Introduction to Cryptocurrency Regulation

Abstract

This Primer relates how the market for cryptocurrencies exploded after the creation of Bitcoins in 2009. That market grew to a market capitalization of $3 trillion in just a few years before its meltdown in 2022. In the meantime, widespread fraud occurred in the marketing and trading of cryptocurrencies. Federal and state financial services regulators stepped in to try and tame those excesses, but their jurisdictional boundaries were such that they were not successful in that effort. Those regulators include state banking departments, the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). This Primer explores the challenges faced by those regulators in applying their existing regulations to cryptocurrency trading. It describes the jurisdictional gaps that are hampering those efforts and describes the need for new legislation to regulate cryptocurrencies in a way that will not stifle blockchain innovation.