Cryptocurrency Regulation: From Vague to Action

Author: CryptoCompound, Translator: Shaw, Jinse Finance

Every cryptocurrency bull market has a theme. The theme for 2017 was speculation, for 2021 it was innovation, and for 2025 it might be regulation.

After a decade of blurred lines and confusing signals, global regulators are finally beginning to move from ambiguity to clear architecture. The discussion that once revolved around "Will they ban it?" is shifting to "How to scale safely?"

This shift from uncertainty to clear architecture lays a solid foundation for the next wave of multi-trillion-dollar institutional adoption.

Regulatory clarity won't kill the market. It will legitimize it.

Regulatory clarity won't kill the market. It will legitimize it.

Regulatory clarity won't kill the market. It will legitimize it.

Why Clear Regulation is the Real Catalyst: The rise and fall of the cryptocurrency market hinges on access to capital—and much of that capital remains constrained by regulatory barriers. Pension funds, insurance companies, and sovereign wealth funds cannot easily "follow the crowd." Their operations must adhere to established frameworks: which assets qualify as securities, who can hold assets in custody, how disclosures should be made, and which exchanges meet compliance standards. When regulations change, eligibility criteria change. When eligibility criteria change, capital flows. Therefore, the biggest driver of long-term cryptocurrency value growth is not simply another halving cycle or a new Layer-2 protocol, but rather the maturity of regulation—the process of integrating cryptocurrencies into the formal financial system without sacrificing their core innovation.

United States: From Enforcement to Infrastructure

For years, the United States has been the most influential and frustrating jurisdiction in the cryptocurrency space. But that is beginning to change.

1. Coordination between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
   After a decade-long jurisdictional battle, the two agencies have launched a coordinated effort to clarify how spot cryptocurrency products are traded. This is a real first step toward harmonization—something that was once politically unthinkable.

2. Exchange-Traded Fund (ETF) Effect.

   The approval of a spot Ethereum ETF in 2024 broke down the psychological barriers that Bitcoin had previously held. A few months later, the Solana ETF was launched, backed by real trading volume, custody infrastructure, and a history of derivatives trading.

   1. Coordination between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

      
      After a decade-long jurisdictional battle, the two agencies have launched a coordinated effort to clarify how spot cryptocurrency products are traded. This is a real first step toward harmonization—something that was once politically unthinkable.

   2. Exchange-Traded Fund (ETF) Effect.

      The approval of a spot Ethereum ETF in 2024 broke down the psychological barriers that Bitcoin had previously held. A few months later, the Solana ETF was launched, backed by real trading volume, custody infrastructure, and a history of derivatives trading.

      The 2024 approval of a spot Ethereum ETF broke down the psychological barriers that Bitcoin had previously held.

      The launch of the Solana ETF a few months Once crypto assets are included in ETFs, they become a legitimate asset class overnight. Pension fund managers can buy them, financial advisors can allocate them, and broker-dealers can recommend them. This packaging format permanently changes the buyer base. Stablecoin legislation is underway. The Payments Stablecoin Act and its 2025 follow-up draft are laying the foundation for a standardized framework regarding reserves, custody, and transparency. Stablecoins are the link between cryptocurrencies and the traditional economy—once regulated, they will become bridges rather than threats. Lessons from the US: If Bitcoin ETFs are proof of concept, then Ethereum and Solana ETFs are templates. In the coming year, we need to focus on which assets can develop the necessary infrastructure, monitoring sharing mechanisms, and custody capabilities to qualify for ETF packaging. These are the tokens that can attract institutional funds—not fleeting "meme coins," but regulated underlying assets. The European Union: MiCA Translates Theory into Law. The European Crypto-Asset Markets Act (MiCA) framework is now in effect and will be fully implemented by 2025. This is the first comprehensive, cross-regional regulatory framework for digital assets, redefining the meaning of "compliance." MiCA requires all Crypto Service Providers (CASPs) to meet stringent standards, including capital adequacy, risk management, governance, disclosure, and custody agreements. It's equivalent to a banking license in the cryptocurrency space—once granted, they can operate throughout the EU. For institutions, this is undoubtedly a major victory. It means they can participate in digital asset business within a predictable framework, without having to guess which jurisdiction is "safe." For startups, it's a screening mechanism. Compliant companies can access funding and partners, while non-compliant companies will be eliminated. **Lessons from the EU:** MiCA is transforming regulation into a competitive barrier. Exchanges, brokers, and custodians certified by MiCA will dominate liquidity in Europe. For investors, this means identifying which platforms and tokens comply with this regulatory framework as early as possible—liquidity will rapidly concentrate once banks begin accepting them. **UK: Building a Trust Layer** The UK Financial Conduct Authority (FCA) and the UK Treasury have taken a slower, more cautious approach—but this is equally crucial. The FCA's latest consultation draft sets strict guidelines for stablecoin issuers and custody services, ensuring customer segregation and prudent regulatory measures. Meanwhile, the UK Treasury has hinted that stablecoins will not be included in the core payments network until a more robust regulatory framework is established. While not as high-profile as the US ETF news, the core of the UK's regulatory process lies in **institutional trust**. Once these safeguards are fully in place, London is poised to become a major hub for custody, derivatives, and stablecoin settlement. **Lessons from the UK:** Investors should focus on companies that comply early on—custodians, fintech companies, and exchanges that meet FCA requirements will have priority access to banking partnerships and institutional funding. **Singapore: A Precise Regulator** If the US is reactive and Europe is comprehensive and meticulous, then Singapore is precise in its approach. The Monetary Authority of Singapore (MAS) has some of the highest licensing standards for digital asset companies globally. Only companies with robust anti-money laundering, risk management, and operational control mechanisms have a chance of approval. Singapore intends to set this high standard as its design goal—it aspires to become a trusted global clearinghouse for digital finance, not the next offshore casino. MAS is finalizing a stablecoin framework limited to the Singapore dollar and some G10 currencies. In effect, this means fewer issuers, but higher trust. Lessons from Singapore: Fewer participants, increased confidence. Investors should view Singapore-licensed platforms as a safe haven for long-term capital allocation in Asia. Six Key Regulatory Triggers to Watch: The following are key milestones that could trigger market volatility and opportunities in the next two quarters: New US Spot ETFs: In addition to BTC, ETH, and SOL, there are new spot cryptocurrency ETFs – focus on applications related to the L2 ecosystem or staking yields. Stablecoin legislation makes progress in the US Congress. The version approved by the US Congress will significantly improve capital efficiency in the decentralized finance (DeFi) sector. The first European CASPs to receive MiCA licenses. Early adopters are expected to receive a premium – liquidity will concentrate around them. The UK FCA finally releases custody rules. This could open doors for cryptocurrency-native companies to partner with traditional banks. Singapore's MAS has issued a licensing announcement. Any large US or EU company receiving approval will be a market signal. Unified cross-agency guidance in the US. A coordinated approach by the SEC and CFTC will immediately increase risk premiums across the industry. Each such event signifies the elimination of regulatory uncertainty—leading to reduced volatility and increased institutional liquidity. Turning the rules into benefits. So how can investors truly leverage the advantages of regulation, rather than simply "hoping for regulatory clarity"? 1. Hold eligible assets. Clearly categorized and custody-supported cryptocurrencies (such as BTC, ETH, and SOL) will continue to attract ETF demand. 1. **2. Infrastructure Compliance.** Exchanges, wallets, and brokers approved by MiCA or FCA are effectively gaining regulatory monopolies. Investing in the stocks of these companies can yield excellent results. 2. **3. **View Stablecoins as Yield Channels.** Once regulated, high-quality stablecoins will evolve from entry-level tokens into institutional yield vehicles—similar to money market funds. This is crucial for the adoption of DeFi. 3. **4. **Focus on Volatility Narrowing.** Every instance of market regulatory clarity tightens spreads and reduces uncertainty. Take advantage of this by going long on volatility before announcements and gradually reducing holdings afterward. 5. Global Vision, Local Focus. Different regions are at different stages of development. Europe leads in regulation, the US in liquidity, and Asia in innovation. Diversification by jurisdiction is just as important as diversification by asset class. Possible Scenario for 2026: Bull Market Scenario (40%): US spot ETFs expand beyond major assets; MiCA license approvals accelerate; stablecoin legislation is passed; institutional investor adoption surges. Results: Higher participation, higher valuations, lower volatility. **Base Scenario (45%):** Transparency gradually increases; ETF growth is slow; MiCA adoption is uneven; stablecoin legislation is delayed. **Outcome:** Some participants benefit; the gap between regulated and unregulated participants widens. **Bear Market Scenario (15%):** Political gridlock, new enforcement actions, or policy implementation delays. **Outcome:** Short-term sell-off, good long-term buying opportunity. **Summary:** For the first time in cryptocurrency history, regulation is no longer the enemy, but the key to unlocking the market. Every new rule, framework, or license reduces uncertainty and expands access. Every clear regulation brings cryptocurrency closer to becoming a core global asset class. The next bull market will reward not only early adopters but also those who are prepared: those who understand how the regulatory landscape is structured and position themselves before others follow suit.