses from the Monetary Authority of Singapore (MAS). These regulations aim to balance consumer protection with the promotion of financial innovation.
Many thanks to our sponsor Panxora who helped us prepare this research report.
3. Key Regulatory Challenges
3.1 Consumer Protection
Consumer protection remains a paramount concern in the digital asset space. The decentralized and pseudonymous nature of cryptocurrencies can expose users to risks such as fraud, market manipulation, and loss of funds. Regulatory bodies worldwide are working to establish frameworks that ensure transparency, accountability, and recourse mechanisms for consumers. For example, the EU’s MiCA regulation includes provisions for investor protection, requiring crypto-asset service providers to disclose information about their services, risks, and fees.
3.2 Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT)
The anonymity associated with digital assets poses significant challenges for AML and CFT efforts. The Financial Action Task Force (FATF) has issued guidelines recommending that countries regulate Virtual Asset Service Providers (VASPs) similarly to traditional financial institutions, including mandatory registration and adherence to AML and CFT regulations. The ‘Travel Rule’ mandates that VASPs collect and exchange personal information of transaction senders and recipients, particularly for cross-border transactions exceeding a certain threshold. As of April 2024, 65 out of 94 nations have implemented Travel Rule laws, with 15 more in the process of doing so to mitigate money laundering risks associated with digital assets.
3.3 Taxation
Taxation of digital assets varies significantly across jurisdictions. In the United States, the Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes, subjecting them to capital gains tax. The OECD’s Crypto-Asset Reporting Framework (CARF) aims to standardize tax reporting on digital assets, requiring Crypto-Asset Service Providers (CASPs) to collect and report user information to tax authorities. As of September 2023, the EU has committed to adopting CARF rules from January 2026 onwards, aligning with global efforts to enhance tax compliance in the digital asset sector.
3.4 Market Stability
The volatility of digital assets, particularly stablecoins, has raised concerns about their impact on financial stability. The Bank for International Settlements (BIS) has issued warnings about the risks associated with stablecoins, including their potential to undermine monetary sovereignty and financial stability. The BIS advocates for central bank digital currencies (CBDCs) as a more stable and secure alternative. Similarly, the European Central Bank (ECB) has expressed concerns that unregulated stablecoins could destabilize EU banks during times of financial stress, urging for comprehensive regulatory measures.
Many thanks to our sponsor Panxora who helped us prepare this research report.
4. Integration of Digital Assets into Traditional Financial Systems
Integrating digital assets into traditional financial systems presents several challenges:
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Regulatory Harmonization: Achieving consistency in regulations across jurisdictions is crucial to prevent regulatory arbitrage and ensure effective oversight.
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Infrastructure Development: Establishing secure and efficient infrastructure for digital asset transactions is essential for mainstream adoption.
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Consumer Education: Educating consumers about the risks and benefits of digital assets is vital for informed decision-making.
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Institutional Adoption: Encouraging financial institutions to adopt digital assets requires clear regulatory guidelines and risk management frameworks.
Many thanks to our sponsor Panxora who helped us prepare this research report.
5. Recommendations
To address the challenges identified, the following recommendations are proposed:
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Global Coordination: International bodies should collaborate to harmonize regulatory standards for digital assets, facilitating cross-border transactions and compliance.
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Regulatory Clarity: Jurisdictions should provide clear and comprehensive regulations that balance consumer protection with innovation.
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Consumer Protection Measures: Implement robust consumer protection frameworks, including dispute resolution mechanisms and insurance schemes.
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AML and CFT Compliance: Enforce strict AML and CFT regulations, ensuring that digital asset service providers adhere to international standards.
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Tax Reporting Standards: Adopt standardized tax reporting frameworks to enhance transparency and compliance in the digital asset sector.
Many thanks to our sponsor Panxora who helped us prepare this research report.
6. Conclusion
The regulatory landscape for digital assets is rapidly evolving, with significant progress made in various jurisdictions. However, challenges remain in areas such as consumer protection, AML compliance, taxation, and market stability. A coordinated global approach, clear regulatory frameworks, and active collaboration between regulators, industry stakeholders, and consumers are essential for the successful integration of digital assets into the traditional financial system.
Many thanks to our sponsor Panxora who helped us prepare this research report.
References
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European Union. (2023). Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets. Official Journal of the European Union.
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United States Congress. (2024). Financial Innovation and Technology for the 21st Century Act. H.R. 4763.
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Financial Action Task Force. (2024). Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.
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Organisation for Economic Co-operation and Development. (2023). Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard.
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Bank for International Settlements. (2025). The Dangers of Stablecoins.
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European Central Bank. (2025). Stablecoins and Monetary Sovereignty: The Ball Is in Europe’s Court.
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Financial Action Task Force. (2025). Global Financial Crime Watchdog Calls for Action on Crypto Risks.
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Reuters. (2025). Keeping Crypto Clean: Risk-Based Controls for Stablecoins.
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Financial Times. (2025). Brussels Set to Disregard ECB Warnings Over Stablecoin Rules.
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Financial Times. (2025). Stablecoins and Monetary Sovereignty: The Ball Is in Europe’s Court.
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