The cryptocurrency industry has historically been defined by rapid innovation and dynamic growth, alongside evolving regulatory frameworks. For years, participants have navigated a fragmented and ambiguous legal landscape, where rules, often designed with traditional finance in mind, differed significantly across regions and did not always account for the unique aspects of blockchain technology. Enforcement approaches also varied, creating further complexity.
However, recent developments suggest a meaningful shift from uncertain and inconsistent oversight to more structured and intentional regulation. This shift reflects a transition from a reactive and ambiguous stance toward a more proactive and clearly defined approach. Rather than applying legacy frameworks, regulators are now designing purpose-built structures focused on alignment with crypto’s distinct nature, proportionality in addressing real risks, and effectiveness in meeting policy objectives. This evolution toward clearer, more suitable regulation is laying the groundwork for sustainable growth across the industry, all while maintaining the innovative spirit that defines crypto.
This article, the first in a three-part series, lays the conceptual foundation, defining regulatory clarity and discussing why it matters. It also examines the role of international standard setters in shaping shared regulatory expectations and nudging convergence.
Part II will explore the approach taken by select jurisdictions towards regulatory clarity, as well as common themes noted amongst these jurisdictional approaches.
The series will conclude with Part III, which provides a strategic reflection on what remains unresolved, what priorities may lie ahead, and how clarity can evolve into a global discipline.
Together, these articles offer a panoramic view of where clarity is emerging, how it is being constructed, and why it remains a work in progress.
The Importance of Regulatory Clarity
At its core, regulatory clarity[i] refers to well-defined laws and guidelines that govern the use of cryptocurrencies, blockchain technology, and related services. When implemented effectively, clear regulations can deliver transformative benefits that extend across the entire ecosystem[ii]. They can stabilize markets by preventing fraud and mitigating systemic risks[iii]; protect consumers through safeguards that ensure fairness without sacrificing innovation; boost investor confidence and participation[iv]; and provide legal certainty, reducing compliance risks for legitimate operators[v].
For regulations to achieve these benefits without unintended consequences, they must embody certain fundamental principles:
First, specificity is paramount. Precise, well-defined requirements eliminate ambiguity that could lead to compliance challenges or legal risks.
Second, regulations should be proportionate and adaptable, ensuring that oversight matches the scale and nature of risks without imposing undue burdens that could stifle innovation or exclude new entrants from the market.
Third, consistency across jurisdictions is essential. The inherently cross-border nature of blockchain technology requires aligned standards for efficient operations and to avoid contradictory requirements.
Fourth, meaningful collaboration. Engagement between regulators and industry participants ensures practical, workable frameworks that allow for real-world testing and refinement of new rules.
The challenge lies in achieving the delicate balance between necessary oversight and innovation freedom. Excessively restrictive policies can smother promising developments, while ambiguous, disproportionate or inconsistent regulations can create untenable operational complexities[vi]. Many experts agree that coherent, well-designed regulations are crucial for transforming cryptocurrency from an experimental asset class into an integrated component of the global financial system.
When jurisdictions converge on foundational principles, they create a more predictable environment for industry participants and regulators alike. In this context, regulatory clarity emerges not just as a legal necessity, but as a strategic enabler, one that paves the way for a more stable, transparent, and innovative crypto ecosystem.
The Role of International Standard Setters
While national regulators are central to shaping crypto oversight, international standard setters play a critical role in defining the contours of regulatory clarity across borders. These bodies do not legislate, but they influence by providing frameworks, principles, and technical guidance that guide domestic rulemaking and foster global coherence. Their work is especially vital in a sector where innovation is inherently global, and where regulatory fragmentation can undermine market integrity, consumer protection and investor confidence, among other things.
FATF: Anchoring AML/CFT Expectations
The Financial Action Task Force (FATF) has been instrumental in establishing baseline standards for anti-money laundering (AML), counter-terrorist financing (CFT) and countering proliferation financing (CPF) in the crypto space[vii]. Since 2015[viii], FATF has progressively expanded its guidance to address the unique risks posed by virtual assets and virtual asset service providers. Its landmark 2019 Guidance for a Risk-Based Approach[ix], among other things, introduced the Travel Rule[x] and clarified AML/CFT obligations for crypto market participants, setting a precedent for regulatory convergence across jurisdictions.
Recognizing that regulatory clarity is not static but iterative, FATF has continued to refine its framework through subsequent updates and publications[xi], reinforcing principles of technological neutrality, functional equivalence, and risk-based supervision which are intended to provide flexibility for innovation while safeguarding the financial system. Yet, this process also illuminates the implementation challenges inherent in global standard-setting. For example, the "Travel Rule" remains technically and operationally complex for many platforms, and jurisdictional divergence in enforcement creates a fragmented compliance landscape. Achieving seamless compliance requires novel technological solutions and ongoing dialogue between regulators and innovators to ensure frameworks are both secure and practicable. This collaborative effort is essential to transform international standards into consistent, effective on-the-ground implementation, that protects users, supports responsible innovation and fosters global interoperability.[xii]
IOSCO and the FSB: Market Integrity and Systemic Risk
Complementing the foundational AML/CFT/CPF work led by the FATF, other international standard-setters are actively shaping the broader regulatory perimeter for crypto-assets. The International Organization of Securities Commissions (IOSCO) and the Financial Stability Board (FSB) have been developing crucial guidance to address market integrity, investor protection, financial stability, and systemic risks.
IOSCO’s extensive 2023 policy recommendations offer detailed guidance for jurisdictional regulatory frameworks, providing much-needed clarity on perennial industry pain points like cross-border cooperation and the custody of client assets[xiii]. Yet, its application to truly decentralized protocols continue to present practical and philosophical challenges.
Concurrently, the FSB’s high-level recommendations[xiv] aim to establish a global regulatory baseline for addressing financial stability risks associated with crypto-asset markets. Its framework for overseeing crypto-asset activities, including those of issuers and service providers, is designed to identify and mitigate systemic vulnerabilities, particularly those arising from growing interconnections with the traditional financial system.
Both IOSCO and the FSB have made notable progress in recognizing and promoting the regulation of stablecoins[xv]. Their shared emphasis on robust governance, full asset backing, and timely convertibility addresses key vulnerabilities. Translating these principles into practice, however, necessitates ongoing technical dialogue between regulators and industry to develop operationally pragmatic compliance solutions.
A unifying principle is “same activity, same risk, same regulation”[xvi] which seeks to harmonize regulatory approaches across jurisdictions, and curb regulatory arbitrage. The anticipated results of the FSB’s 2025 peer review[xvii], will be a key indicator as to how well global standards are being implemented and where gaps persist.
Ultimately, the rapid evolution of the crypto ecosystem demands an equally dynamic regulatory response. It is only through continuous international coordination, technical collaboration, and a willingness to adapt, that frameworks can provide the regulatory clarity needed to successfully balance the imperative for market integrity and investor protection with the flexibility to foster responsible innovation.
BIS and the Basel Committee: The Foundation of Prudential Clarity
While other bodies focus on market conduct and integrity, the Bank for International Settlements (BIS) and its Basel Committee on Banking Supervision (BCBS) provide essential prudential standards for the regulated banking sector’s engagement with cryptoassets. The BCBS issued its landmark standards on the Prudential Treatment of Cryptoasset Exposures[xviii] in December 2022[xix]and refined with targeted amendments in 2024. The amendments aim to promote a consistent global understanding of the relevant requirements, particularly the criteria for stablecoins to qualify for a preferential regulatory treatment[xx].
The framework is foundational to regulatory clarity for two key reasons. First, it establishes a clear, risk-sensitive hierarchy that distinguishes between lower-risk assets like tokenized traditional instruments and strictly regulated stablecoins, and higher-risk assets like unbacked crypto assets. This taxonomy provides a critical reference point for banks and supervisors, directly informing capital allocation and risk management decisions.
Second, by including stringent capital requirements within its standards for the riskiest assets, the BCBS sends an unambiguous message that banking stability is paramount. This ultra-conservative stance, however, has drawn criticism from industry participants, who argue that the prohibitively high capital charges risk stifling institutional adoption and innovation within the banking sector rather than merely managing risk.
The standards also establish a crucial prudential anchor by mandating robust risk management, governance, and strong supervisory oversight.
The Basel standards are becoming the cornerstone for global jurisdictions, providing a definitive reference for rules on custody and institutional participation. In essence, the Basel Committee seeks to establish the guardrails within which banks can safely operate, offering the certainty needed for cautious and calculated institutional adoption.
OECD and IMF: Taxation, Transparency, and Global Coordination
Moving beyond market and prudential regulation, the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) have been developing core international frameworks to support regulatory clarity in taxation[xxi] and macroeconomic policy.
The OECD’s Crypto-Asset Reporting Framework (CARF) [xxii] establishes a global standard for tax transparency in the crypto asset space, addressing a critical gap in cross-border regulation of crypto-assets. By harmonizing data collection and automated reporting obligations for crypto-asset service providers, CARF provides jurisdictions with the essential infrastructure to identify taxable activity, enforce compliance, and systematically deter evasion. Its modular architecture, encompassing rules, model exchange agreements, and technical schemas[xxiii], facilitate scalability and interoperability across diverse regulatory regimes.
The IMF provides a critical macro perspective, focusing on the preservation of monetary sovereignty and economic stability in its member states. The IMF’s guidance, disseminated through its FinTech Notes, country reports, and policy papers[xxiv], urges comprehensive regulatory approaches that address not only financial integrity risks but also profound macroeconomic implications. The IMF’s recommendations are designed to be synthesized with standards from the FSB and other standard-setting bodies to foster a consistent, coordinated global strategy. Key priorities include establishing clear legal and regulatory certainty for crypto assets, safeguarding monetary sovereignty by avoiding their use as official currency, developing measures to guard against excessive capital flow volatility, and implementing unambiguous tax treatment to ensure fiscal safeguards. The primary challenge, however, lies in the capacity of diverse national jurisdictions to translate this high-level guidance into technically sound and operationally coherent domestic policy.
Conclusion
Through their coordinated efforts, international standard-setters have laid the architectural foundation for crypto-asset regulation, establishing core global norms across AML/CFT,/CPF market conduct, prudential oversight, and tax transparency. This foundational work has catalyzed a critical shift from widespread ambiguity to a new phase of structured engagement, providing baseline expectations that nudge jurisdictions toward convergence while respecting local nuances.
The fundamental challenge lies in implementation. National regulators must embed these global guardrails in a manner that delivers substantive clarity, fosters dynamic oversight environments, and effectively mitigates systemic risk. Harmonized and practical solutions are increasingly essential as the industry matures.
Ultimately, regulatory clarity is not a static checklist but a living framework, an essential prerequisite for market legitimacy, resilience, and global interoperability. Without it, innovation is constrained, compliance becomes guesswork, and cross-border collaboration falters. Sustained dialogue between innovators and regulators remains the only viable path to translating high-level standards into robust, workable protections for all participants. The task ahead is to build a coherent, secure, and innovative financial ecosystem for the future.
Part II of this article series will analyze how select jurisdictions have been interpreting and implementing these international standards, mapping the tangible construction of regulatory clarity and identifying common themes across the global landscape.
References
[i] This definition is focused on what regulatory means within the crypto sector and not the broader financial/regulatory sector.
[iii] “Crypto-asset regulation is instrumental in mitigating systemic risks and safeguarding financial stability”: Wronka, C. Crypto-asset regulatory landscape: a comparative analysis of the crypto-asset regulation in the UK and Germany. J Asset Manag 25, 417–426 (2024). https://doi.org/10.1057/s41260-024-00358-z
[iv] “Regulatory oversight fosters investor confidence and market trust. As crypto assets continue to gain mainstream attention, attracting institutional investors and retail participants, establishing clear rules and guidelines can reduce uncertainty and foster confidence in the market”. Ibid.
[v] Regulatory fragmentation has long stood as a barrier to market maturity. Inconsistent definitions, overlapping mandates, and divergent enforcement approaches have created persistent uncertainty for participants navigating the crypto landscape.
[vi] Wronka, C -Ibid.
[ix] The FATF introduced the ‘Travel Rule’ in 2019 by way of a revision to Recommendation 15 to extend anti-money laundering, counter terrorist financing and counterproliferation financing obligations to virtual assets and Virtual Assets Services Providers. The amendment to the recommendation required countries to identify and assess their money laundering and terrorist financing related risks for new, developing and preexisting technologies. See here.
[x] requiring virtual asset service providers to transmit originator and beneficiary information for qualifying transactions.
[xii] While implementation has varied, FATF’s framework has catalyzed legislative reform in dozens of jurisdictions and remains a cornerstone of cross-border compliance.
[xiii] IOSCO’s November 2023 Final Report introduced 18 policy recommendations covering governance, trade disclosures, custody, operational risks, retail distribution, and cross-border cooperation. It emphasizes lifecycle-based regulation and consistent oversight across jurisdictions. IOSCO’s December 2023 Final Report outlines 9 policy recommendations for DeFi, focusing on responsible persons, operational risks, disclosures, and cross-border cooperation. It maps the DeFi stack and identifies key risks and actors. An umbrella note explains how DeFi and crypto-asset recommendations interoperate for cohesive regulation.
[xix] The effect of these standards (which focuses on managing the risks that crypto assets pose to banks), is to amend the BCBS’ framework for the prudential regulation of banks.
[xx] See amendments here.
[xxi] A July 2023 IMF working paper highlighted a fundamental challenge: the difficulty in quantifying the global crypto-asset market makes calculating the potential tax gap from unreported holdings and transactions nearly impossible.
[xxii] See here. CARF was developed to address the rapid growth of the crypto-asset market and to ensure that recent gains in global tax transparency are not gradually eroded. The CARF comprises: (i) Rules and Commentary for domestic implementation, structured around asset scope, reporting entities, reportable transactions, and due diligence; (ii) a multilateral or bilateral framework for automatic exchange of information (CARF MCAA); and (iii) a standardized XML schema for reporting and data exchange.
[xxiii] In October 2024, the OECD published the XML Schemas and Guidance to support the transmission of information between tax authorities for the Crypto-Asset Reporting Framework (CARF) and the amended Common Reporting Standard (CRS); including reporting requirements for both regulations. It has since published further updates.