summary
In early 2026, news about the nominee for Federal Reserve Chair could trigger volatility in the crypto market, demonstrating how deeply embedded crypto assets are in the macroeconomic policy environment. Policy factors are shifting from background variables to core factors influencing market structure.
Looking back over the past decade, crypto regulation has gone through three phases: early ambiguity and ex-post enforcement, followed by a period of clearer direction but no concrete rules, until 2025 when it entered the real implementation phase. Regulation is no longer just chasing risks, but proactively intervening in market structure design, clarifying who can participate, how assets are custodied, and who bears the responsibility for liquidation.
Policies are no longer simply categorized as either beneficial or detrimental. They are more like a financial order engineering project, reshaping market structures through institutional arrangements. Stablecoins are being incorporated into balance sheet regulatory logic, increasingly resembling regulated payment and financial intermediaries; exchanges and service providers are being included in licensing and capital requirements; DeFi's leverage and liquidation structures are beginning to be viewed as systemic risks; Asia is adopting a permissioned open approach, while the US and Europe are gradually clarifying boundaries through legislation and enforcement. Global regulatory logic is converging: risks must be visible, responsibilities must be traceable, and failures must be liquidable.
Entering 2026, policy focus has shifted further upwards. The focus has moved from investor protection and price volatility to systemic issues such as liquidity structure, clearing mechanisms, and cross-border capital transmission. Will stablecoins affect the money market? Could on-chain leverage spill over into traditional finance? Will cross-border payments and PayFi change the regulatory framework for foreign exchange and payments? These questions are becoming new policy focal points.
In this institutional environment, the competitive logic of the crypto market is changing. Structures characterized by high leverage, ambiguous responsibilities, and opaque reserves will become increasingly unsustainable; designs with clear reserves, risk isolation, and well-defined liquidation pathways offer greater long-term viability. Innovation will not disappear, but it will shift from disorderly expansion to more sustainable growth.
Understanding policy evolution is not just about macro-level judgment, but also a prerequisite for understanding future market structures. The landscape of cryptography is being institutionalized and reshaped. Those who can find a balance between transparency and efficiency are more likely to navigate the next cycle.
Table of contents
1. The policy is neither good nor bad news, but rather a "financial order project".
1.1 Research Background: 2025-2026 is a true watershed moment for crypto policy.
1.2 Why will the use of regulation as a "price variable" gradually become ineffective by 2025?
1.3 Encryption policies are shifting from "attitude expression" to "system implementation".
2. Timeline: Policy Evolution from the "Ambiguous Period" to the "Implementation Period"
2.1 2018-2022: A Period of Regulatory Ambiguity, the Crypto Market's "Wild Growth" Period
2.2 2023-2024: Policy Setting Period, Direction Clear but Not Yet Implemented
2.3 2025: The year the rules begin to be truly enforced.
3. Key Changes in 2025: Not the Bill, but the Change in Regulatory Logic
3.1 The United States: From "Enforcement and Regulation" to "Institutional Redistribution"
3.2 EU MiCA: Real-world Implementation Results by 2025
3.3 The Asian Approach: Permission-Based Opening-Up, Rather Than Relaxed Regulation
3.4 Summary: Consensus on Regulatory Logic in 2025
4. Policy Focus in 2026: Shift from Price Risk to Systemic Risk
4.1 The regulatory focus of stablecoins may shift towards the macro-financial framework.
4.2 On-chain leverage and liquidation risks: Does DeFi possess systemic security?
4.3 PayFi and Cross-border Payments: Regulatory Focus of On-Chain Payment Paths
4.4 Key words for 2026: Non-price risk, systemic importance, cross-market transmission
5. How policies are reshaping the crypto market structure
5.1 Changes in Product Form: From High-Leverage Game to Risk Isolation Design
5.2 Changes in Funding Paths: From Anonymous Liquidity to Identifiable Liquidity
5.3 Changes in the risk structure: Who bears the tail risk?
6. Outlook and Trends: From "Compliance Adaptation" to "Structural Choices"
6.1 Compliance is no longer a cost item, but a right to market access.
6.2 The market will move towards a "dual-track system": compliant financial layer vs. on-chain innovation layer
6.3 Stablecoins will become a core entry point for the "new financial infrastructure".
6.4 Regulation will shift from "rule-making" to "data-driven".
6.5 Evolution of the Landscape: From "Open Competition" to "Structural Concentration"
6.6 The Compliance Path of DeFi: From "Protocol Neutrality" to "Interface Compliance"
6.7 Track Repricing: From "Traffic Competition" to "Structural Competition"
7. Conclusion: A New Stage for the Crypto Market Under the Institutional Environment
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1. The policy is neither good nor bad news, but rather a "financial order project".
In early February 2026, the crypto market experienced a rapid decline, triggered by a macroeconomic policy signal: Trump nominated former Federal Reserve Governor Kevin Warsh to be the next Federal Reserve Chairman. Following the announcement, the market quickly repriced future monetary policy expectations, the dollar strengthened, risk assets as a whole came under pressure, and the crypto market experienced a significant chain reaction. This event demonstrates that the Web3 market has entered a phase of high sensitivity to policy and can react instantly. Unlike the past, which was primarily driven by its own cycles and narratives, in early 2026, even an uncertain policy signal was enough to rapidly transmit to crypto asset prices through risk appetite, leverage adjustments, and capital flows. Policy changes from 2025 to 2026 are no longer merely background conditions for the market, but are becoming core variables influencing market structure. Studying the historical logic and future direction of policies is no longer a supplement to macroeconomic judgments, but a necessary prerequisite for understanding how the crypto market operates and its long-term evolution.
1.1 Research Background: 2025-2026 is a true watershed moment for crypto policy.
Looking back at the evolution of crypto policies over the past decade, a clear break emerges: regulation from 2018 to 2022 was largely driven by market demands. The primary task of regulatory bodies was to remedy and enforce regulations after risks had already surfaced. Addressing issues such as the ICO bubble, exchange collapses, stablecoin de-pegging, and algorithmic model failures exhibited a clear reactive characteristic.
The reason 2025 is considered a policy turning point is not because of the passage of a major bill, nor because of a sudden shift in regulatory attitude from friendly to tough, but rather because regulation began to shift from reactive to proactive design. The focus of policy discussions underwent a fundamental change: no longer solely on which behaviors were illegal, but on proactively intervening in the market structure itself, redefining which businesses can exist, in what structure they should exist, and who should bear the responsibility for liquidation, backing, and risk isolation. During this phase, a consensus gradually formed across multiple jurisdictions: the crypto market is no longer a marginal testing ground that can remain outside the system indefinitely, but a structural market that must be integrated into the existing financial order and managed accordingly.
Entering 2026, this change became even more apparent. The focus of discussion shifted from whether or not to regulate, to how to regulate, at what level, and who would be responsible. Regulation began to manifest as concrete and enforceable institutional arrangements, including entry standards, compliance boundaries, risk isolation mechanisms, and cross-market coordination rules. It is in this sense that 2025–2026 constitutes a true watershed moment for crypto policy: for the first time, regulation no longer merely restricts the market, but begins to reshape the very structure of the market.
1.2 Why will the use of regulation as a "price variable" gradually become ineffective by 2025?
For a long time, the market has been accustomed to understanding the impact of policies in a highly simplified way: the passage of a bill is good news, and a delay in approval is bad news; tightening regulations mean a bearish outlook, and friendly policy statements mean a bullish outlook. This logic was not entirely ineffective in the early stages, because the main impact of policies at that time was indeed concentrated on expectations and sentiment. However, with the change in regulatory logic, this understanding began to clearly fail in 2025. The core focus of policy is no longer the price itself, but the structural risks behind the price. From a regulatory perspective, what is truly of concern is not how much a particular token will rise or fall, but whether the risk will spill over into the traditional financial system, how leverage is created and transmitted, and who should bear the liquidation and responsibility in extreme circumstances.
The way policies influence the market is changing: they no longer affect prices by directly influencing sentiment, but rather shape the market structure in the long term through institutional design. Regulators won't tell the market where to go, but they will clearly define which businesses can obtain compliant liquidity, which models will be systematically compressed, and which participants have long-term viability. Within this framework, judgments like "passing a bill is always a good thing" appear too simplistic. Some policies may suppress activity in the short term, but in the medium to long term, they increase the safety and certainty of capital inflows; conversely, some seemingly lenient statements, without enforcement mechanisms, often fail to truly change market dynamics. Therefore, since 2025, policy has no longer been a simple price variable, but a key factor determining the direction of market structure evolution.
1.3 Encryption policies are shifting from "attitude expression" to "system implementation".
If we were to summarize the policy changes from 2025 to 2026 in one sentence, it would be this: crypto regulation is shifting from uncertainty to structural constraints. Early market uncertainty stemmed primarily from concerns about a blanket ban; however, in 2025-2026, this uncertainty is being replaced by a clearer, but more binding, regulatory framework. Regulation doesn't promise market growth, but it clarifies which behaviors will no longer be tolerated and which paths are compliant in the long term. Simultaneously, the regulatory focus is shifting from policy statements to enforcement. Policies are gradually being translated into actionable rules, including licensing systems, disclosure requirements, and the division of responsibilities for liquidation and custody. Compliance is no longer just a narrative label but is beginning to translate into real operating costs and competitive barriers.
In this process, the way policies affect the market has also changed: it is no longer mainly reflected in short-term fluctuations, but rather in the continuous shaping of capital structures, product forms, and participating entities through institutional arrangements. This change is often slow but highly irreversible. Based on this assessment, this article will no longer focus on the "good or bad" aspects of a single policy, but will attempt to answer a more fundamental question: Under the new policy framework, what kind of structure will the crypto market be reshaped into, and which participants will benefit or be eliminated in this process?
2. Timeline: Policy Evolution from the "Ambiguous Period" to the "Implementation Period"
If we take a longer-term view, we will find that encryption policies are not random responses, but rather evolve along a clear path, from vague to enforceable, and from attitude expressions to institutional arrangements.
2.1 2018-2022: A Period of Regulatory Ambiguity, the Crypto Market's "Wild Growth" Period
The period from 2018 to 2022 was a typical period of regulatory ambiguity for the crypto market. The core characteristic of this stage was the lack of a unified regulatory logic that could be anticipated, understood, and internalized by the market. From a policy perspective, most rules at that time remained at the level of qualitative judgment: whether digital assets belonged to securities, commodities, or payment instruments was inconsistently determined by different institutions and jurisdictions. Enforcement exhibited a clear fragmented characteristic, often intervening only after risks had become apparent, rather than setting clear boundaries beforehand. The crypto market gradually developed a highly self-reinforcing structure. From 2018 to 2022, core innovations in the market almost entirely revolved around efficiency and expansion: DeFi lending and decentralized exchanges developed rapidly, and algorithmic stablecoins, cross-protocol yield stacking, permissionless derivatives, and high-leverage products emerged continuously. Projects and platforms generally prioritized growth rate over compliance design.
During this process, leverage was continuously amplified, yet clear clearing and liability boundaries were lacking. Stablecoins, lacking transparent reserves and audit constraints, effectively assumed the role of settlement and liquidity hubs within the system; while the yield structures formed through liquidity mining and cross-protocol combinations trapped a significant amount of risk within the system without corresponding isolation or backstop mechanisms. Many models considered innovative at the time were essentially radical restructurings of traditional financial logic in a space where regulation had not yet intervened in structural design. This stage exhibited a typical pattern of "innovation first, rules lagging behind." When entry barriers, liability attribution, and risk boundaries were unclear, the market naturally evolved along the path of lowest cost and fastest expansion, laying the structural groundwork for subsequent regulatory intervention. The period from 2018 to 2022 was not one of regulatory failure, but rather one where regulation had not yet truly entered the structural design phase.
2.2 2023-2024: Policy Setting Period, Direction Clear but Not Yet Implemented
From 2023 to 2024, crypto policy entered a period of policy clarification. The regulatory directions of major jurisdictions began to converge, but an enforceable and stable institutional framework was not yet fully established. Regulators began to clarify "which behaviors are unacceptable," but still did not provide a complete set of long-term operating rules.
United States: Clear law enforcement, lagging legislation
In the United States, this phase was particularly pronounced. Regulators sent frequent signals to the market through enforcement actions, rejecting certain business models and redefining compliance boundaries. However, a unified and clear federal legislation remained absent, leaving the market able to sense regulatory attitudes but struggling to accurately assess long-term compliance paths. Several landmark cases reinforced this signal. In 2023, FTX founder Sam Bankman-Fried was convicted of fraud and conspiracy, clearly conveying the regulatory stance that key responsible parties must bear legal consequences. Celsius Network, a crypto lending platform that went bankrupt in 2022, saw its founder, Alex Mashinsky, indicted in 2023, plead guilty in 2024, and sentenced in 2025, further reinforcing expectations of accountability for high-yield promises and misuse of customer funds. Meanwhile, the developers of the privacy mixing protocol Tornado Cash faced criminal charges in 2023, sparking widespread industry discussion about the boundaries of responsibility for decentralized tools. Despite Congress pushing forward several legislative proposals during the same period, a unified and enforceable regulatory framework had yet to be established by 2024. This situation has led the market to constantly test the limits in practice, resulting in a situation where the direction is set but the rules have not been implemented.
EU and Asia: A Clearer Path
In contrast, the EU completed a more systematic institutional design at this stage. The launch of MiCA, for the first time, defined the boundaries of the issuance, service, and market of crypto assets within a complete framework, clarifying that they would be incorporated into the existing financial regulatory system. Some Asian financial centers chose a more strategic path. Through licensing systems and clear compliance frameworks, they allowed certain businesses to operate within the regulatory purview, provided that risk boundaries were clear. Hong Kong began issuing licenses to virtual asset trading platforms, with HashKey Group and OSL being among the first local exchanges to receive approval. Singapore raised the entry threshold through a tiered licensing system. This "licensing-based openness" provided the market with a more predictable development path and created real-world examples for institutional participation and compliant innovation. The tone set at this stage does not equate to the rules being finalized. It is more like a collective signal from regulators to the market: the crypto market will no longer exist in a gray area for a long time, and the core of future competition will no longer be just technology and traffic, but compliance capabilities and structural design.
2.3 2025: The year the rules begin to be truly enforced.
If the previous phase addressed "where to go," then starting in 2025, regulators began systematically answering "how to go." The changes that year didn't stem from a single market-shaking bill, but rather from the concrete enforcement of rules. The focus of regulation shifted to three fundamental yet long-avoided questions: who is qualified to issue and provide services, where should funds be held in custody, and who bears responsibility should problems arise. In the EU, MiCA entered its substantive implementation phase in 2025, with stablecoin issuers and crypto service providers beginning to be subject to ongoing regulation within a unified framework. In Asia, issuance qualifications, custody arrangements, and the division of responsibilities were further refined, and stablecoins gradually shifted from "market consensus tools" to regulated payment and settlement components. In the US, even though legislation was not yet fully formed, the custody, clearing, and disclosure requirements surrounding spot Bitcoin ETFs effectively established the operational paradigm for compliant funds entering the crypto market. Regulators began to gradually reshape the market structure through the enforcement of fundamental rules. Compliance shifted from a matter of attitude to a matter of sustainable operation. Some models were not directly prohibited, but naturally became unfeasible under the constraints of responsibility and cost. 2025 marks a pivotal year for the crypto market, transitioning from a "scalable structure" to a "sustainable structure." Rules begin to take effect, forcing the market to confront a fundamental question for the first time: in a system that demands accountability, who will survive?
3. Key Changes in 2025: Not the Bill, but the Change in Regulatory Logic
The changes in 2025 will not necessarily be marked by the passage of a particular bill, but rather by a fundamental shift in regulatory narratives, power structures, and institutional design approaches.
3.1 The United States: From "Enforcement and Regulation" to "Institutional Redistribution"
In recent years, the US governance of the crypto industry has relied heavily on law enforcement. The SEC has incorporated numerous projects into its securities regulatory framework through case-by-case interpretation; the CFTC has intervened to a limited extent in the derivatives and futures markets. On the surface, this appears to be a hardening of regulation, but in reality, it's a stopgap measure implemented to fill institutional gaps. By 2025, the problems can no longer be solved through law enforcement: on the one hand, the boundaries of enforcement are becoming increasingly blurred, and the judicial system is under increasing pressure; on the other hand, institutions, banks, and payment systems are beginning to substantially enter the crypto space, and the original handling models are no longer sufficient to support large-scale financial activities. US regulation is shifting from "whoever violates the rules, punishes them" to a more fundamental question: who has the right to regulate what? What is the basis for regulation? And in which regulatory framework should crypto assets with different financial attributes be placed?
The true significance of the Clarity Act is not whether it passes or not, but rather the logic of demarcation.
The CLARITY Act, officially the Digital Asset Market Clarity Act of 2025, is a legislative attempt by the U.S. Congress to systematically restructure the digital asset market amid long-term regulatory uncertainty. Introduced in the House of Representatives on May 29, 2025, it passed the House in July of the same year with a significant bipartisan majority, becoming the first comprehensive crypto market structure bill to pass a single house of Congress. As of April 2026, the CLARITY Act had still not passed the Senate, remaining in a state of continuous delays and back-and-forth negotiations: on the one hand, the Senate had not yet established a new timetable for deliberation, leading to multiple delays in the legislative process; on the other hand, significant disagreements remained on key issues such as stablecoin yields, the scope of DeFi regulation, and the conflict of interest between the banking and crypto industries, making it difficult for the bill to reach the final vote. Despite this, the bill is still considered a core framework for U.S. digital asset regulation and continues to receive policy attention (including public calls from Treasury officials to push for legislation). However, with the 2026 midterm elections approaching, its eventual passage within the current congressional cycle remains highly uncertain.
In terms of content, CLARITY is not a special bill addressing a single issue, but rather a "market structure bill." Its core purpose is not to encourage or restrict a particular type of crypto activity, but to answer a more fundamental question: how should the digital asset market be incorporated into the existing financial regulatory system? Around this goal, the core content of the CLARITY bill can be summarized in four aspects.
First, it clarifies the legal classification framework for digital assets. CLARITY is the first to differentiate between different types of digital assets at the legislative level, focusing on the distinction between "investment-grade digital assets" and "mature digital commodities." Some tokens may be classified as securities during early-stage financing and centralized control; however, their legal status can change when the network no longer relies on a single entity and the tokens are primarily used for network functions or transaction settlement. Second, it introduces a "dynamic regulatory attribution" mechanism. Unlike the previous enforcement logic of a permanent classification once determined, CLARITY allows digital assets to transition from the SEC's securities regulatory system to the CFTC's commodity or digital commodity system after meeting specific conditions. This design essentially acknowledges the legal significance of the decentralized process itself.
Third, the legislation clarifies the boundaries of power between the SEC and the CFTC. CLARITY defines the regulatory division of labor through legislation: the SEC is primarily responsible for security-type digital assets involving financing, issuance, and expected investment returns; the CFTC is responsible for the market for highly decentralized digital goods and their derivatives, primarily focused on trading and use. This arrangement attempts to end the long-standing uncertainty surrounding jurisdictional disputes through enforcement. Finally, the legislation stratifies the compliance responsibilities of market participants. It does not simply place all the responsibility on project teams, but rather sets differentiated obligations for different roles such as project teams, trading platforms, brokers, and custodians, including information disclosure, registration requirements, user asset segregation, and risk management responsibilities.
Based on this institutional design, the analytical significance of the CLARITY Act can be unfolded. From 2021 to 2024, the United States lacked a systematic legislative framework for crypto assets, with regulation primarily relying on the SEC to define rule boundaries through enforcement actions. Many projects, trading platforms, and infrastructure institutions were often only informed of whether they were considered securities, brokers, or illegal exchanges after being prosecuted or investigated. This ex post facto discretionary regulation gradually sparked dissatisfaction among the industry, the judicial system, and some legislators. In this predicament, CLARITY was proposed. Its core objective is not to relax regulation, but to replace enforcement with institutional frameworks, and uncertainty with rules. Therefore, the true significance of CLARITY lies not in whether it is formally passed at a specific point in time, but in its first attempt to extract the logic of demarcating commodities and securities from case-by-case enforcement and elevate it to an institutional framework that can be anticipated by the market.
Once this demarcation logic is institutionalized, its impact will be structural: the SEC and CFTC will no longer compete for regulatory power through cases, but will instead achieve a clear division of labor through legislation. Project teams can no longer rely on regulatory ambiguity in the long term and must define their compliance path from the design stage. Trading platforms and infrastructure institutions will also be forced to make clear choices regarding license types, business boundaries, and risk isolation. Therefore, CLARITY is not simply a crypto-friendly bill, but rather an experiment in the redistribution of market structure and regulatory power by the US regulatory system. It signifies that US crypto regulation is shifting from a stage highly dependent on enforcement discretion to a structured and predictable institutional governance logic.
Stablecoin legislation: On the surface, it's about currency; at its core, it's about balance sheets.
Compared to the debate over token attributes, stablecoins became the fastest-growing and most widely agreed-upon legislative direction in US crypto regulation in 2025. This shift stems from a high degree of consensus among regulators regarding the nature of stablecoins: stablecoins are not a technological innovation issue, but rather a standard financial intermediary and payment tool issue. At the legislative level, this consensus is reflected in a series of bills surrounding stablecoins, most notably the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act) and the previously discussed draft federal stablecoin regulatory framework. While these bills still differ on specific provisions, they are highly consistent in their core direction.
From an overall design perspective, US stablecoin legislation views stablecoins as redeemable financial instruments issued to the public with dollar-denominated assets as their liability base. Therefore, the legislation focuses on the issuing entity, balance sheet, redemption capacity, and systemic risk. Specifically, these bills address four core questions, which constitute the true core of the stablecoin regulatory logic.
First, what are the reserve assets, and how are they held in custody? Acts such as GENIUS explicitly emphasize that compliant stablecoins must be backed by highly liquid, low-risk assets, typically limited to cash, short-term government bonds, or equivalent cash assets. Furthermore, these reserve assets must be strictly segregated from the issuer's own assets and held by a compliant custodian. The core purpose of this design is to ensure that the issuer possesses genuine and enforceable redemption capabilities even in extreme circumstances.
Second, there's the issue of who owns the returns generated by the reserve assets. This is the most sensitive and controversial part of the stablecoin business model. As the scale of stablecoins expands, the interest income generated by their reserve assets will become extremely substantial. The focus of legislative discussion is: do these returns constitute the use of public funds? Do they possess deposit-like or wealth management-like attributes? Should they be subject to the same constraints as banks or money market funds? This question directly determines whether the stablecoin issuer is more like a technology company or a financial institution.
Third, should stablecoins be considered payment instruments and payment infrastructure? Several bills have explicitly included stablecoins in the framework of payment regulation discussions. Once stablecoins are widely used for on-chain or off-chain payments, cross-border settlements, and merchant clearing, the regulatory focus will shift from asset issuance to payment security, anti-money laundering, system stability, and operational continuity. This means that stablecoin issuers will need to assume compliance responsibilities approaching those of payment institutions and even systemic financial infrastructure.
Fourth, who bears the responsibility for redemption and the ultimate risk? In times of severe market volatility or a crisis of confidence, whether stablecoins can be redeemed promptly and in full is a primary concern for regulators. Relevant legislation generally requires clear redemption mechanisms, time windows, and legal liability attribution, and discusses whether to introduce higher-level regulatory constraints to prevent stablecoins from evolving into a source of systemic risk in extreme circumstances.
Combining these four points reveals a trend: the regulatory logic for stablecoins has completely departed from the technological context of crypto assets, shifting towards the balance sheet and risk management framework of traditional financial regulation. Starting in 2025, in terms of institutional design, stablecoins are increasingly resembling the following traditional financial models: narrow banks with liabilities backed by high-quality assets, money market funds with high liquidity and strict investment restrictions, or strictly regulated payment financial institutions. This also means that stablecoins are viewed as a form of financial institution, rather than simply a technological product. This change not only reshapes the survival logic of stablecoin projects themselves but also profoundly impacts the underlying structure of the entire crypto market, as almost all DeFi protocols, exchange liquidity, clearing mechanisms, and cross-border capital flows are ultimately built upon stablecoins as a financial intermediary layer.
3.2 EU MiCA: Real-world Implementation Results by 2025
While the US may still be in a phase of institutional development but not yet fully implemented in 2025, the EU's MiCA (Markets in Crypto-Assets Regulation) is the first large-scale crypto regulatory framework to truly enter full enforcement. In terms of timing, MiCA isn't a new regulation that emerged in 2025, but it's precisely in 2024–2025 that its core provisions begin to exert substantial constraints on the market. Therefore, the significance of MiCA no longer lies in the appearance of the rules, but in their ability to be concretely examined: Which provisions have truly changed market behavior? Which parts have been circumvented by the market? Where have the boundaries of regulation been exposed?
Which clauses were actually enforced?
In practice, the parts of MiCA that are truly strictly enforced are not the most discussed grand principles, but rather the parts most easily implemented by regulators and closest to traditional financial regulatory experience. First, there are the entry and licensing requirements for exchanges and service providers. MiCA establishes clear registration and operational standards for Crypto Asset Service Providers (CASPs), including capital requirements, internal risk control, customer asset segregation, information disclosure, and management responsibility. This part saw the most stringent enforcement in 2025, making it virtually impossible for large centralized exchanges to avoid compliance registration; otherwise, they would directly lose access to the EU market. Second, there are the constraints on the issuance of stablecoins and asset reference tokens. MiCA imposes clear reserve requirements, information disclosure obligations, and redemption responsibilities on stablecoin issuers in extreme circumstances. Especially in situations where trading volume is too large and may pose systemic risk, issuers may face restrictions on the issuance size. This provision created a substantial barrier for Eurozone stablecoin projects in 2025 and indirectly limited the expansion of some USD stablecoins in the EU market. Third, there is the strengthened enforcement of anti-money laundering and transaction monitoring obligations. MiCA's deep integration with the EU's existing AML/CFT framework has brought crypto service providers closer to the compliance standards of traditional financial institutions in areas such as customer identification, transaction monitoring, and cross-border transfer records. This change has directly increased compliance costs and accelerated the exit of small and medium-sized trading platforms. In essence, MiCA's clearest message in 2025 is that as long as you are a centralized entity providing services to the public, you cannot remain outside of regulation indefinitely.
Which clauses are being used by the market for "compliance arbitrage"?
However, MiCA is not a completely flawless regulatory network. On the contrary, with its implementation, the market quickly found several legitimate but not entirely consistent with the original intent of regulation. The most typical example is the issue of defining the boundaries of the regulated entities. MiCA mainly targets issuers and service providers, while its binding force is significantly weakened for projects that do not have a clear legal entity, separate the front-end from the protocol, or operate through decentralized governance. This has led some projects to actively weaken their role as service providers in their structural design to circumvent MiCA. The separation of geographical and business structures also provides some room for maneuver. Some institutions formally meet MiCA requirements by placing core technology, liquidity, or governance structures outside the EU, while retaining only limited functions or compliant shell companies within the EU, but in reality maintaining a high degree of operational flexibility. This practice is not illegal, but it clearly weakens MiCA's actual binding force on global operations. Thirdly, there is the ambiguity between DeFi and non-custodial services. MiCA has not provided a systematic regulatory framework for DeFi, but rather adopted a relatively restrained approach. The actual effect in 2025 was that centralized platforms faced significantly increased compliance costs, while decentralized protocols gained a relative institutional advantage in the short term, creating a kind of reverse incentive for compliance. These phenomena do not mean that MiCA has failed, but rather reveal a reality: any system centered on principal-based regulation inevitably presents arbitrage opportunities when facing a highly modular and reconfigurable crypto market.
MiCA's Real Constraints on Exchanges, Issuers, and DeFi
From a market structure perspective, MiCA in 2025 did not bring about a comprehensive tightening, but rather an asymmetric impact. For centralized exchanges, MiCA actually increased industry concentration. Rising compliance costs and unified cross-border licenses made it easier for large exchanges to bear regulatory pressure, while the survival space for small and medium-sized platforms was significantly compressed. As a result, trading liquidity in the EU market became more concentrated, but innovation flexibility decreased. For token and stablecoin issuers, MiCA strengthened the concept of responsible parties. Project teams need to assume clear responsibility for information disclosure, market behavior, and risk management, which to some extent curbed high-risk, low-transparency issuance models, but also raised the entry threshold for compliant projects. For DeFi, the impact of MiCA in 2025 was more like a delayed regulatory pressure. In the short term, DeFi relatively benefited because it was difficult to be directly incorporated into the regulatory framework; however, in the long term, as front-end, interface, and governance participants are gradually brought under regulatory scrutiny, its regulatory space is gradually narrowing. The core message MiCA is sending in 2025 is not that the EU wants to strictly control encryption, but that as long as you play a clear role in the financial system, you must accept the corresponding level of regulation; however, the system itself is still constantly being tested and revised by the market.
3.3 The Asian Approach: Permission-Based Opening-Up, Rather Than Relaxed Regulation
Around 2025, while the US and Europe were grappling with legislation and demarcation, some Asian financial centers had already forged a distinctly different path. The regulatory models exemplified by Hong Kong and Singapore did not simply allow the crypto industry free rein; instead, they adopted a licensing-based open strategy: establishing entry points first, then strengthening controls, and finally conducting ongoing audits. While this approach appears more welcoming on the surface, it actually places higher and more specific demands on the market structure.
Singapore: Functional Regulation Centered on the Payment Services Act
Singapore's cryptocurrency regulation is centered on the Payment Services Act (PSA), which functionally breaks down and regulates cryptocurrency activities. Under the PSA framework, stablecoins, cryptocurrency trading, custody, and transfers are all categorized under Digital Payment Tokens (DPTs). Any institution providing such services to the public must obtain a license and continuously meet requirements regarding capital adequacy, anti-money laundering, risk management, and technological security. The key to this design is that it treats cryptocurrency activities directly as financial services. Regulation focuses not on the technical attributes of the tokens themselves, but on whether they involve public funds, whether they undertake payment or clearing functions, and whether they may pose systemic risks. In 2024-2025, Singapore further strengthened restrictions on retail investor protection, leveraged trading, and yield-generating products through regulatory guidelines, making cryptocurrency businesses more closely resemble traditional payment and financial intermediaries. The long-term impact of this model is that cryptocurrency institutions in Singapore can more easily obtain a clear compliance path, but they must also accept continuous and stringent regulatory scrutiny. The market structure is therefore characterized by high institutionalization, low leverage, and low tolerance for error, making it more suitable for institutional and cross-border businesses rather than high-risk speculative markets.
Hong Kong: A gateway-style regulatory approach centered on virtual asset servicer licenses and extending to asset issuance.
Compared to Singapore's functional regulation, Hong Kong adopts a more typical entry-level regulatory approach. Its core institutional tool initially stemmed from the Securities and Futures Commission's (SFC) Virtual Asset Service Provider (VASP) licensing system, which was further expanded in 2026 to include stablecoin issuer licenses, gradually forming a two-tiered regulatory structure from trading entry points to core asset supply. Under the VASP framework, any trading platform providing virtual asset trading services to the public must apply for and hold a license, and be subject to regulatory requirements highly similar to those of traditional securities brokers, including client asset custody and segregation, internal control and risk management systems, information disclosure and compliance audits, and appropriate personnel requirements for management. It is noteworthy that Hong Kong has not attempted to meticulously classify tokens through legislation, but rather focuses its regulatory emphasis on platform responsibility and intermediary activities. Any platform undertaking matching, custody, or trade execution functions must be included in the comprehensive regulatory system.
In practice, the issuance of VASP (more accurately VATP) licenses in Hong Kong has been noticeably cautious. As of early 2026, the number of virtual asset trading platforms with formal licenses from the Securities and Futures Commission (SFC) was approximately 10 to 12, primarily including leading institutions such as OSL and HashKey, as well as later approved platforms like HKVAX, HKbitEX, Bullish, and VDX. However, "obtaining a license" does not equate to "effectively operating." Market feedback indicates that only a few leading platforms have achieved significant trading volume and user recognition, while other licensed institutions are mostly in their early stages: some are still building their technical and compliance systems, while others are only open to institutional or small-scale users, resulting in relatively limited overall business scale and market presence. Meanwhile, many platforms that had previously applied for licenses (including several leading exchanges) have chosen to withdraw their applications or exit the Hong Kong market. For example, major exchanges such as OKX, Bybit, Gate.io, and Huobi voluntarily withdrew their VASP license applications during the transition period; meanwhile, many small and medium-sized platforms such as HKVAEX, IBTCEX, and QuanXLab also withdrew from or terminated their application processes.
After 2025, with the gradual opening up of retail investor participation, this system further strengthened the requirements for platform compliance and significantly raised the entry barrier to the Hong Kong market. Structurally, the Hong Kong model does not encourage a large influx of projects, but rather aims to create a highly controllable crypto-finance hub centered on compliant trading, asset management, and on-chain financial infrastructure. Institutions that can enter this system typically possess strong financial resources, compliance capabilities, and long-term operational expectations.
Building on this, with the formal implementation of stablecoin issuer licenses in 2026, regulation has further extended to the more core aspect of "asset issuance and credit creation." The first batch of licenses was issued only to a small number of entities with banking or large institutional backgrounds, exhibiting a clear high barrier to entry and a centralized nature. Hong Kong is not only regulating the circulation market of crypto assets but also beginning to directly intervene in the supply mechanism of the on-chain "currency layer."
The experiences of Singapore and Hong Kong demonstrate that so-called regulatory friendliness in Asia does not mean lax rules, but rather the rapid integration of crypto activities into existing financial regulatory frameworks through licensing systems. The long-term impact of this approach is: a relatively controlled pace of innovation with significantly reduced systemic risk; a market that is more institutionalized, compliant, and focused on long-term operations; and the crypto industry being clearly recognized as part of the financial system, not an exception. This also makes Asia one of the first regions globally to complete the transition from grey-area innovation to financial infrastructure in the crypto market by 2025.
Stablecoin licenses: Regulation shifts from trading platform to asset issuance.
In April 2026, Hong Kong's regulatory framework further extended to the core aspect of stablecoin issuance. According to an announcement by the Hong Kong Monetary Authority, on April 10, 2026, under the Stablecoin Ordinance, Hong Kong officially issued its first batch of stablecoin issuer licenses, with only two institutions approved: HSBC Limited and Anchorpoint Financial, a joint venture established by Standard Chartered Bank (Hong Kong), PCCW, and Animoca Brands. In this round of licensing, the regulator assessed dozens of applications but ultimately approved only two institutions, demonstrating extremely high entry barriers and a clear "limited issuance" characteristic.
Unlike previous VASP licenses, which primarily constrained trading and intermediary activities, stablecoin licenses directly involve the more core financial function of "currency issuance and credit creation." Therefore, licensed institutions must complete a series of preparatory work before officially issuing stablecoins, including technical system testing, risk management mechanisms, reserve asset arrangements, and compliance operation systems. This change has significant structural implications: Hong Kong regulation is extending from "control of trading platform access" to "control of core asset supply," bringing stablecoins into the category of regulated deposit instruments. Simultaneously, the issuance of licenses is highly concentrated on entities with banking backgrounds or large institutional resources, intentionally concentrating the power to issue stablecoins in the hands of at least a few high-credit participants.
Furthermore, the first batch of licensed institutions primarily consisted of banks and large financial institutions, rather than native crypto projects. This reflects the regulator's intention to use the traditional financial system as the credit starting point for stablecoin issuance, strengthening the security and compliance constraints of reserve assets from the outset. This approach not only changes the market participation structure but also reshapes the competitive logic of stablecoins: the global landscape previously dominated by Tether and USD Coin is gradually evolving into a new form of "regional regulatory leadership + distributed competition among compliant issuers." The functional boundaries of stablecoins are also expanding, extending from a crypto transaction medium to payments, clearing, and even real-world asset (RWA) settlement. Against this backdrop, Hong Kong's institutional practices are not only an upgrade to local regulation but also potentially a crucial reference path for global stablecoin regulation, driving stablecoins to gradually transition from crypto market infrastructure to a broader financial infrastructure.
3.4 Summary: Consensus on Regulatory Logic in 2025
Summarizing the evolution of crypto regulation in various countries since 2025, a clear consensus is emerging: the focus of regulation is no longer on protecting innovation, but on ensuring innovation operates within a controllable framework. When crypto applications involve real funds and real risks, they must be incorporated into the financial order. This consensus can be understood as a three-tiered regulatory bottom line: risks need to be visible, responsibility needs to be identifiable, and failures need to be manageable. Whether it's DeFi, stablecoins, or on-chain derivatives, asset sources, yield structures, leverage levels, and liquidation mechanisms are all being required to be presented in a more transparent and auditable manner, significantly narrowing the space for black-box risk accumulation. Simultaneously, the regulatory focus has shifted from decentralization to who actually controls the system. The existence of parameter adjustment rights, front-end control, or governance leadership implies a corresponding responsible party. More importantly, regulation does not attempt to eliminate failure itself, but rather requires that failures be isolated, liquidated, and exitable, preventing a single project or mechanism from evolving into a source of systemic risk. The regulatory logic of 2025 is not to negate Web3, but to set a clear boundary for it: visible risks, identifiable responsibility, and the ability to mitigate failures. Only innovations that can operate within this framework have a long-term survival space.
4. Policy Focus in 2026: Shift from Price Risk to Systemic Risk
In 2026, regulatory focus will shift towards whether the crypto market will develop systemic risks; if so, how can these risks be contained within existing financial frameworks? With the expansion of stablecoins, the maturation of on-chain derivatives, and the deep involvement of traditional institutions, the crypto market is increasingly embedded in real-world fund flows and payment networks, changing the nature of the risks. The real issue to discuss is no longer just asset price fluctuations, but rather the robustness of the liquidity structure, the reliability of the liquidation mechanism, and the existence of transmission channels between different markets.
4.1 The regulatory focus of stablecoins may shift towards the macro-financial framework.
In 2025, the focus was on the legality of stablecoins and who should regulate them. In 2026, perhaps more worthy of our attention is the financial framework in which stablecoins will be placed. The focus of regulatory discussions may shift from the issuance qualifications themselves to their role in the overall financial system and whether they will have spillover effects at the macro level. Over the past few years, stablecoins have gradually achieved legal recognition. Mainstream markets have established clear requirements for issuers, reserve assets, and redemption mechanisms through legislation or regulatory frameworks. Stablecoins have been incorporated into the formal regulatory system and are no longer innovative tools operating outside of regulations. A deeper question remains: are they merely payment tools, or a form of financial intermediary?
Currently, many laws define stablecoins as payment instruments, emphasizing their function as an on-chain settlement medium. Regulatory focus is concentrated on anti-money laundering, fund traceability, and one-to-one redemption capabilities. From this perspective, stablecoins are more like digital clearing tools, their core task being to improve payment efficiency rather than fulfilling a credit expansion function. However, as their scale expands, stablecoin reserves are heavily allocated to assets such as short-term government bonds, and their size has already begun to influence the structure of the money market. In this context, the regulatory perspective may shift further upwards, from "payment security" to "financial stability." If stablecoins are considered quasi-money market instruments, then the focus will shift to asset maturity matching, liquidity stress testing, and management of concentrated redemption risks, and its regulatory logic will be closer to a macro-prudential framework.
In 2026, stablecoins may simultaneously assume the dual roles of payment infrastructure and liquidity pools. Their regulatory focus may no longer be limited to a single department, but rather involve collaboration among central banks, fiscal authorities, and financial regulatory agencies. The impact of stablecoin reserve structures on government bond demand and the potential impact of redemption pressure on short-term interest rates are likely to become important topics of policy discussion. From a trend perspective, stablecoins are shifting from a "crypto market tool" to a "macro-financial variable." Once this shift is institutionalized, the competitive logic of the industry will also change. It will not only be a competition of technology and user scale, but also of compliance capabilities, asset management capabilities, and risk tolerance.
4.2 On-chain leverage and liquidation risks: Does DeFi possess systemic security?
In recent years, regulatory attention to DeFi has largely focused on compliance boundaries, investor protection, and individual risk events. However, with the continuous integration of on-chain lending, perpetual contracts, and liquidity staking and re-staking structures, the risk profile of DeFi is no longer limited to a single protocol but is gradually exhibiting characteristics of cross-protocol and cross-asset linkage. Entering 2026, whether on-chain leverage structures will be included in the regulatory purview of systemic risk is a matter of great concern. Currently, there is no unified legal framework globally for DeFi leverage and liquidation mechanisms, nor are there clear rules regarding capital adequacy ratios or leverage caps. However, international institutions, including the Financial Stability Board (FSB), have begun assessing whether DeFi functionally poses comparable risks to the traditional financial system, and the focus of regulatory discussions is shifting towards identifying the structural vulnerabilities of DeFi.
On-chain liquidation mechanisms are generally considered to have the advantages of transparency and automated execution, but transparency does not equate to stability. In extreme market conditions, oracle price delays, network congestion, and competition among liquidation bots can amplify price volatility and exacerbate selling pressure. When restaking and multi-layered leverage are combined, asset price declines can spread rapidly between different protocols, blurring risk boundaries. Although this process is algorithmic, its economic consequences are not fundamentally different from the chain deleveraging in traditional finance. Unlike traditional finance, DeFi lacks a central counterparty and clear liquidity support arrangements. Traditional markets often rely on central bank tools or market stabilization mechanisms under stress scenarios, while on-chain systems rely more on market-based liquidation and arbitrage forces to clear risk. As the scale expands, regulators may begin to focus on a more macro-level issue: if on-chain leverage is liquidated in a concentrated manner within a short period, will the impact spill over to the stablecoin market, exchange liquidity, and even affect demand for short-term USD assets?
In terms of current progress, explicit limits on DeFi leverage may not be immediately introduced in 2026, but the regulatory approach may undergo more subtle changes. Regulators are likely to start with foundational work, strengthening data collection and risk monitoring, and gradually establishing a framework for continuous assessment of on-chain leverage, collateral asset structure, and liquidation concentration. Based on this, the legal responsibilities and compliance boundaries of key infrastructure closely related to DeFi operations, such as oracle services, cross-chain bridges, and front-end interfaces, may be further clarified. Simultaneously, given the inherent cross-border nature of DeFi, regulatory cooperation and information sharing mechanisms between jurisdictions are expected to become more important to reduce regulatory arbitrage opportunities and improve overall risk identification capabilities. DeFi will not be immediately subject to strict prudential regulation, but rather gradually move to the periphery of macro-financial discussions. Its design logic may therefore change: from simply pursuing capital efficiency and maximizing returns to emphasizing risk isolation, liquidity buffers, and structural transparency. If the regulatory focus in previous years was on DeFi compliance, then what is more noteworthy to observe in 2026 is whether it begins to be regarded as a potential financial infrastructure. Once this positioning is gradually established, the institutional environment and competitive landscape of DeFi will be reshaped accordingly.
4.3 PayFi and Cross-border Payments: Regulatory Focus of On-Chain Payment Paths
In 2026, just as noteworthy as stablecoins themselves is whether on-chain payments based on stablecoins will be formally incorporated into the regulatory framework for cross-border payments. With the combination of stablecoins, compliant wallets, and deposit/withdrawal channels, on-chain transfers have begun serving real-world trade settlements and cross-border remittances. Once scaled up, it will no longer be merely a technological innovation but could become a payment pathway outside the traditional banking system. Currently, there is no specific legal category for "PayFi," but relevant regulations already exist. The United States includes stablecoin issuers in its money transfer and anti-money laundering regulations; the European Union regulates electronic money tokens under the MiCA framework; and Singapore, Japan, and other regions have also incorporated stablecoins into their payment laws. Meanwhile, the FATF's "Travel Rules" require virtual asset servicers to retain identity information during cross-border transfers. These rules collectively constitute the basic regulatory framework for on-chain cross-border payments.
Entering 2026, regulatory focus may shift to whether it affects the order of cross-border capital flows. Core issues include: whether capital flows are traceable, whether they bypass the banking system to form parallel channels, and whether they have a substantial impact on foreign exchange management or capital flows. Especially in some emerging markets, stablecoins have already been used as cross-border settlement or value stores, which may prompt regulators to re-examine their domestic foreign exchange and payment management mechanisms. Therefore, the more likely trend is not a complete tightening or loosening, but rather the integration of PayFi into the existing cross-border payment regulatory framework. Wallet identity verification obligations may be strengthened, licensing requirements for deposit and withdrawal channels may be more clearly defined, and cross-border data reporting may become more standardized. When stablecoin issuers, wallets, and fiat currency channels form a closed loop, "who bears the responsibility for compliance" will become a key issue. From a trend perspective, PayFi is gradually transforming from a payment application into a new variable in the cross-border payment structure. While 2026 may not see disruptive policy changes, regulatory attention to its macroeconomic impact is clearly increasing.
4.4 Key words for 2026: Non-price risk, systemic importance, cross-market transmission
In summary, the policy logic for 2026 can be summarized as a shift in three directions.
(1) Shift from price volatility to structural stability. The real risk is no longer short-term rises and falls, but whether there is a liquidity mismatch, excessive leverage, or a run on stablecoins. Price is just the surface, structure is the root cause.
(2) Determination of systemic importance. When certain stablecoin or derivative protocols become large enough, they may be considered financial infrastructure with systemic impact. Once included in this framework, reporting obligations, capital requirements, and stress tests will be strengthened. Leading platforms will gradually enter a "quasi-banking" stage, while smaller protocols may face higher compliance thresholds, and market concentration will increase.
(3) Cross-market transmission. The connection between the crypto market and traditional finance is deepening. Stablecoin reserves affect the demand for government bonds, ETF fund flows connect the two markets, and on-chain settlement volatility may be reflected in the broader liquidity environment. When this transmission path becomes clear, crypto assets will no longer be a peripheral area, but part of the financial system.
The core shift in policy logic in 2026 is from "whether to allow their existence" to "how to integrate them into the order." Stablecoins will be financialized, DeFi will be structured, and on-chain payments will be institutionalized. Price will remain important, but the market landscape will be determined by how risk is defined and managed.
5. How policies are reshaping the crypto market structure
In the previous sections, we discussed the policy direction itself. In this section, we will focus on how policies, in turn, change how the market operates. Regulation does not directly determine prices, but it profoundly affects product design, fund flows, and risk allocation. As compliance boundaries become clearer, the competitive logic of the market also shifts. In the past, the crypto market competed on the speed of innovation and capital efficiency; as the policy framework gradually takes shape, the focus of competition is shifting to structural robustness and risk controllability. 2026 may be a period of further deepening of this structural shift.
5.1 Changes in Product Form: From High-Leverage Game to Risk Isolation Design
Early crypto products most attractive for liquidity often possessed three characteristics: high leverage, high returns, and low barriers to entry. Perpetual contracts, revolving lending, and restaking strategies all aimed to maximize capital efficiency. During periods of ample liquidity and rising prices, these structures could rapidly amplify profits; however, in extreme market conditions, they could also amplify liquidation pressures and cascading effects. The problem wasn't leverage itself, but rather the unclear boundaries of responsibility. When product design lacked a clearly defined risk-bearing entity, or when liquidation mechanisms relied heavily on market dynamics rather than risk buffers, losses in the event of severe volatility often fell on the weakest link. From a regulatory perspective, this structure inherently lacked sustainability because it was difficult to incorporate into an assessable and regulated framework. As policies became clearer, the market is evolving in another direction: modularization and risk isolation. Modularization involves separating functions such as trading, custody, liquidation, and yield generation, allowing for clear risk identification; risk isolation prevents the rapid transmission of pressure from a single asset or protocol to the entire system. For example, stricter collateral ratio designs, independent liquidation pool arrangements, and the separation of assets from operating entities all fall under this approach. This shift may reduce the explosive growth potential of products, but increase their structural stability. Future mainstream product forms may no longer attract users with extreme profits, but rather emphasize transparency, auditing mechanisms, and stress testing capabilities. The clearer the regulations, the more the market will favor designs that can survive in the long term, rather than short-term arbitrage tools.
5.2 Changes in Funding Paths: From Anonymous Liquidity to Identifiable Liquidity
One of the most direct impacts of policy on the market is changing how funds enter. Early markets heavily relied on anonymous liquidity, with users participating in lending or trading directly through self-custodied wallets, resulting in relatively dispersed sources and destinations of funds. This open structure improved efficiency but also created opportunities for regulatory arbitrage. As anti-money laundering rules, travel regulations, and stablecoin regulatory frameworks gradually take effect, fund flows are becoming clearer. Exchanges, wallet service providers, and deposit/withdrawal channels assume greater compliance responsibility, and institutional funds tend to enter the market through custody and auditing processes. Liquidity is thus stratified: some maintain its native on-chain form, while others carry clear identities and compliance attributes. This stratification, in turn, influences project architecture. More and more protocols are separating the front-end from the underlying contracts, introducing compliance controls at the access layer while maintaining the openness of on-chain logic. Some protocols are establishing independent pools or permissioned liquidity modules to attract specific types of funds. Market structures are also showing a multi-layered trend. The main chain acts more as a value settlement and security layer, while second-layer networks or dedicated chains support high-frequency application scenarios. Regulators typically focus on fiat currency interfaces and critical infrastructure nodes, rather than every single on-chain transaction. Therefore, projects often concentrate compliance pressures at the entry and exit points, while keeping innovative functions within on-chain modules. Funding hasn't decreased, but rather become more structured. Future competition will not only be about vying for liquidity volume, but also about effectively integrating funds across different compliance levels.
5.3 Changes in the risk structure: Who bears the tail risk?
Policy has also changed how risk is borne. Early crypto market risks exhibited spillover characteristics; liquidation mechanisms relied on automatic execution and market dynamics, and losses were rapidly transmitted during periods of extreme volatility, primarily borne by leveraged users or liquidity providers. Projects themselves rarely implemented formal risk buffers. As regulators began emphasizing reserve transparency, asset matching, and liquidation stability, protocol designs gradually adjusted. More and more projects introduced risk reserves, insurance funds, or tiered liquidation mechanisms, increasing collateral ratios and limiting extreme leverage to reduce systemic shocks. This shift signifies that risk is beginning to be internalized. With clearer legal responsibilities, issuers and platforms need to consider long-term sustainability rather than simply pursuing scale expansion. Tail risks are no longer entirely left to the market to digest spontaneously but are pre-allocated and absorbed through structural design. Risk doesn't disappear, but it becomes more visible, measurable, and priced. Participants have a clearer understanding of the boundaries of their own risk, and the market structure is thus gradually shifting from a highly expansionary model to a more resilient one.
6. Outlook and Trends: From "Compliance Adaptation" to "Structural Choices"
As regulation shifts from uncertainty to enforceability, the core issue in the market has fundamentally changed: it's no longer about how to circumvent regulation, but rather under what structure should one participate in regulation. For project teams, exchanges, and institutions, after 2026, they need to identify which structures have long-term sustainability and whether they are operating within the framework of regulation. The role of regulation is transforming from a "short-term emotional variable" to a "long-term structural variable." It no longer merely affects market fluctuations but begins to systematically reshape the business models, funding sources, and competitive landscape of different sectors. Market differentiation increasingly depends on whether one can be embedded within the regulatory system.
6.1 Compliance is no longer a cost item, but a right to market access.
In the past, compliance was often seen as a passive cost, a constraint that had to be imposed after a business matured. However, judging from the policy evolution from 2025 to 2026, compliance is shifting towards an institutional screening mechanism. Its core role is no longer restriction, but rather determining who can enter the market. Whether it's the US's legislative exploration around market structure, the implementation of the EU's MiCA, or Hong Kong's licensing system for stablecoins and trading platforms, they are all essentially answering the question of "who can participate in the market" in advance. The direct result is that the market is gradually forming a tiered structure: one group of entities enters a strongly regulated system, obtaining institutional funding and compliant liquidity; another group remains in the gray area or unlicensed innovation space, continuing to bear higher uncertainty. Over time, the funds and users between the two will show an increasingly obvious separation. The impact of this change on specific sectors has already begun to emerge. Exchanges are no longer just matching platforms, but are gradually evolving into compliant financial gateways, with licensing capabilities becoming a core barrier; project teams need to consider compliant paths for issuance and liquidity from the early stages, otherwise it will be difficult to reach larger-scale funds; institutional funds will prioritize flowing into assets and structures with clear regulatory status. Compliance determines "eligibility to participate."
6.2 The market will move towards a "dual-track system": compliant financial layer vs. on-chain innovation layer
Based on the practices of major regulatory jurisdictions worldwide, the crypto market is unlikely to be uniformly incorporated into a single system, but is more likely to maintain a "dual-track" structure in the long term. On one side is the compliant financial layer centered on stablecoins, ETFs, licensed exchanges, and custodians. This system emphasizes transparency, accountability, and risk control, primarily handling institutional funds and large-scale asset allocation. On the other side is the native innovation layer represented by DeFi and on-chain protocols, characterized by openness, experimentalism, and high-risk tolerance. These two tracks will not be isolated but will be connected in a limited way through stablecoins, deposit and withdrawal channels, and various compliant interfaces. Under this structure, the industry's core capability is no longer just single-point product innovation, but rather how to establish connections between the two systems, bringing off-chain funds onto the chain while transforming on-chain assets into financial products acceptable to the regulatory system. This makes DeFi no longer a completely independent financial system, but gradually evolve into an on-chain execution and innovation layer; centralized exchanges and custodians become key hubs connecting the two tracks; and cross-chain, bridging, and settlement infrastructures have transformed from technical tools into key nodes with financial attributes. Future competition will largely revolve around "who can become the connector".
6.3 Stablecoins will become a core entry point for the "new financial infrastructure".
Stablecoins are undergoing a leap from tool to infrastructure. Since 2026, the core questions surrounding stablecoins have focused on the qualifications of their issuers and their credit rating within the financial system. Current regulatory practices worldwide show a clear concentration of stablecoin issuance rights in the hands of banks and high-credit institutions. Stablecoins are no longer merely liquidity tools within the crypto market but are beginning to embed themselves within the broader financial system, becoming a crucial interface connecting on-chain and off-chain transactions. Their functionality is also expanding, extending from an initial medium of exchange to payments, clearing, collateralization, and even RWA settlement, exhibiting characteristics of a "financial operating system." The stablecoin sector itself will shift from relying on liquidity scale to relying on credit backing and regulatory qualifications, significantly strengthening the concentration effect among leading players. The payment sector is likely to revolve around stablecoins, becoming the most practical application scenario. The development of RWA will also heavily rely on stablecoins as a clearing and liquidity carrier. The role of exchanges as entry points may be partially weakened, while stablecoin networks themselves have the potential to become new user entry points.
6.4 Regulation will shift from "rule-making" to "data-driven".
As the regulatory framework gradually takes shape, the focus of regulation is shifting from rule-making to continuous monitoring and dynamic intervention. The future regulatory system will resemble a real-time operating system, relying on data rather than static rule texts. The transparency of on-chain data allows regulators to continuously track key risk indicators in the market, such as stablecoin size, leverage levels, or liquidation concentration. In this context, regulation will no longer rely on blanket restrictions but will be more likely to intervene in specific structures through targeted constraints and window guidance. This approach improves regulatory efficiency while shifting market uncertainty from whether regulation will occur to when and how precise intervention will occur. The importance of on-chain data and risk control capabilities has significantly increased, and related infrastructure has evolved from auxiliary tools to an integral part of the regulatory collaboration layer. DeFi protocols also need to proactively consider transparency and risk control in their design, while areas such as high leverage and complex derivatives may become key regulatory targets, leading to a contraction in their innovation space.
6.5 Evolution of the Landscape: From "Open Competition" to "Structural Concentration"
From a longer-term perspective, the ultimate impact of regulation is not to suppress the market, but to reshape its concentration. Because compliance has a significant scale effect, large institutions are more likely to bear the costs, gain trust, and establish stable interactions with regulators, leading to a gradual concentration of resources in a few key players. In this process, key players such as exchanges, stablecoin issuers, and custodians have already begun to show a trend of consolidation among leading players. The future market structure is likely to evolve into one where a few core compliant infrastructures dominate, with numerous innovative projects revolving around them, while entities in the middle—neither fully decentralized nor possessing compliance capabilities—will face continuous pressure. This change may also extend to public blockchains and related ecosystems; ecosystems lacking core liquidity entry points or compliance access capabilities may gradually become marginalized, while infrastructures capable of absorbing mainstream funds will generate stronger network effects.
6.6 The Compliance Path of DeFi: From "Protocol Neutrality" to "Interface Compliance"
Recent weakening of enforcement against DeFi reflects a subtle shift in regulatory strategy: a more realistic approach is to address the issue from the interface layer rather than directly constraining the underlying protocols. As a result, a clearer direction is emerging: the protocols themselves remain neutral, but the entry points and connection layers upon which their operation depends are brought under regulation. From a practical enforcement perspective, regulation may focus on the front end (Web UI), development teams or operating entities, liquidity entry points (such as fiat currency deposits and withdrawals, stablecoins), and assets connected to the real world (RWA). In the future, DeFi is likely to evolve into a "layered compliance structure": the underlying protocols maintain openness and decentralization, while user access paths, funding entry points, and asset mapping will gradually incorporate mechanisms such as KYC/AML, permission lists, or geographical restrictions.
This evolution will directly change the development logic of DeFi. The past growth model centered on TVL (Total Value Link) may gradually give way to "fund quality and compliant access capabilities." Protocols that rely purely on permissionless narratives will have their space compressed, leaning more towards experimentation and long-tail innovation. Projects hoping to attract larger-scale funds must proactively introduce compliant interfaces at certain levels. DeFi structures that can connect with compliant funds, especially those combined with RWA (Rule of Laws and Regulations), are expected to become the new mainstream direction; for example, introducing whitelist pools, compliant stablecoin settlement, or on-chain financial structures that collaborate with licensed institutions. This is essentially reshaping the positioning of DeFi: it is no longer just a replacement system for traditional finance, but may become the on-chain execution layer of the regulatory financial system. The real competition will shift from "whether it is decentralized" to "how to embed regulatory requirements without compromising core efficiency."
6.7 Track Repricing: From "Traffic Competition" to "Structural Competition"
As regulation becomes a structural variable, the market's valuation logic is also changing. Previously, the core factors driving project valuations were concentrated on metrics such as user scale, trading volume, and TVL (Total Value Added). However, the importance of these factors will relatively decrease in the future, replaced by compliance capabilities, funding attributes, and the ability to access the regulatory system. This change will lead to significant differentiation across different sectors. DeFi will split into "compliant structures" that support institutional funding and "permissionless structures" that facilitate innovative experiments; RWA, due to its inherent compliance interface attributes, is expected to be the most direct beneficiary; the stablecoin sector will further strengthen its concentration among leading players, with competition driven by credit and licenses; exchanges will gradually evolve into comprehensive financial platforms; and on-chain data and risk control infrastructure will become implicit but crucial support layers. The core of market competition is shifting from "whose product is better" to "who is in a more advantageous structure."
For industry participants, the era of regulation does not signify increased certainty, but rather a shift in the sources of uncertainty. Prices remain unpredictable, but structures are becoming more predictable. Funds will flow to safer, more transparent systems; risks will be compressed to more manageable levels; and power will concentrate in the hands of compliant entities. The real watershed moment lies not in whether a particular law is passed, but in whether the structure you operate within is on a long-term path permitted by regulation.
7. Conclusion: A New Stage for the Crypto Market Under the Institutional Environment
As the regulatory framework becomes clearer, the crypto market is undergoing a profound structural reshaping. While policy doesn't determine price movements, it is changing how products are designed, how capital enters, and how risks are allocated. Consequently, the competitive logic of the market is shifting from efficiency-first to structure-first.
Past rapid growth was built on high leverage, nested returns, and spillover risks. With regulators increasingly strengthening the transparency of stablecoin reserves, the robustness of liquidation mechanisms, and the traceability of cross-border funds, such highly overlapping structures with blurred lines of responsibility will become increasingly unsustainable. Conversely, designs with clear reserves, risk isolation, and well-defined liquidation pathways are more likely to attract long-term funding and institutional support.
