How Cryptocurrency Regulations Work

Cryptocurrency regulations are an integral component of building this new asset class. Understanding these frameworks is vital.

Due to the incredible and volatile growth of crypto assets, regulators are making strides toward their regulation. But designing new regulatory frameworks presents many difficulties and hurdles.

Some states have created “regulatory sandboxes” to provide relief for new industries like fintech and cryptocurrency, while others impose stringent anti-money laundering (AML) obligations on crypto exchanges.


FinCEN prides itself on following the money. As part of its responsibility to enforce the Bank Secrecy Act (BSA) and safeguard financial systems from criminals who utilize them to launder illegal funds, FinCEN uses information gathered by financial industry providers, who must file Suspicious Activity Reports (SARs), Currency Transaction Reports (CTRs), Designation of Exempt Person and Registered Money Services Business reports with FinCEN as mandated. FinCEN then shares these reports with US agencies such as FBI, DEA, Secret Service and IRS for review and sharing among US agencies.

FinCEN works to counter terrorist financing by collecting, analyzing and disseminating financial intelligence to support law enforcement partners on all levels. Furthermore, this international body coordinates through Egmont Group 166 FIUs around the world which work as independent Financial Intelligence Units (FIU). Furthermore, FinCEN can block transactions from individuals listed on US sanction lists; hence compliance should always be a top priority among financial institutions – and having an Identity Verification solution in place ensures staying compliant is key for success.


FINRA may not be at the forefront of your mind as a consumer, but they work behind the scenes to protect security and integrity of securities trading. Their primary goal is protecting investors from potential abuse while upholding ethical behavior within the financial industry by enforcing rules, investigating misconduct cases, providing public information through BrokerCheck databases and fining or suspending brokers for unethical behavior.

FINRA offers an array of investor education resources and tools designed to inform investment decisions. Furthermore, their staff monitor daily market transactions to maintain market integrity and take any necessary actions against fraud if necessary.

Noncompliance with FINRA regulations can result in serious penalties and loss of investor trust, so to prevent them it is crucial that companies work cooperatively with regulators and respond promptly and thoroughly to examinations or inquiries from examination firms or inquiries by investors. Furthermore, firms should enlist compliance consultants or legal professionals as advisers when necessary and use an efficient and dependable compliance solution solution.


Cryptocurrencies have quickly become part of global financial markets, yet most remain unregulated. That may change soon: the Securities and Exchange Commission (SEC) plans to regulate cryptocurrency exchanges as well as stablecoins – similar to traditional currencies with stable prices – in 2019.

The Securities and Exchange Commission (SEC) is an administrative body established to oversee financial markets and enforce federal securities laws. It comprises five Commissioners appointed by the President and confirmed by the United States Senate; they serve terms of five years each and cannot hold more than three consecutive terms in office; additionally, one may be designated by their president as chairman.

The Securities and Exchange Commission is working on regulating cryptocurrency derivatives such as futures and swaps in order to mitigate investor risks while safeguarding the financial system. They are also considering new regulations for virtual currency exchanges as well as creating an international taskforce focused on this issue, developing recommendations for banks on managing exposures to virtual currencies, while the Bank for International Settlements also developed a framework for regulating crypto assets.


The Commodity Futures Trading Commission, or CFTC, regulates trading of commodities and futures contracts relating to Bitcoin. Recently, this agency has increased its efforts to monitor crypto markets to ensure an equitable investment experience for all. In addition to monitoring, research is conducted as well as education regarding risks involved. In addition to that, its legislative branch aids Congress with regulations governing this market.

At present, the CFTC comprises 13 distinct operating divisions and offices. Each of these areas specializes in one aspect of agency work; for instance, Market Participants Division supervises those registered registrants that conduct dealing, trading, investment or advisory activities in the swaps market.

This division collaborates with other CFTC departments and industry stakeholders to ensure data quality, integrity, and confidentiality. Furthermore, it works to break down silos by integrating datasets both from within the Commission as well as external sources into one clear picture of market activity. Furthermore, training on data management and analysis tools of CFTC is offered here with particular attention given to diversity and inclusion promotion.


The Consumer Financial Protection Bureau (CFPB) safeguards financial markets for consumers, ensuring prices, risks and terms of products are clear to enable informed decisions to be made by individuals. In addition, its work ensures companies compete fairly when providing quality service and products to customers.

CFPB has broad authority to enforce federal consumer protection laws and prohibit unfair, deceptive or abusive acts or practices. It can issue subpoenas, conduct investigations and bring civil lawsuits in federal court to enforce them; Treasury’s Twohig has stated that one key focus for the Bureau will be working closely with state regulators so as to reach its goals more quickly.

After the 2008 financial crisis, Congress established the Consumer Financial Protection Bureau under Dodd-Frank Wall Street Reform and Consumer Protection Act. Within seven years of being established, this agency helped 29 million consumers receive $11.9 billion in relief through restitution payments, principal reductions and cancellations of debt. Unlike other federal agencies, however, the CFPB does not rely on congressional funding; instead it receives its funds through earnings from the Federal Reserve System – something which has made its funding source an issue and made critics accuse it is unconstitutional.