2025 Crypto Regulatory Apocalypse

By Tristero Research, Compiled by Saoirse and Foresight News. In 2025, US cryptocurrency policy reached a significant turning point. For years, the industry had been mired in a state of "regulation through enforcement"—litigation replacing clear rules, applying outdated precedents to emerging technologies, and causing market volatility driven by headlines. Compliance became a guessing game, and talent flowed to Europe and Asia, where the rules were at least clearly defined and on paper. This year, that dynamic finally shifted. In January, SAB 121, which had previously hindered banks from conducting cryptocurrency custody services, was repealed. In June, the US Congress passed the GENIUS Act, the first federally recognized stablecoin, pegging it to the value of the US dollar. On September 2nd, the US SEC and the Commodity Futures Trading Commission (CFTC) ended a years-long deadlock and issued a joint statement inviting institutions such as Nasdaq and the Chicago Mercantile Exchange (CME) to list Bitcoin and Ethereum spot products under the same standards as stocks and futures. Now, there is finally a narrow but real path for launching cryptocurrency projects, conducting bank custody services, and attracting institutional investment—no longer having to worry about sudden rule changes in court. The signal is clear: the United States wants to integrate cryptocurrencies into its financial system and intends to set global standards for how that system operates. The Enforcement and Regulation Era (2021–January 2025) For much of the past decade, the US cryptocurrency industry has been shrouded in legal uncertainty. During Gary Gensler's tenure as SEC Chairman, regulators relied on a 79-year-old precedent, the "Howey Test," to define the entire industry. This 1946 Supreme Court ruling ruled that if the buyer of a Florida citrus grove expects to profit from the labor of others, then the sale of the grove constitutes an "investment contract." This logic, seemingly sound in the mid-20th century, has been forcibly applied to tokens, blockchains, and decentralized networks. The SEC has determined that any token purchased with the expectation that its developers will increase its value is a security. By this standard, virtually any asset in the cryptocurrency space could be classified as a security. Critics point out that this is not "regulation" at all, but a political and legal strategy intended to control the industry without providing a compliance path. The end result was years of court battles rather than a clear regulatory framework. Ripple Case: One Token, Two Legal Identities In December 2020, the SEC filed a lawsuit against Ripple Labs, accusing it of raising $1.3 billion through an unregistered XRP token securities offering. After years of litigation, Judge Analisa Torres issued a partial ruling in July 2023: XRP was not a security when sold to the public on an exchange (because retail buyers did not rely on Ripple's operations for returns); however, when sold directly to institutions, XRP was deemed a security because the contract and marketing tied the token's value to Ripple's efforts. This ruling set a peculiar precedent: the same asset could have both "security" and "non-security" status in different scenarios. Exchanges and issuers were completely confused, unsure of which actions would trigger SEC prosecution. The Coinbase Case: Approved First, Sued Later The SEC's lawsuit against Coinbase highlights regulatory inconsistencies. In 2021, Coinbase went public with an SEC-approved S-1 registration statement. Two years later, in June 2023, the SEC sued Coinbase, accusing it of operating as an unregistered exchange, broker, and clearing house. Coinbase immediately countered, pointing out that the SEC had reviewed and approved its disclosures during its IPO. It even raised an "equitable estoppel" defense, arguing that the government's silence during its IPO amounted to "implied approval" and that suing afterward constituted "active misconduct." While this legal argument is extremely difficult, it accurately reflects the industry's frustration: no matter how much cooperation with regulators is achieved, the rules are always changed after the fact, as if the industry is designed to lose. The market isn't waiting for the final verdict. Academic event studies show that when the SEC designates an asset as a security, its price plummets: by 5.2% within three days and over 17% within a month. Traders call this phenomenon the "SEC effect"—sell-offs driven not by asset fundamentals but by news related to regulatory enforcement. Talent and capital are flowing to Europe (such as the EU's Markets in Crypto-Assets Directive, MiCA) and Asia (such as Singapore's licensing regime) because these regions' rules at least clarify what's allowed. Meanwhile, the SEC in Washington continues to expand its enforcement staff: during Gensler's tenure, each cryptocurrency case had an average of 8.3 lawyers, far exceeding the 5.9 under his predecessor, Jay Clayton, demonstrating the intensity of litigation-driven regulation. In early 2025, this strategy finally came to an end. The new administration dropped pending lawsuits against Coinbase and other companies, marking the end of the "era of regulatory oversight." While it left a legacy of uncertainty, stagnant innovation, and capital outflow, it also paved the way for a major shift in regulatory direction: regulators would no longer fight the industry in court but instead work to build a systemic framework.

Spring Agenda 2025: Building a New Regulatory Framework

In 2025, U.S. cryptocurrency regulation underwent a radical shift. The White House transformed its campaign promise of "becoming the global capital of cryptocurrency" into policy, demanding that regulators stop viewing cryptocurrency as a "problem to be punished" and instead view it as an "industry to be regulated." The working group set a clear goal: to use existing regulatory authority to clarify rules, attract talent, and ensure the United States' central position in blockchain innovation.

The SEC and CFTC responded with a "dual-track approach"—Project Crypto and Crypto Sprint—which together constituted the first attempt to establish a long-term regulatory framework for digital assets. The biggest shift occurred at the level of regulatory philosophy. In his landmark speech, SEC Chairman Paul Atkins declared: "Most crypto assets are not securities." This statement completely overturned the previous assumption—regulators no longer assumed that almost all tokens met the definition of securities under the "Howey Test," but instead adopted a more nuanced classification approach. The "Crypto Initiative" was subsequently launched to modernize securities laws through rulemaking and guidance, creating room for the development of assets that were difficult to classify into 20th-century classification systems. Safe Harbor: Unfettering Innovation For years, new network projects have been caught in a dilemma—any token distribution could be considered a "security offering." The new agenda introduces "exemptions" and "safe harbor rules," allowing projects to commence operations under regulatory oversight and fulfill information disclosure obligations, and gradually achieve "full decentralization." This system recognizes the "evolving nature" of crypto projects: tokens do not need to be permanently considered securities. Spot Access: Opening the Door to the Mainstream Market On September 2, 2025, the SEC and CFTC issued a joint statement that shook the market, clarifying that current laws do not prohibit national exchanges such as Nasdaq, the New York Stock Exchange (NYSE), and the Chicago Mercantile Exchange (CME) from listing Bitcoin and Ethereum spot products.

Guarded by regulatory safeguards such as "monitoring, secure custody, and transparent transaction reporting," digital assets were officially allowed to enter the same trading venues as traditional securities and commodities for the first time.

Unlocking Custody: A Key Step for Institutional Entry

For a long time, SAB 121, a rule requiring banks to treat client cryptocurrencies as "own liabilities," and its extremely high capital consumption made it a "poison pill clause." One of the first measures of the new regulatory system was the repeal of SAB 121. Subsequently, directives were issued to adjust custody rules, allowing banks and custodians to safely hold digital assets. This change opens the door for traditional financial institutions, finally meeting asset allocators' demand for "institutional-grade secure custody." The Rise of "Super Apps": An Integrated Service Framework Atkins also pushed his team to design a framework for "integrated intermediaries," with the vision of a single licensed entity capable of providing trading, lending, pledging, and custody services for both securities and non-securities. American companies no longer need to contend with the current fragmented landscape of overlapping licenses. Instead, they can offer integrated digital financial services on a single platform, emulating the popular Asian model. A Coherent Strategy: Bringing Crypto to Wall Street's Orbit Taken together, these initiatives represent a coordinated effort to integrate cryptocurrency into the U.S. financial system. While the previous era of law enforcement saw talent and trillions of dollars in market capitalization flow overseas, the new agenda combines nationalistic narratives of "American leadership" and a "golden age of cryptocurrency" with mechanisms that favor large, regulated institutions. Permitting spot exchange-traded products (ETPs), bank custody, and licensed super-apps all point in the same direction: bringing cryptocurrency into the orbit of Wall Street. While this strategy promises stability and investor protection, it also narrows the diversity of the industry ecosystem. For most, the future of cryptocurrency in the United States will rely on familiar financial institutions rather than peer-to-peer protocols. While the concept of decentralization hasn't died, it has been pushed to the brink of rapid integration into the traditional financial system. The New World Order: A Global Benchmark for Cryptocurrency Regulation The US regulatory shift is not an isolated event. Globally, other power centers are competing to shape cryptocurrency rules according to their own logic. Three core models have emerged: the European "rulebook model," the US and UK "integrated model," and the Asian "sandbox model." Europe: The Rulebook Model The EU's Markets in Crypto-Assets Act (MiCA) will officially come into effect at the end of 2024, providing unified regulatory framework for its 27 member states. This framework strictly categorizes tokens (asset-referenced, e-money, etc.) and establishes a "single license" system—once approved, businesses can operate across the EU. While MiCA provides legal certainty, it lacks flexibility and currently excludes NFTs and DeFi from its regulatory scope. The UK has expanded the scope of the Financial Services and Markets Act (FSMA) to include cryptocurrencies within the existing financial system, even defining custody and staking as "regulated services." This "beyond MiCA" approach is both detailed and comprehensive, requiring all overseas institutions that engage with UK retail clients to comply with UK rules.

Asia: Sandbox Hub

When the United States was mired in litigation, Singapore and Hong Kong chose a pragmatic path:

• Singapore established a tiered licensing system based on the Payment Services Act, formulated strict anti-money laundering/counter-terrorist financing (AML/CFT) rules, and set detailed standards for stablecoins;

• Hong Kong, China, has reopened its cryptocurrency market through an exchange licensing system, recently further expanding retail investors' trading rights for mainstream tokens.

Both places have clear goals: to rapidly attract business, gradually update regulations, and build a global cryptocurrency hub.

China: Special Exception

China still prohibits all private cryptocurrency trading, mining, and exchange activities, focusing its efforts on the development of the digital yuan. However, US initiatives in the stablecoin sector (particularly the GENIUS Act) are forcing China to reassess its policies. USDT has been widely used in China to circumvent regulations, and policymakers are currently considering whether to allow the issuance of RMB-backed stablecoins, with Hong Kong likely serving as a pilot platform. These models together outline a fragmented global crypto landscape: Europe seeks control through a single regulation, Asia pursues flexibility and competitiveness, and the US integrates cryptocurrencies into the orbit of Wall Street, betting that the depth of its capital markets will make its model the global default. Market Reaction: The market is forward-looking. Even before the SEC and CFTC issued their joint statement, investor behavior indicated anticipation of a policy shift: Every regulatory signal in 2025—the repeal of SAB 121 in January, the dismissal of the Coinbase lawsuit in March, and the Senate's passage of the GENIUS Act in June—has fueled market momentum. When Chairman Atkins delivered his "Crypto Plan" speech in September, the capital market had already made it clear that the "era of law enforcement and regulation" had officially ended. The most direct evidence comes from exchange-traded products (ETPs): Since the beginning of 2025, US cryptocurrency ETPs have seen net inflows exceeding $35 billion, with Ethereum funds accounting for the largest share. In August alone, inflows reached $4.9 billion, with nearly $4 billion going to Ethereum-related products. The shift of funds from Bitcoin to Ethereum is a typical signal of growing institutional confidence—once institutions trust the regulatory framework, they will allocate assets further out along the risk curve. Venture Capital Rebounds: From "Speculation" to "Compliance" In the second quarter of 2025, cryptocurrency startups raised over $10 billion, double the amount raised in the same period the previous year and the strongest quarter since the 2021 bull market. Unlike previous "diversified bets on popular concepts," current capital investment is more disciplined: nearly half of the funds flow into trading venues and compliance infrastructure, indicating that venture capital is "following regulatory clarity" rather than chasing hype. Retail investor sentiment: Optimism returns to 2021 levels. An early summer survey showed that US investors' optimism about cryptocurrencies has reached a peak since 2021: over 60% of Americans who are familiar with cryptocurrencies expect cryptocurrencies to appreciate during the new president's term; two-thirds of existing holders plan to increase their holdings. Simply put, the market had already "read the signals" and wasn't waiting for a final announcement in September. Each policy move—the repeal of stringent accounting rules, the dismissal of lawsuits, the passage of stablecoin legislation—pushed more capital from the sidelines to the market. The joint statement from the SEC and CFTC now formalizes expectations that investors had already priced in: the US is back in the cryptocurrency game, and capital is flowing back with it. Winners, Losers, and New Vulnerabilities Every major rule change creates winners, losers, and hidden risks. The regulatory shift in the United States is no exception—it not only opens the door to innovation but also reshapes the competitive landscape by favoring some players and excluding others. Winners: Compliant players and traditional financial giants. Compliant exchanges: Platforms like Coinbase and Kraken, which have spent years building compliance systems, have become a natural gateway for US capital. After the SEC dropped its lawsuit against Coinbase in early 2025, it has practically become the default exchange in the US market. Wall Street institutions: The repeal of SAB 121 and the approval of spot trading products have opened the floodgates for banks and asset management companies. Core traditional financial services like custody, ETFs, and physical subscriptions have officially entered the market, allowing giants like BlackRock and Fidelity to easily integrate cryptocurrencies into their existing distribution systems and quickly capture market share. Compliant Stablecoin Issuers: Stablecoins that meet the stringent requirements of the GENIUS Act (such as Circle's USDC) leverage federal oversight to transform regulatory liabilities into competitive advantages. The market reaction was immediate: Coinbase's stock price rose on expectations of USDC's growth, while Visa and Mastercard's stock prices fell due to the potential impact of stablecoins on the credit card settlement system. Tokenized RWA Platforms: Clear securities definition standards and a safe harbor for compliant issuance provide a clear path for bringing assets like real estate, private equity, and bonds onto the blockchain, accelerating the development of the RWA sector. Losers: Arbitrageurs and Non-Mainstream Assets. Offshore Exchanges: Offshore platforms relying on regulatory arbitrage have seen their survival shrink dramatically. OKX's guilty plea and fine in February 2025 highlight the risks of serving US users—for these platforms, the US market has become "risk-outweighing reward."

Algorithmic Stablecoins: The vision of "uncollateralized currency" has been completely dashed. Due to their inability to meet the "1:1 liquidity reserve backing" requirement, algorithmic stablecoins are effectively banned in the US market.

Privacy Coins: Anonymous assets like Monero and Zcash directly conflict with AML/KYC regulations and are being gradually delisted from regulated platforms, becoming the "junk bonds of crypto"—traded only on the fringes of the market and carrying extremely high risks. DeFi at a Crossroads DeFi faces two paths: RegDeFi (Regulated DeFi): integrating KYC/AML functionality into smart contracts or front-ends to meet institutional participation needs; and the "Wild West" approach: maintaining a "permissionless" nature while remaining isolated from mainstream liquidity. Regulators do not agree with the notion that "complete decentralization is unregulatable." As the Bank for International Settlements (BIS) points out in its "decentralization illusion," nearly all DeFi projects have "pressure points" (such as governance token holders, core developers, and web interfaces) that can be targeted for regulation. This regulatory pressure also creates room for regulatory capture: deep-pocketed giants like Coinbase, Wall Street banks, and asset management firms are in the best position to influence rulemaking. The risk is that regulation could become a barrier to entry, excluding smaller innovators. For example, Coinbase's lobbying for stablecoin legislation (which could be detrimental to Tether) demonstrates this trend of giants dictating the rules. A deeper risk lies in "systemic interconnectedness." While the old regulatory system was chaotic, it maintained a firewall: when FTX collapsed, the risk spread was largely confined to the cryptocurrency sector. The new framework has dismantled this barrier—banks are involved in custody, stablecoins are integrated into payment channels, and ETFs directly link cryptocurrencies to retirement portfolios. This means that risks in the cryptocurrency sector are no longer isolated: failures in the custody departments of large banks, systemic ETF failures, or the sudden collapse of regulated stablecoins could all trigger chain reactions in traditional markets. Ironically, the very rules intended to make cryptocurrency safer have actually tied it even more tightly to the traditional financial system—the house may have been rebuilt, but the foundation is now interconnected with traditional finance; a single tremor can be felt throughout. Looking Ahead: Three Possible Paths for 2026 and Beyond The stage has been set for the regulatory shift in 2025, but the drama is still unfolding. As the dust settles, three paths are most likely: Major Integration (Most Likely) The United States successfully integrates cryptocurrency into its financial system. By 2026, a safe harbor system for token issuance will be implemented, and the SEC and CFTC will finalize registration rules for digital asset intermediaries. Compliant US dollar stablecoins under the GENIUS Act will become mainstream payment channels, integrated into fintech applications and traditional banking operations. Bitcoin and Ethereum spot ETPs will become standard investment portfolios, with banks and asset managers offering custody and investment products on a large scale. The market will concentrate on a small number of large, compliant exchanges, and DeFi will develop an "institutional-grade RegDeFi" sector by embedding KYC/AML procedures. Leveraging the depth of the US capital market, this framework will become the global default standard, with other jurisdictions gradually aligning with it to maintain market access. A Fragmented World (Medium Likelihood) The US may stagnate due to internal obstacles: political deadlock, legal proceedings, and power struggles between the SEC and CFTC could lead to a fragmented and difficult-to-enforce regulatory framework. By then, the EU, with its unified MiCA rules, could become a core hub for "large-scale, compliant crypto businesses," while Singapore and Hong Kong will continue to attract high-growth projects with flexible sandbox mechanisms. Ultimately, this will result in three independent regulatory tracks globally, fragmented markets with minimal interoperability. Companies will need to separate their operations by region and adapt to different rules. Decentralized Renaissance (Low Probability) Excessive centralization can backfire: if regulation heavily favors traditional financial giants, recreating the inefficiencies of Wall Street's "high fees, low selection" model, developers and users may exit the mainstream system en masse. Breakthroughs in zero-knowledge proofs, decentralized identity, and cross-chain technologies could give rise to a "censorship-resistant parallel economy"—one that doesn't replace the regulatory system but rather runs alongside it, providing users with the "sovereignty and resilience" of a single country, becoming a new vehicle for the decentralized ideals of cryptocurrency.

Conclusion: The Era of Grand Integration Has Officially Begun

The significance of this regulatory shift varies greatly depending on one's perspective: for the public, it concerns security and stability; for investors, it signifies legitimacy and market access; for industry developers, it provides a long-awaited clear roadmap; and for policymakers, it represents a geostrategic move to reshape America's global dominance in fintech.

These perspectives converge on one core point: the "grand integration" of cryptocurrency with the core of the US financial system has officially begun. The risks (such as systemic interconnectedness), contradictions (the clash between decentralized ideals and traditional financial rules), and countercurrents (the potential for a decentralized revival) inherent in this integration will collectively shape the next phase of the cryptocurrency industry's development.