The landscape of cryptocurrency laws is evolving rapidly as more countries develop regulations to govern the use, exchange, and taxation of digital currencies. As the adoption of cryptocurrencies like Bitcoin and Ethereum continues to rise, governments around the world are taking steps to implement frameworks that address concerns related to financial stability, anti-money laundering (AML), and investor protection.
Different nations have adopted varying approaches to cryptocurrency regulation. Some countries, like El Salvador, have fully embraced crypto by recognizing Bitcoin as legal tender, while others, such as China, have imposed strict bans on crypto mining and trading. Meanwhile, regions like the European Union and the United States are working on frameworks to ensure transparency and compliance with existing financial regulations.
Staying informed about these dynamic developments is key for businesses, investors, and users involved in the cryptocurrency space. This guide offers insights into the different legislative approaches to cryptocurrencies, key government perspectives, and upcoming regulations that may shape the global crypto environment.
What is Laws for Cryptocurrency?
Cryptocurrency laws vary globally and address issues like taxation, regulation, and fraud prevention. Cryptocurrencies, such as Bitcoin, are considered a form of digital money that uses cryptographic methods to secure transactions on decentralized platforms like blockchain. These coins or tokens are not backed by a central government, and their legality and regulation depend on the jurisdiction. In the United States, for example, the IRS treats cryptocurrencies as property, subjecting them to capital gains taxes. As governments adapt, countries have implemented varying levels of regulation to combat illegal activities like money laundering and to ensure transparency in cryptocurrency transactions. The rules around cryptocurrency aim to balance innovation with risk management.
Current and Proposed Cryptocurrency Regulations
As of now, the regulatory framework for cryptocurrency in the United States remains in its infancy, largely shaped by existing laws like the Banking Secrecy Act (BSA) of 1970 and the USA PATRIOT Act of 2001. The BSA mandates that financial institutions play an active role in preventing money laundering and the financing of terrorism. This framework has been extended to cryptocurrency exchanges and businesses involved in digital assets.
In the wake of the 9/11 attacks, the USA PATRIOT Act was enacted, amending the BSA to require enhanced vigilance by financial institutions in detecting and reporting suspicious activities, including those linked to terrorism financing and money laundering. These laws now form the foundation of many proposals and discussions about how to regulate the cryptocurrency space in the U.S. Proposed regulations continue to evolve as lawmakers seek to balance consumer protection, innovation, and national security concerns in the rapidly changing landscape of digital assets.
The Financial Crimes Enforcement Network (FinCEN) is the U.S. Treasury agency responsible for enforcing the Bank Secrecy Act (BSA) and addressing financial crime concerns. Since 2013, FinCEN has recommended including cryptocurrency exchanges under the definition of “money transmitters,” which brings them under BSA and Patriot Act regulations.
In 2019, FinCEN received reports concerning $119 trillion in suspected Bitcoin transactions. This highlighted the growing challenge of cryptocurrency-related financial crimes.
In December 2020, FinCEN proposed new regulations aimed at enhancing oversight of cryptocurrency transactions. These proposals would require money transmitters to collect and maintain detailed information about parties involved in cryptocurrency transactions exceeding $3,000, especially if they use unhosted wallets or are located in high-risk jurisdictions. For transactions over $10,000, the law would require reporting payor and recipient details to FinCEN, similar to requirements for bank wire transfers. These measures underscore the increasing regulatory scrutiny on cryptocurrency to prevent money laundering and illicit financial activity.
Legal Concerns Around Cryptocurrency Use
Here are the updated legal concerns around cryptocurrency use in 2025, based on recent reports and trends:
- Criminal Activities and Terrorist Financing: Cryptocurrencies continue to be exploited for illicit activities, including money laundering, fraud, and funding terrorism, due to their pseudonymous nature.
- Tax Evasion and Financial Secrecy: The use of cryptocurrencies to conceal assets, avoid taxes, and bypass financial regulations remains a significant concern for governments and tax authorities globally.
- Cybersecurity Risks: The rise in cryptocurrency theft, hacking, and security breaches, including exploits on decentralized finance (DeFi) platforms, has led to increasing legal challenges around user protection and financial safety.
- Investment Fraud and Scams: Ongoing issues with fraudulent cryptocurrency schemes, including Ponzi schemes, pump-and-dump operations, and misleading investment opportunities, continue to harm investors and erode trust in the market.
These concerns emphasize the growing urgency for more robust legal frameworks and enhanced global collaboration to regulate cryptocurrency activities effectively.
A significant legal concern surrounding Bitcoin and other cryptocurrencies is the level of anonymity they offer, which has the potential to facilitate illicit activities. This has prompted the development of anonymity-enhanced cryptocurrencies (AECs) such as Monero, Zcash, and Dash. These coins are specifically designed to make tracking transactions more challenging, raising concerns for regulators and law enforcement agencies. As the cryptocurrency landscape evolves, legal frameworks are continually adapting to address these issues, balancing privacy with the need for compliance and anti-money laundering (AML) measures.
The Silk Road
The Silk Road remains one of the most notorious examples of how Bitcoin was utilized in illicit activities. Between 2011 and 2013, it was a marketplace for illegal goods like drugs, forged documents, and hacking tools. Bitcoin’s pseudonymous nature allowed for relatively anonymous transactions, making it the preferred payment method. The site was designed to shield users’ identities, enabling illegal exchanges. Ross Ulbricht, the creator of Silk Road, was convicted in 2015 on charges such as narcotics distribution and money laundering conspiracy. His case marked a significant point in the intersection of cryptocurrency and crime, influencing later discussions on the regulation of digital currencies.
Cause for Caution With Crypto Investing
The same characteristics that make cryptocurrencies so appealing are also the reasons why investors should proceed with caution. Cryptocurrencies, being decentralized and difficult to trace, can attract hackers. Once stolen, these digital assets are virtually impossible to recover. A notable example is the 2014 hack of the Mount Gox platform, which resulted in the loss of hundreds of millions of dollars in bitcoin. Investors who stored their crypto on the exchange were left with limited recourse.
In the United States, cryptocurrency is not recognized as legal tender and isn’t backed by any government or central bank. Its value is driven primarily by supply and demand, making it prone to wild fluctuations. Although cryptocurrencies like Bitcoin have provided substantial profits for some, they remain highly volatile, making their long-term viability as a stable currency uncertain.
The regulatory landscape surrounding cryptocurrency continues to evolve, especially as FinCen’s proposed laws move forward. If these laws pass, cryptocurrency exchanges could be classified as money transmitters, subject to state-level consumer protections. This regulatory shift aims to combat financial crimes such as money laundering and terrorist financing. However, despite these efforts, cryptocurrency exchanges will still lack federal financial guarantees like those offered by the FDIC for traditional financial institutions.
Additionally, regulatory bodies like the Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC), and FINRA have raised concerns about potential fraud in the cryptocurrency space, particularly with Initial Coin Offerings (ICOs) and virtual currency investments. The New York State Attorney General’s warning in March 2021 about the inherent risks in cryptocurrencies still resonates today, as many investors are cautioned about the volatility and unpredictability of these digital assets, which can lead to substantial financial losses.
Bitcoin Crime and Tax Evasion
As of 2025, cryptocurrency governance continues to be a focal point of legislative and regulatory discussions. U.S. lawmakers are considering a bipartisan development bill that could significantly impact cryptocurrency exchanges and their role in tax reporting.
A proposed change to expand the definition of a brokerage firm would include entities dealing with digital asset trading, such as crypto exchanges, thereby increasing their obligations to report transactions to the IRS. This move is intended to help detect tax evasion within the crypto space, which has been a concern in recent years.
Furthermore, SEC Chair Gary Gensler has emphasized the need for broader legislation to combat ransomware attacks, similar to the high-profile Colonial Pipeline incident of May 2021, where attackers demanded cryptocurrency ransoms. While Gensler has not provided specifics on how the SEC will prosecute these cases, he confirmed that the agency will leverage its powers fully to address such issues.
A recent U.S. Treasury report highlighted that Bitcoin and other cryptocurrencies are increasingly used for illicit activities, particularly tax evasion. This continues to raise alarms about the need for stronger regulations and enforcement to ensure that the growing digital asset industry does not facilitate illegal behavior.