Why is crypto regulated, and who sets the rules?
Regulators ask what a crypto-asset or a crypto business really is, such as a security, a commodity, a form of money or a payment service, because each answer brings different rules.1,2,3 Global bodies such as FATF, the FSB, IOSCO and the Basel Committee write standards, and each country decides how to turn them into its own law.4,5,1,6
This module explains public rules in general terms. It is not legal advice. Rules and their status change often, and countries keep updating their crypto laws.7 We date anything that can change, and this module was checked on 22 October 2026. Always read the official text, and ask a lawyer about your own situation.8,9
Why regulate crypto at all?
Different bodies worry about different risks. IOSCO, the global group of securities regulators, focuses on market integrity and investor protection.1 In 2023 it said ordinary investors' exposure to crypto had grown "exponentially", and so had their losses.1
The Financial Action Task Force (FATF) works against money laundering, terrorist financing and the financing of weapons of mass destruction.4 The Financial Stability Board (FSB) focuses on risks to the stability of the whole financial system.5
Same activity, same risk, same rules
In July 2023, the FSB based its crypto framework on one principle: "same activity, same risk, same regulation".5 IOSCO uses almost the same words.1
So regulators start with two questions. What is this crypto-asset like? And what does this business actually do? IOSCO asks regulators to check whether crypto-assets "are, or behave like substitutes for, regulated financial instruments".1
The four big questions
| Question | Where the answer leads | One example from this module |
|---|---|---|
| Is it a security, like a share or an investment contract? | Securities law, such as registration and disclosure10,2 | US courts use the Howey test (lesson 4)10 |
| Is it a commodity? | Commodities and derivatives law11,12 | The CFTC says virtual currencies such as bitcoin are commodities (lesson 4)11 |
| Is it money, or a claim on money? | E-money and stablecoin rules13 | MiCA's e-money tokens reference one official currency (lesson 3)13 |
| Does the business hold or move value for others? | Anti-money-laundering rules and licences14,3 | US money transmitters register with FinCEN (lesson 4)3 |
One token can raise more than one of these questions. In the US, for example, the SEC said in March 2026 that a crypto asset that is not a security can still be sold as part of an investment contract, which is a security.2
Who writes the global standards
| Body | What it is | Its crypto work (dated) |
|---|---|---|
| FATF | An independent inter-governmental body. Its Recommendations are the global standard against money laundering.4 | Revised Recommendation 15 in October 2018 and added its interpretive note on virtual assets in June 2019 (lesson 2).14 |
| FSB | An international body that monitors and makes recommendations about the global financial system.15 | Published its global crypto framework in July 2023.7 |
| IOSCO | Its members regulate more than 95% of the world's securities markets, in more than 130 jurisdictions.1 | Published 18 crypto recommendations in November 2023.1 |
| Basel Committee (BCBS) | The main global standard setter for the prudential regulation of banks.6 | Its crypto standard for banks had an implementation date of 1 January 2026.16 On 1 October 2026 it said it was reviewing parts of it.17 |
"Prudential" rules deal with things like how much capital and liquidity a bank must hold for its risks. The Basel Committee's crypto disclosures, for example, cover the capital and liquidity banks need for their crypto exposures.6,16
Standards are not laws
IOSCO's recommendations are addressed to the authorities in each country, not to firms directly.1 Each country decides how to turn global standards into its own law.1,7
That leaves gaps. In October 2025, the FSB published a review of how its crypto framework was being put in place. The chair of the team that wrote it said progress was "incomplete, uneven and inconsistent".7 The chair added that this "creates opportunities for regulatory arbitrage", meaning firms can take advantage of the differences between countries' rules.7,1
IOSCO also noted that many crypto firms offer services from offshore financial centres. It added that serving customers in a country may still bring in that country's laws.1 This is why one firm can face the rules of several places at once.1,18
- Policy Recommendations for Crypto and Digital Asset Markets: Final Report (FR11/2023). Board of the International Organization of Securities Commissions (IOSCO), 16 November 2023.
- Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets (Release No. 33-11412). US Securities and Exchange Commission, with guidance from the Commodity Futures Trading Commission, 17 March 2026, effective 23 March 2026.
- Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (FIN-2019-G001). Financial Crimes Enforcement Network (FinCEN), US Department of the Treasury, 9 May 2019.
- Updated Guidance for a Risk-Based Approach: Virtual Assets and Virtual Asset Service Providers. Financial Action Task Force (FATF), October 2021.
- FSB Global Regulatory Framework for Crypto-asset Activities. Financial Stability Board, 17 July 2023.
- Basel Committee on Banking Supervision. Bank for International Settlements (read 22 October 2026).
- FSB finds significant gaps and inconsistencies in implementation of crypto and stablecoin recommendations. Financial Stability Board, press release, 16 October 2025.
- Markets in Crypto-Assets Regulation (MiCA). European Securities and Markets Authority (ESMA), read 22 October 2026.
- H.R.3633: Digital Asset Market Clarity Act, all actions and titles. Congress.gov, Library of Congress (actions list read through the Congress.gov data service on 22 October 2026).
- Securities and Exchange Commission v. W. J. Howey Co., 328 U.S. 293. Supreme Court of the United States (Library of Congress copy of the United States Reports), 27 May 1946.
- Bitcoin Basics (customer brochure). US Commodity Futures Trading Commission, Office of Customer Education and Outreach.
- The Commission: CFTC mission statement. US Commodity Futures Trading Commission.
- Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA): Articles 2 and 3, scope and definitions. European Parliament and Council of the European Union, Official Journal L 150, 9 June 2023 (read on EUR-Lex; the original text, not later amendments), 31 May 2023.
- The FATF Recommendations: Recommendation 15 and the glossary. Financial Action Task Force (FATF), updated June 2026, February 2012, updated June 2026.
- About the FSB. Financial Stability Board (read 22 October 2026).
- Basel Committee publishes final disclosure framework for banks' cryptoasset exposures and targeted amendments to its cryptoasset standard. Basel Committee on Banking Supervision, press release, 17 July 2024.
- Basel Committee meets to advance supervisory and regulatory initiatives and discuss risks and vulnerabilities to the global banking system. Basel Committee on Banking Supervision, media release, 1 October 2026.
- The FATF Recommendations: Interpretive Note to Recommendation 15 (new technologies). Financial Action Task Force (FATF), updated June 2026, updated June 2026.
General education built from the publicly available sources listed above. Not financial, legal, tax or investment advice. Naming a company, project or regulator is not an endorsement either way. Last checked 2026-10-22. Terms and disclaimer.