Twenty years ago, the idea of buying a car through an online auction would have seemed absurd. Today, about 50% of car auctions are done completely online. Similarly, we’re on the edge of another transformation: the rise of cryptocurrency and digital currencies. These new forms of money challenge traditional financial systems, spark global debate, and unlock new possibilities for how individuals, businesses, and governments exchange value.

Digital currency refers to money that exists entirely online, such as cryptocurrencies (like Bitcoin), stablecoins (digital dollars), and Central Bank Digital Currencies (CBDCs) being developed by governments. These currencies are already being used around the world to make payments, send money across borders, invest, and access financial services, often without a traditional bank. In places like El Zonte, El Salvador, also known as Bitcoin Beach, a fishing village rebuilt its economy using Bitcoin during the pandemic, bypassing the effects of local currency hyperinflation.

This isn’t just for tech experts. A small shop owner in Africa, a remote worker in the Philippines, or an entrepreneur in the U.S. can all use digital currency through a simple app on their phone. A recent National Cryptocurrency Association survey found that over 55 million Americans use cryptocurrency, and most say it’s had a positive impact on their lives.

The digital currency economy is growing fast, worth trillions of dollars globally, and opening doors to faster payments, lower fees, more control over your money, and new ways to own and trade digital assets like art, music, and even tokenized real estate.

Governments and institutions like the Federal Reserve and European Central Bank are also exploring how digital money could enhance efficiency, security, and financial inclusion.

If you’re wondering how all this works and what it could mean for your future, you’re not alone. This is just the beginning. Understanding the basics now is your first step into the future of money.

WHO USES CRYPTOCURRENCY

U.S. ADOPTION

According to surveys by Pew Research, approximately 16% of U.S. adults have used, traded, or owned cryptocurrency, equating to around 50–55 million Americans. More recent data estimates up to 28% (≈65 million) adults now hold crypto.

GLOBAL ADOPTION

Global crypto ownership is estimated at 4.2% of the world population, translating to over 420 million users. Adoption is especially high in countries such as India (≈100 million users), Nigeria (≈22 million users, or 42% of population), Vietnam, and Brazil.

BUSINESS ACCEPTANCE AND USE

By late 2024, over 15,000 businesses globally accepted cryptocurrencies as payment, with companies like Overstock and Shopify merchants integrating crypto checkouts. Beyond payments, many organizations are exploring blockchain solutions for contracts, inventory management, and internal payments.

CONCEPTUAL LITERACY: KEY TERMS TO KNOW

Watch The Future of Money and Payments by Stanford Graduate School of Business (6 minutes). This video breaks down how the payment landscape is transforming and why trust, technology, and regulation are now tightly intertwined.

To fully appreciate the insights shared, it helps to be familiar with core concepts like blockchain, stablecoins, digital wallets, and programmable money.

Learn more about how cryptocurrency works (14 minutes):

Here are some key terms to know beyond cryptocurrency to follow the future of money:

• Digital tokens: Digital tokens are units of value created and managed on a blockchain, like digital casino chips. Each represents a specific value or right within a system and can be used to play, trade, or access services, depending on the token type. Tokens can represent currency, ownership, or access rights to real-world assets like art, property, or event tickets. Unlike traditional money, digital tokens are programmable, traceable, and transferable without banks or intermediaries. There are different types of tokens:
  • Cryptocurrency is a type of digital money that exists only online. Unlike traditional currencies like the U.S. dollar or euro, cryptocurrencies are decentralized, meaning they aren’t issued or controlled by a central bank or government. Instead, they use a technology called blockchain to record transactions in a secure, public ledger.
    Bitcoin is the most well-known cryptocurrency, but thousands of others exist, such as Ethereum, Solana, and Ripple, each with unique features and uses. You can use cryptocurrency to buy goods and services, send money globally, or invest, though prices can be volatile. For a beginner-friendly overview, see NerdWallet’s guide to cryptocurrency.
  • Stablecoins are tokens designed to maintain a stable value (e.g., USDC – US Dollar Coin issued in partnership with CoinBase). Walmart, Amazon, and PayPal are exploring launching their own U.S. dollar-pegged stablecoins to streamline payments and cut fees, especially after the GENIUS Act, which provides a legal framework for non-banks to issue them securely and legally. This Chainalysis report explains how stablecoins work.
  • Programmable Money: Digital currency embedded with code that lets it automatically follow rules, like releasing funds on a certain date, limiting use to specific purposes, or triggering payments when conditions are met.
  • Utility tokens give access to services or products within a platform.
  • Security tokens represent investment contracts or ownership shares. Here’s what the SEC says about the tokenization of securities.
  • Non Fungible Tokens (NFTs) are unique digital assets stored on a blockchain that prove ownership and authenticity, typically of digital art, music, videos, collectibles, virtual land, or even event tickets. NFTs are minted (created) on blockchain platforms such as Ethereum (ETH), Solana (SOL), Polygon (MATIC), Tezos (XTZ).
    Creators use NFT marketplaces like: OpenSea, Rarible, Foundation, and Magic Eden to upload content, write in metadata (e.g. title, creator, description), and set properties like ownership rights or royalties.
    • Artists and Creators: Make digital art, music, or other media and mint it into NFTs to sell or share. Examples: Beeple, Grimes, music producers, photographers.
    • Game Developers and Metaverse Builders: create NFTs to represent in-game assets like skins, avatars, or virtual land. Examples: Decentraland, The Sandbox.
    • Brands and Organizations: mint NFTs for marketing, collectibles, or loyalty programs. Examples: Nike (digital sneakers), and NBA Top Shot (game highlights).
    • Coders and Entrepreneurs: build NFT platforms, tools, or smart contracts enabling others to mint NFTs, often with programmable features like royalties.
• Cryptography is the science of protecting information using codes and mathematical techniques. It plays a foundational role in cryptocurrency by keeping transactions secure, private, and tamper-proof.
  The most common form is public-key cryptography, where each person has a public address (like a digital mailbox) and a private key ( a password) to access their funds.
• Blockchain is a decentralized digital ledger that records transactions in a secure, transparent, and tamper-resistant way across a network of computers. These computers, called “nodes,” are distributed around the world and can be run by individuals, businesses, or institutions.
  Its main advantage is its capacity to deliver secure, transparent, and trustworthy transactions without the need for traditional middlemen like banks. Its structure reduces the risk of fraud and errors, making it particularly useful in sectors like finance and healthcare where security is essential. Blockchain also boosts efficiency and lowers costs by simplifying operations and strengthening accountability. The Reserve Bank of Australia (RBA) explains how cryptocurrencies work, including the role of blockchain and why they matter in today’s financial world. You can read more in their Cryptocurrency Explainer.
• Consensus Mechanisms: Proof of Work (PoW) and Proof of Stake (PoS) are the engines behind crypto transactions. They function like operating systems, powering different cryptocurrencies and determining how transactions are verified, secured, and rewarded on the blockchain.
• Cryptomining refers specifically to PoW systems used by Bitcoin and Litecoin, which involve powerful computers (miners) racing to solve complex mathematical puzzles. The first to solve the puzzle adds a block of transactions to the blockchain and earns newly minted coins as a reward. While highly secure, PoW consumes large amounts of energy.
  In contrast, PoS systems, such as Ethereum 2.0, Cardano, and Solana, use a more energy-efficient approach. Instead of solving puzzles, computers called validators are selected to confirm transactions based on how much cryptocurrency they have staked (locked up) as collateral. Validators don’t need high-powered hardware, just a stable internet connection and properly configured software.
  The decision to use PoW or PoS is made by the blockchain’s developers and its community. It reflects trade-offs among security, energy usage, decentralization, and user accessibility. CryptoSlate is a news and data platform offering real-time information on cryptocurrencies, categorized by their consensus mechanisms, an important consideration when choosing a cryptocurrency.

Investigate the differences in these systems further (12 minutes):

• A digital wallet is an app or software tool that lets users store, send, receive, and manage their cryptocurrency or digital assets. It functions like a virtual wallet, but instead of holding cash or cards, it stores private keys: the credentials needed to access and control crypto on the blockchain. There are two main types of digital wallets:
  • Hot wallets: Connected to the internet (e.g., mobile apps or browser extensions) – easy to use for everyday transactions. Examples: Coinbase Wallet, Trust Wallet, or MetaMask.
  • Cold wallets: Offline devices or hardware,  used for long-term, secure storage. Examples: Ledger or Trezor.
• Central Bank Digital Currency (CBDC) is a digital version of a country’s official currency, like the U.S. dollar or the euro, issued and fully backed by a central bank. Unlike cryptocurrencies like Bitcoin or Ethereum, CBDCs are centralized, meaning they are regulated and controlled by national monetary authorities.
  • For governments, CBDCs offer a way to modernize the monetary system while retaining control over national currency. They also promise faster, more secure, and lower-cost payments, especially cross-border transfers. Central banks around the world, including the Federal Reserve, European Central Bank, and firms like Deloitte, are actively researching or piloting CBDCs. The Atlantic Council’s CBDC Tracker offers a real-time global view.

WHO ISSUES CRYPTOCURRENCIES?

Not all cryptocurrencies are created or issued the same way. Some are launched by open-source communities, others by tech companies or decentralized organizations. Knowing who’s behind a coin helps assess whether it’s reliable, stable, or risky.

WHY ISSUE OR USE DIGITAL CURRENCIES AND TOKENS?

Digital currencies and tokens, whether cryptocurrencies like Bitcoin, stablecoins like USDC, or programmable tokens like DAI, offer powerful opportunities to reshape how individuals, businesses, and governments exchange value. These assets aren’t just a new form of money; they represent a broader transformation of the financial system.

1. Faster, Cheaper Transactions

Digital currencies significantly reduce the time and cost of transferring money, especially across borders. Traditional wire transfers can take several days and incur multiple intermediary and currency conversion fees. In contrast, cryptocurrency transactions often settle within minutes, with lower transaction costs and no middlemen, which is especially valuable in international trade, global remittances, and freelancer payments.

2. Financial Inclusion

Over 1.4 billion people globally remain unbanked, many without access to basic financial services. Digital currencies allow them to send, receive, and store value using only a smartphone and internet connection, no bank required.

• Mobile wallets, like M-Pesa in Kenya or Trust Wallet in the crypto space, demonstrate how digital tools can empower participation in the economy.
• However, success depends on more than access: user experience (UX), digital literacy, and fraud awareness are critical.

3. Innovation and Competitive Pressure

The rise of digital currencies is pushing traditional financial institutions to modernize. Banks and payment platforms now compete with real-time settlement, lower fees, and borderless access. This shift has fueled fintech innovation, from new platforms and wallets to lending protocols and central bank digital currency (CBDC) pilots, all aimed at delivering faster, more user-friendly services.

Digital currencies can also help companies retain customers, control transaction ecosystems, and reduce reliance on credit card networks and payment processors.

4. Transparency, Security, and Trust

Blockchain technology ensures that every transaction is recorded on a secure, tamper-resistant ledger. This transparency:

• Reduces fraud and corruption.
• Simplifies audits and compliance.
• Builds accountability and trust between users and institutions.

For governments and NGOs, this level of traceability could be especially useful in aid distribution, procurement, and anti-corruption efforts.

5. Programmable Money and Smart Contracts

Digital tokens can be programmed to execute rules automatically. They may be created by central banks (CBDCs), private companies (like PayPal or stablecoin issuers), or blockchain developers using smart contracts, technology that encodes logic directly into transactions. Payments  trigger only when predefined conditions are met, eliminating manual processing. This is revolutionizing:

• Insurance payouts;
• Creator royalties;
• Supply chain payments;
• Tokenized real estate and investment funds.

Programmable money streamlines operations, reduces human error, and enables tailored financial tools for businesses, government and individuals, embedding logic into transactions and reducing reliance on intermediaries.

6. Global Economic Participation

Digital currencies let individuals and small businesses participate directly in the global economy without traditional gatekeepers. Freelancers can get paid instantly in crypto; small exporters can avoid costly conversion fees; creators can monetize their work globally. In countries with unstable currencies, crypto can serve as an alternative store of value, as seen in El Zonte, El Salvador (Bitcoin Beach), where residents rebuilt a local economy using Bitcoin to bypass inflation.

Bhutan has quietly emerged as a digital economy player by mining over 13,000 Bitcoin (BTC) using its abundant supply of hydroelectric power. Bitcoin mining uses powerful computers to solve complex problems that secure the network, with miners earning Bitcoin as a reward. Leveraging clean, low-cost energy, Bhutan’s state-owned firms have generated an estimated $390 million in Bitcoin, based on an average price of $30,000 per BTC. This strategy converts natural resources into digital assets, showing how even small nations can benefit from the cryptocurrency ecosystem.

RISK AND CONCERNS WITH DIGITAL CURRENCIES

While digital currencies and tokens offer exciting potential, they also bring real-world challenges and risks that must be understood, especially as adoption grows among individuals, businesses, and governments.

1. Volatility and Speculation

Cryptocurrencies like Bitcoin and Ethereum are notoriously volatile, with prices  swinging by double digits in hours. This unpredictability makes them unreliable for everyday use or long-term savings. It also deters adoption as a stable medium of exchange and encourages risky speculation, potentially fueling market bubbles and investor losses.

2. Fraud, Scams, and Theft

The lack of consistent regulation has created fertile ground for phishing attacks, fake tokens, rug-pull scams, and fraudulent exchanges. Victims often have limited legal recourse, especially when transactions are irreversible and identities are masked.

• The FTC outlines common scams, including fake investments, impersonation, and social engineering tactics that create urgency to trick users into sending funds.
• AI and deepfake threats are also rising, with scammers using realistic video or audio to impersonate trusted figures. A Deloitte case study shows how generative AI now aids financial crimes.
• Chainalysis has tracked major enforcement cases, like the Bybit hack and Greece’s first crypto seizure, highlighting both the scale of abuse and growing capacity to trace it.

3. Energy Consumption and Environmental Impact

Some cryptocurrencies use proof-of-work (PoW) consensus mechanisms, which require powerful computers solving complex puzzles, consuming immense amounts of electricity.

• Bitcoin’s energy footprint, for example, has been compared to that of small nations.
• In response, many networks (like Ethereum) have moved to proof-of-stake (PoS) systems, which drastically reduce energy use.

Other innovations are emerging:

• CarbonChain and similar platforms are  using blockchain to trace and verify the carbon footprint of supply chains and digital assets in real time. This transparency helps companies and consumers make informed, environmentally conscious choices. See CarbonChain’s site and explainer on carbon accounting for more.
• Energy-conscious firms like Integrity Energy are evaluating the energy footprint of mining operations.

Still, environmental sustainability remains a central issue for public trust and regulatory scrutiny.

4. Regulatory Uncertainty

With crypto regulations still evolving across jurisdictions, users and businesses face unclear compliance requirements. Some countries welcome innovation; others restrict or ban crypto activity outright. This inconsistency complicates global business operations, deters institutional adoption, and raises concerns over consumer protection and tax enforcement.

5. Monetary Sovereignty and Policy Risk

Governments worry that widespread use of decentralized cryptocurrencies could:

• Undermine national currencies.
• Reduce control over monetary policy, such as interest rates and inflation.
• Hinder enforcement of sanctions and capital controls.

These risks are especially acute in emerging economies with weak financial systems, but even advanced economies are now exploring central bank digital currencies (CBDCs) to provide regulated alternatives.

FEDERAL GOVERNMENT

Under the U.S. Constitution, the federal government has explicit powers to regulate the nation’s currency, manage interstate and international commerce, levy taxes, and ensure national security.

These constitutional authorities provide a strong foundation for federal oversight of digital assets, including cryptocurrencies, stablecoins, and Central Bank Digital Currencies (CBDCs). However, because digital currencies operate across borders, moving instantly between jurisdictions, the U.S. must also work in close collaboration with international governments and regulatory bodies to ensure consistency, prevent regulatory arbitrage, and combat global risks like money laundering, terrorism financing, and cybercrime.

As digital money (cryptocurrencies, stablecoins, and CBDCs) becomes more integrated into the financial system, the federal government is charged with establishing clear rules to ensure security, trust, innovation, and international alignment.

The key areas requiring a robust framework include:

• Legal classification of digital assets.
• Anti-money laundering and financial crime prevention.
• Consumer and investor protection.
• Stablecoin oversight.
• Digital wallet and custody standards.
• Cross-border tax reporting.

WHO REGULATES DIGITAL CURRENCY IN THE U.S.?

There’s no single crypto regulator. Instead, multiple agencies oversee different parts of the system. Here’s a simple breakdown of who does what and how to explore further:

• U.S. Department of the Treasury regulates digital money by coordinating financial stability efforts, enforcing anti-money laundering rules, and guiding policy development through agencies like FinCEN and the IRS.
  • FinCEN: Enforces anti-money laundering (AML) laws; requires crypto platforms to report suspicious transactions and follow Know Your Customer (KYC) rules.
  • OFAC: Ensures compliance with economic sanctions, including transactions involving banned crypto wallets or countries.
• Securities and Exchange Commission (SEC):
  • Regulates cryptocurrencies that are classified as securities.
  • Targets fraud and unregistered offerings in digital asset markets.
  • Publishes investor alerts and enforcement actions related to ICOs and crypto platforms.
• Commodity Futures Trading Commission (CFTC):
  • Regulates crypto assets like Bitcoin and Ethereum as commodities.
  • Oversees derivatives markets and is piloting frameworks for crypto exchanges.
• Federal Reserve:
  • Leads research on Central Bank Digital Currency (CBDC).
  • Focuses on how digital money might impact monetary policy, banking, and financial stability.
• Internal Revenue Service (IRS):
  • Classifies all cryptocurrencies as property, not cash. When you buy, sell, exchange, or use cryptocurrency, you are subject to capital gains or losses, just like you would be with stocks, bonds, or real estate.
  • Requires taxpayers to report capital gains or losses on crypto transactions.
• Federal Trade Commission (FTC):
  • Investigates consumer scams and fraud related to cryptocurrency.
  • Offers guidance for avoiding common crypto traps and recovers stolen funds when possible.
• U.S. Department of Justice (DOJ) andFBI:
  • Enforce laws around fraud, hacking, ransomware, and money laundering using crypto.
  • The FBI’s Internet Crime Complaint Center (IC3) accepts reports of crypto-related scams.

U.S. CONGRESS

Key legislative committees are debating the future of digital currency regulation:

• House Financial Services Committee.
• Senate Banking, Housing, and Urban Affairs Committee.
• House Ways and Means Committee.
• Senate Finance Committee.

These committees are crafting bills on stablecoins, crypto taxes, DeFi oversight, and CBDCs.

Digital currency oversight in the U.S. is a shared responsibility. Each agency plays a role in ensuring cryptocurrencies are secure, fair, and integrated into the financial system responsibly. As technology evolves, expect clearer rules and more collaboration among regulators.

What follows is a deeper dive into the essential regulatory categories.

1. LEGAL CLASSIFICATION AND MARKET OVERSIGHT

WHY IT MATTERS

Clear legal definitions of digital assets are essential to determine how cryptocurrencies, tokens, and stablecoins are regulated. Classification affects who enforces the rules, how users are protected, and whether innovation is encouraged or hindered. Without a unified framework, businesses face uncertainty, regulators risk gaps in oversight, and consumers are left exposed to risk.

HOW CLASSIFICATION WORKS

Digital assets can fall into different legal categories:

• Securities: Investment-style tokens (e.g., ICOs) are regulated by the Securities and Exchange Commission (SEC) when they meet the Howey Test criteria.
• Commodities: Assets like Bitcoin and Ethereum are decentralized and treated as commodities under the Commodity Futures Trading Commission (CFTC).
• Stablecoins: These tokens are pegged to fiat currencies (e.g., the U.S. dollar) and designed for payment. New legislation has clarified their regulatory path.

KEY U.S. LEGISLATION

• GENIUS Act (S.1582) – Guaranteeing Uniformity in Stablecoins: The first federal bill to define “payment stablecoins.” It requires:
  • Full 1:1 reserve backing;
  • Prohibits algorithmic stablecoins;
  • Assigns oversight to Federal Reserve, U.S. Treasury, OCC to monitor systemic risks and regulate stablecoin issuers, not the SEC or CFTC.
• CLARITY Act (H.R.3633) – Crypto Legal Clarity Act:
  • Digital assets are treated as securities under SEC oversight during initial fundraising phases, when there is centralized control and investor profit expectations. As the underlying blockchain becomes sufficiently decentralized, the asset may qualify as a commodity, falling under CFTC regulation. This approach recognizes the unique lifecycle of digital assets and offers regulatory clarity to support innovation while protecting investors.
• Digital Commodity Exchange Act (DCEA): Establishes a federal regulatory framework for crypto spot markets under CFTC supervision.
• Securities Exchange Act of 1934 and Commodity Exchange Act: Existing financial laws that are currently adapted to cover certain types of digital assets.

INTERNATIONAL APPROACHES

• Markets in Crypto-Assets Regulation (MiCA) – The EU’s comprehensive crypto law categorizing assets into:
  • EMTs: E-Money Tokens pegged to a single fiat currency (its value is tied 1:1 to just one national currency).
  • ARTs: Asset-Referenced Tokens backed by multiple currencies or commodities.
• Financial Action Task Force (FATF):
  • An intergovernmental body that sets international standards for Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF). FATF defines “virtual assets” and mandates the “Travel Rule” to prevent illicit crypto transfers across borders.

Thanks to the GENIUS Act, stablecoins now have a federal legal framework, but most crypto tokens still operate in a complex and evolving classification system. A clear regulatory structure is essential to foster innovation, protect consumers, and ensure global coordination.

2. ANTI-MONEY LAUNDERING (AML) AND FINANCIAL CRIME PREVENTION

WHY IT MATTERS

Because cryptocurrency transactions can obscure user identities and bypass intermediaries, they can be misused for money laundering, terrorist financing, fraud, and sanctions evasion. A strong regulatory framework is essential to protect national security, uphold financial integrity, and ensure responsible innovation.

KEY U.S. LAWS

• Bank Secrecy Act (BSA): Requires financial institutions to implement AML compliance programs, verify customer identities (KYC), and report suspicious activity (SARs).
• Anti-Money Laundering Act of 2020: Modernizes the BSA, expands the definition of financial institutions to include crypto-related businesses, and strengthens FinCEN’s authority.
• CANSEE Act (S.2669) (Crypto-Asset National Security Enhancement and Enforcement Act): A proposed bill requiring DeFi platforms (Decentralized Finance) to enforce AML (Anti Money Laundering) and sanctions compliance, closing a significant regulatory gap.

GLOBAL STANDARDS

• Financial Action Task Force (FATF): An intergovernmental organization that develops global standards to prevent money laundering and terrorism financing. Its Travel Rule requires crypto providers to collect and share sender/recipient data for large transactions.
• OECD Crypto-Asset Reporting Framework (CARF): Launching in 2026, CARF standardizes international tax information sharing for crypto assets across 40+ jurisdictions.

WHAT’S STILL MISSING AND WHO’S WORKING ON IT

3. CONSUMER AND INVESTOR PROTECTION

The crypto market is rife with risk. Without proper oversight, consumers and investors may fall victim to fraudulent schemes, hacks, misleading advertising, or risky investment products. Many users are unaware of the protections they lack when engaging with unregulated crypto exchanges, wallet apps, or DeFi platforms. A robust regulatory framework is essential to ensure transparency, accountability, and safeguards comparable to traditional finance.

KEY U.S. LAWS

• CLARITY Act (H.R. 4763): Defines regulatory responsibilities between the SEC and CFTC and introduces mandatory disclosure and registration requirements for digital asset issuers and exchanges.
• Investment Advisers Act of 1940: Applied to digital asset managers and platforms that offer investment advice or structured crypto portfolios.
• Securities Act of 1933 and Securities Exchange Act of 1934: Enforced by the SEC to address fraudulent token offerings and ensure investor disclosures.

INTERNATIONAL COUNTERPARTS

• UK Financial Conduct Authority (FCA): Limits crypto marketing to retail investors, requires risk labels and fair advertising.
• EU MiCA Regulation: Introduces comprehensive consumer protection rules, mandatory whitepapers, conflict-of-interest disclosures, and conduct standards across the EU.

WHAT’S STILL MISSING AND WHO’S WORKING ON IT

Here’s a snapshot of what’s missing and who’s working to close the gap.

4. STABLECOIN ISSUANCE AND PAYMENT INFRASTRUCTURE

Stablecoins are digital currencies pegged to the value of traditional fiat currencies (like the U.S. dollar), making them more stable than cryptocurrencies like Bitcoin. They are poised to become central to everyday payments, remittances, and digital financial infrastructure. However, they also pose systemic risks if not transparently backed or properly regulated.

U.S. LEGAL FRAMEWORKS AND KEY AGENCIES

• GENIUS Act (S. 1582): Sets requirements for stablecoin issuers, including 1:1 reserve backing, regular audits, and restrictions on risky activities. Oversight involves the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC).
• President’s Working Group on Financial Markets (2021 Report): Recommends federal oversight and coordination, led by the Department of the Treasury.

GLOBAL STANDARDS

• EU MiCA Regulation: Classifies stablecoins as e-money tokens or asset-referenced tokens and imposes strict reserve and licensing rules.
• Bank for International Settlements (BIS) Innovation Hub: Runs cross-border Central Bank Digital Currency (CBDC) and stablecoin settlement pilots.

WHAT’S MISSING AND IN THE WORKS

While the GENIUS Act represents a major step forward, there is still no unified licensing framework for non-bank stablecoin issuers. Interoperability with traditional financial infrastructure remains a challenge, and algorithmic stablecoins fall outside existing legislation.

This summary highlights remaining gaps and where progress is underway.

5. DIGITAL WALLETS AND CUSTODY

Digital wallets serve as the main interface for users to send, receive, and manage cryptocurrencies. In the context of digital assets, custody refers to the service of securely holding and managing someone else’s cryptocurrency or digital tokens on their behalf. Just like a bank holds your cash or securities in an account, a crypto custodian stores digital assets in secure wallets (often using a combination of cold storage and cybersecurity protocols) to protect against theft, loss, or hacking.

Custodians can be:

• Specialized crypto firms (e.g., Coinbase Custody).
• Traditional financial institutions offering crypto services.
• Banks that receive charters to manage digital asset custody.

Custody is especially important for institutional investors and compliance with regulatory requirements, and it’s governed in the U.S. by rules proposed by the SEC, CFTC, and OCC.

U.S. LEGAL FRAMEWORK AND KEY AGENCIES

• Security and Exchange Commission (SEC)  Staff Accounting Bulletin (SAB) 122: Guides how custodians should account for customer crypto assets.
• Proposed Digital Asset Custody Rules: Would clarify who can hold crypto on behalf of users and under what conditions. Oversight includes the SEC, Commodity Futures Trading Commission (CFTC), and Office of the Comptroller of the Currency (OCC).
• Consumer Financial Protection Bureau (CFPB): Regulates consumer-facing digital wallet apps.

INTERNATIONAL FRAMEWORKS

• Monetary Authority of Singapore (MAS): Requires wallet and custody providers to be licensed and comply with safeguarding rules.
• MiCA Custody Requirements: Sets insurance, disclosure, and security standards for crypto custodians.

SUMMARY OF GAPS AND IN-PROGRESS ACTIONS

The SEC’s Staff Accounting Bulletin No. 121 (SAB 121), issued in 2022, was widely criticized for discouraging banks from offering crypto custody services. . It required institutions to report customers’ crypto holdings as liabilities on their own balance sheets, an unusual treatment that triggered capital requirements and raised risk concerns. In response to bipartisan pushback from lawmakers and industry stakeholders, the SEC rescinded SAB 121 in January 2025 through the issuance of SAB 122. The revised guidance eliminates the liability mandate and restores a risk-based accounting approach, making it easier for institutions to offer crypto custody services.

The table below outlines key pain points in custody and wallet oversight, and the steps underway to address them.

6. CROSS-BORDER COORDINATION AND TAX TRANSPARENCY

Cryptocurrencies operate across borders, making it difficult to trace transactions, enforce laws, or collect taxes. Without coordinated rules, countries face risks of tax evasion, money laundering, and unfair regulatory competition.

U.S. LEGAL FRAMEWORK AND KEY AGENCIES

• Infrastructure Investment and Jobs Act (2021): Defines “digital asset brokers” and mandates that crypto exchanges report transactions to the Internal Revenue Service (IRS) (effective 2025). Led by the IRS and Department of the Treasury.
• Keep Innovation in America Act (H.R.1414): Seeks to narrow IRS reporting to intermediaries with customer relationships, reducing burden and improving clarity.

GLOBAL INITIATIVES

• OECD Crypto-Asset Reporting Framework (CARF): Launching in 2026, requires countries to automatically share tax-related crypto data.
• FATF Travel Rule: Requires crypto providers to exchange sender/receiver identity information across borders.

WHAT’S MISSING AND IN THE WORKS

The IRS is developing clearer rules for how to report airdrops, staking income, and NFT transactions. Ambiguity remains about which platforms qualify as “brokers.” Here’s a quick overview of where tax guidance still lags—and how agencies and lawmakers are working to fill the gaps.

STATE AND LOCAL GOVERNMENTS

While most authority over currency and financial systems lies with the federal government, state and local governments play a critical role in shaping how digital currency is adopted, regulated, and experienced in daily life.

Under the Tenth Amendment of the U.S. Constitution, states have the power to regulate commerce, education, licensing, and consumer protection, making them key players in innovation, enforcement, and experimentation.

KEY AREAS OF STATE AUTHORITY AND ACTION

Digital Assets associations advocate and inform legislators and candidates. Many states either have:

1. State-specific blockchain or digital asset associations, like the Illinois Blockchain Association or Texas Blockchain Council, or the Florida Blockchain Association.
2. Chapters or regional offices of national organizations, such as:
   • Digital Chamber;
   • Blockchain Association;
   • Global Blockchain Business Council (GBBC);
   • Global Council on Digital Commerce.
3. Industry-focused tech councils or innovation hubs that include blockchain in their portfolios (e.g., Colorado’s Office of Information Technology or Arizona’s Commerce Authority).

LOCAL GOVERNMENT INNOVATION

Local governments play a critical and often overlooked role in shaping how communities interact with emerging financial technologies. Cities and municipalities are on the front lines of innovation, testing ways to incorporate cryptocurrency, blockchain, and digital wallets into everyday services. From accepting Bitcoin for parking tickets to experimenting with local reward tokens and zoning rules for crypto infrastructure, local governments are uniquely positioned to pilot practical solutions, foster financial literacy, and build public trust in the future of money.

WHAT’S NEXT: WHERE IT’S GOING

In addition to current efforts, several states and cities are leading the way on next-stage policies and innovations in digital finance. The table below highlights where state and local governments are charting new directions that could influence broader national trends.

These initiatives reinforce the role of state and local governments as regulatory testbeds. Their proximity to communities and openness to experimentation make them key contributors to the evolving digital finance landscape.

GEOPOLITICAL IMPLICATIONS OF DIGITAL CURRENCY

As digital currencies rapidly evolve, they present profound geopolitical implications—particularly in how countries manage economic power, enforce sanctions, and protect national security.

SANCTIONS EVASION AND DECENTRALIZED PAYMENTS

Many U.S.-led sanctions rely on the SWIFT network and global banking systems to monitor and block illicit financial flows. However, cryptocurrencies and Central Bank Digital Currencies (CBDCs) offer alternative, decentralized rails that can make tracking or enforcing these sanctions more difficult.

• Russia: Since the invasion of Ukraine, Russia has expanded its use of crypto and is developing a digital ruble to reduce reliance on the dollar and bypass sanctions. Russian officials have even promoted cross-border settlement in crypto.
• Iran: Iranian companies have used crypto to import goods, circumventing sanctions. The government has approved crypto for international trade, and mining has become state-sanctioned in some provinces.

GLOBAL CURRENCY POWER AND DIGITAL AUTHORITARIANISM

• China: The People’s Bank of China is leading the global CBDC race with the digital yuan (e-CNY), piloted in over 25 cities. It’s positioned as a tool for both currency internationalization and domestic surveillance, bypassing SWIFT and tracking all transactions within the system.

These developments raise critical questions about:

• U.S. leadership in global finance.
• Dollar dominance in trade and reserves.
• Privacy, control, and civil liberties in digital money systems.

STRATEGIC RESPONSE

To maintain its influence, the U.S. is considering the following:

• Accelerate development of a digital dollar through collaboration with allies and the private sector.
• Strengthen international AML/CFT standards via organizations like the Financial Action Task Force (FATF).
• Enhance transparency and cross-border coordination through frameworks like the OECD CARF and FATF’s Travel Rule.

FURTHER READING

• Brookings: Crypto, Sanctions, and Geopolitics.
• FATF: Virtual Assets.
• OECD Crypto-Asset Reporting Framework (CARF).

LEARN AND EXPLORE

• Consider opening a digital wallet through trusted platforms like Coinbase, Kraken, or Gemini to test small, secure crypto transactions.
• Explore your bank or investment firm’s digital offerings—many now pilot crypto custody, tokenized rewards, or blockchain-secured tools.
• Use reliable sources to deepen your understanding:
  • CoinDesk – daily news, market trends, and expert commentary.
  • Crypto Council for Innovation – policy insights and advocacy.
• Real-world example: You could buy handcrafted dresses directly from a women’s cooperative in Sri Lanka using cryptocurrency—avoiding wire delays and empowering global entrepreneurs.

FOR BUSINESSES AND ORGANIZATIONS

• Evaluate whether crypto fits your business, especially for e-commerce, international sales, or donation models.
• Explore crypto payments through services like BitPay or Strike and convert instantly to dollars.
• Consult financial professionals for guidance on tax and reporting requirements for digital asset income.
• Engage with state based councils and associations on blockchain and digital assets.
• Explore blockchain beyond payments.
  • Example: Valence provides blockchain-secured research collaboration tools ideal for healthcare, compliance, and academic publishing.

EDUCATE AND CONVENE YOUR COMMUNITY

• Start local – Use The Policy Circle’s Insight to structure thoughtful dialogue:
  • Start a Policy Circle, host a lunch-and-learn at your workplace, faith community, or neighborhood group.
  • Organize a town hall or panel with your local Chamber of Commerce or small business alliance.
  • Bring in a speaker to your clubs, school PTA, trade association, or professional organization.
• Collaborate with local institutions:
  • State based Blockchain Associations, and Digital Chambers.
  • Encourage your public library to offer workshops or feature reading lists on digital finance.
  • Urge schools and colleges to update financial literacy programs to include digital currencies, privacy, and new payment systems. For example, the University of Cincinnati hosts crypto risk awareness workshops.

INFLUENCE POLICY

• Follow key developments in digital currency laws and agency oversight.
• Submit feedback during open comment periods on rulemaking via FederalRegister.gov or your state’s legislative site.
• Join or nominate others for state and local boards, such as innovation councils, tech task forces, or financial literacy committees.
• Reach out to your representatives with stories that show how innovation affects real people, like a woman in Nigeria who gets paid instantly for remote work, or your own business navigating international sales. Visit the National Crypto Association for stories of everyday uses of cryptocurrencies.