Regulatory Crossroads: The Future of Crypto Assets in the US, Europe, and China

Global cryptocurrency regulation is heading towards a divergent future between the US and Europe: the US is integrating it into the mainstream financial system through pragmatic legislation, while Europe's MiCA rules may stifle innovation in the name of "compliance."

Original text: A Tale of Two Worlds: A Comparative Analysis of Crypto Regulations Worldwide

Author: @TradFiHater

Compiled by: AididiaoJP, Foresight News

When Satoshi Nakamoto, the inventor of Bitcoin, published the white paper, mining was so simple: any gamer with an ordinary home computer could potentially accumulate wealth worth tens of millions of dollars in the future.

On a home computer, you could have built a vast legacy of wealth, allowing your descendants to live without hard work, because Bitcoin has the potential return of up to 250,000 times.

At the time, most gamers were engrossed in Halo 3 on Xbox, and only a few young people used home computers to earn far more wealth than modern tech giants. Napoleon built his legend by conquering Egypt and Europe, while you only need to click "Start Mining."

Over the past fifteen years, Bitcoin has become a global asset, and its mining has evolved into a large-scale industry requiring billions of dollars in funding, specialized hardware, and enormous energy consumption. Today, mining an average of one Bitcoin consumes 900,000 kilowatt-hours of electricity.

Bitcoin has given rise to a completely new paradigm, standing in stark contrast to the traditional financial world we are familiar with, dominated by established institutions. It may be the first truly significant act of rebellion against the elite since the failed "Occupy Wall Street" movement. It's noteworthy that Bitcoin was born precisely after the "Great Financial Crisis" of the Obama era, a crisis largely stemming from the tolerance of high-risk, "casino-style" banking. The Sarbanes-Oxley Act of 2002 was intended to prevent a repeat of the dot-com bubble; ironically, the 2008 financial collapse was far more severe.

Whoever Satoshi Nakamoto was, his inventions all came at just the right time, a spasmodic yet thoughtful rebellion against the powerful and ubiquitous traditional financial system.

From disorder to regulation: A cycle of history

Before 1933, the U.S. stock market was largely unregulated, relying solely on scattered "blue sky laws" in various states, which led to severe information asymmetry and rampant fraudulent trading.

The liquidity crisis of 1929 served as a "stress test" that broke this model, proving that decentralized self-regulation could not contain systemic risk. The US government implemented a "mandatory reset" through the Securities Act of 1933 and 1934: replacing the "buyer beware" principle with a central enforcement agency (the Securities and Exchange Commission, SEC) and mandatory disclosure requirements, establishing uniform legal standards for all publicly traded assets to restore market confidence in the system's solvency. Today, in the decentralized finance (DeFi) sector, we are witnessing the exact same process unfolding.

Until recently, cryptocurrencies operated as a permissionless "shadow banking" asset, functionally similar to the US stock market before 1933, but far more dangerous due to a complete lack of regulation. Their governance relied primarily on code and hype, failing to adequately assess the immense risks this "beast" could pose. The series of collapses in 2022 served as a "1929-style stress test" for the crypto world, demonstrating that decentralization does not equate to unlimited returns and stable currencies; rather, it created a risk node that could potentially devour multiple asset classes.

We are witnessing a forced shift in the zeitgeist: the crypto world is moving from a libertarian, casino-like paradigm to a compliant asset class. Regulators are attempting to make a "U-turn" on cryptocurrencies: once legalized, funds, institutions, the wealthy, and nations can hoard them like any other asset, thereby enabling taxation.

This article aims to analyze the origins of the "institutional rebirth" of cryptocurrencies, a transformation that is now inevitable. Our goal is to deduce the logical endpoint of this trend and attempt to depict the final form of the DeFi ecosystem.

Implementation of regulations: a step-by-step approach

Before DeFi entered its first true "dark age" in 2021, its early development was not driven by entirely new legislation, but rather by federal agencies continuously extending existing laws to cover digital assets.

The first significant federal action occurred in 2013: the U.S. Financial Crimes Enforcement Network classified cryptocurrency "exchanges" and "administrators" as money services businesses, subjecting them to the Bank Secrecy Act and anti-money laundering regulations. 2013 can be considered the year that DeFi was first "recognized" by Wall Street, paving the way for subsequent regulation and suppression.

In 2014, the IRS defined virtual currencies as "property" rather than "money" (for federal tax purposes), making each transaction potentially subject to capital gains tax. This legally defined Bitcoin, meaning it became taxable, is a far cry from its original "rebellious" intent!

At the state level, New York State introduced the controversial BitLicense in 2015, the first regulatory framework requiring cryptocurrency companies to disclose information. Ultimately, the Securities and Exchange Commission (SEC) brought the frenzy to a close with its "DAO Investigation Report," confirming that many tokens were unregistered securities based on the Howey Test.

In 2020, the U.S. Office of the Comptroller of the Currency briefly allowed national banks to provide custody services for cryptocurrencies, but this move was later questioned by the Biden administration, a practice that has been "routine" for almost every president.

The Shackles of the Old World: The European Path

In the "Old World" across the ocean, outdated customs similarly dominate the development of cryptocurrencies. Influenced by rigid Roman law traditions (which differ greatly from the Anglo-American common law system), an atmosphere of anti-individual liberty permeates the landscape, limiting the possibilities of DeFi within a regressive civilization. It must be remembered that the American spirit is deeply influenced by Protestant ethics, a spirit of self-governance that has shaped America's entrepreneurial culture, ideals of freedom, and pioneering spirit.

In Europe, Catholic traditions, Roman law, and feudal remnants have given rise to vastly different cultures. Therefore, it's not surprising that established powers like France, Britain, and Germany have taken different paths. In a society that favors obedience over risk-taking, cryptocurrencies are destined for severe repression.

Europe's early crypto era was defined by a fragmented bureaucracy rather than a unified vision. The industry achieved its first legal victory in 2015 when the European Court of Justice ruled in a case that Bitcoin transactions were exempt from VAT, effectively recognizing the "monetary" nature of cryptocurrencies.

In the absence of unified EU law, national regulations operated independently until the Crypto Asset Market Regulation was introduced. France established a strict national framework through the PACTE Law, Germany introduced a cryptocurrency custody licensing system, while Malta and Switzerland competed to attract businesses with more lenient and favorable regulations.

In 2020, the Fifth Anti-Money Laundering Directive ended this chaotic era, mandating strict customer verification across the EU and effectively eliminating anonymous transactions. The European Commission finally realized that the 27 conflicting sets of rules were unsustainable and proposed MiCA at the end of 2020, marking the end of the "patchwork era" and the beginning of a unified regulatory era.

The American "visionary" model?

The transformation of the US regulatory system is not a genuine systemic reform, but rather driven more by opinion leaders. The power shift in 2025 will bring a new philosophy: mercantilism will prevail over moralism.

Trump's launch of his controversial "memecoin" in December 2024 may be a landmark event. It shows that even the elite are willing to "make cryptocurrency great again." Now, several "crypto popes" are leading the way, working to secure greater freedom and space for founders, developers, and retail investors.

Paul Atkins' appointment as head of the U.S. Securities and Exchange Commission (SEC) is more like a "regime change" than a typical personnel reshuffle. His predecessor, Gary Gensler, viewed the crypto industry with near-hostility, becoming a "public enemy" of a generation of crypto professionals. An Oxford University paper even analyzed the pain inflicted by Gensler's policies. Many believe that his radical stance delayed the development of DeFi for years, and that the regulator, who should have been guiding the industry, was severely out of touch with it.

Atkins not only halted numerous lawsuits but also essentially apologized for his previous policies. His "crypto project" is considered a prime example of bureaucratic flexibility. The project aimed to establish an extremely rigid, standardized, and comprehensive disclosure system, allowing Wall Street to trade crypto assets like Solana like it trades oil. According to Anli International Law Firm, the core of the plan included:

1. To establish a clear regulatory framework for the issuance of crypto assets in the United States.
2. Ensure freedom of choice in selecting custodians and trading venues.
3. Encourage market competition and promote the development of "super apps".
4. Support on-chain innovation and decentralized finance.
5. Establish an innovation exemption mechanism to ensure commercial viability.

The most crucial shift may lie with the Treasury Department. Former Treasury Secretary Janet Yellen viewed stablecoins as a systemic risk. Current Treasury Secretary Scott Bessant, an official with a hedge fund mindset, sees the essence: stablecoin issuers are the "only new net buyers" of U.S. Treasury bonds.

Bessant is acutely aware of the severity of the US deficit. Against the backdrop of central banks worldwide slowing their purchases of US Treasury bonds, the insatiable appetite of stablecoin issuers for short-term treasury bonds is a major boon for the new Treasury Secretary. He believes that USDC, USDT, and similar currencies are not competitors to the dollar, but rather its "vanguard," extending dollar hegemony to countries where fiat currencies have plummeted and citizens prefer to hold stablecoins.

Another classic example of a "short-to-long" reversal is JPMorgan Chase CEO Jamie Dimon. He once threatened to fire any employee trading Bitcoin, but has now completed one of the most lucrative "180-degree turns" in financial history. JPMorgan Chase's launch of a cryptocurrency mortgage lending business in 2025 is seen as a "surrender." According to The Block:

JPMorgan Chase's plan to allow institutional clients to use Bitcoin and Ethereum as collateral for loans marks Wall Street's deeper involvement in the cryptocurrency space.

Bloomberg, citing sources familiar with the matter, said the plan will be rolled out globally and will rely on third-party escrow agencies to hold the mortgaged assets.

When Goldman Sachs and BlackRock began eroding JPMorgan Chase's custody fee revenue, the "war" had quietly ended; the banks won by "not participating."

Senator Cynthia Loomis, once seen as a "lone crypto fighter," has become one of the most steadfast supporters of the new collateral system in the United States. Her proposal for a "strategic Bitcoin reserve" has moved from the fringe of online forums to serious congressional hearings. While her appeals haven't directly driven up the price of Bitcoin, her efforts are genuine.

The legal landscape in 2025 will consist of two parts: those "settled" and those "still pending." Current government enthusiasm for cryptocurrencies is so high that top law firms are launching real-time policy tracking services. For example, Riesling LLP's "US Crypto Policy Tracker" closely follows the actions of various regulatory agencies, which are tirelessly developing new regulations for DeFi. However, we are still in the "exploratory phase."

Currently, two bills are dominating the debate in the United States:

• The GENIUS Act, passed in July 2025, marks Washington's first step towards regulating stablecoins—the most important crypto asset class after Bitcoin. It mandates that stablecoins be backed by a 1:1 reserve of U.S. Treasury bonds, transforming them from a systemic risk into a geopolitical tool similar to gold or oil. The act effectively authorizes private issuers like Circle and Tether as "officially recognized buyers" of U.S. Treasury bonds, creating a win-win situation.
• The Clarity Act: This market structure bill, designed to clarify the distinction between securities and commodities and resolve the jurisdictional dispute between the SEC and CFTC, remains stalled on the House Financial Services Committee's side. Before its passage, exchanges existed in a comfortable but fragile "gray area," operating on interim regulatory guidelines rather than robust written law.

Currently, the bill has become a point of contention between Republicans and Democrats, and appears to be being used as a "weapon" by both sides.

Furthermore, the repeal of Employee Accounting Bulletin No. 121 is significant. This accounting rule previously required banks to classify custodial crypto assets as liabilities on their balance sheets, effectively preventing banks from holding cryptocurrencies. Its repeal is like opening a floodgate, signifying that institutional capital can finally enter the crypto market without fear of regulatory repercussions. Meanwhile, Bitcoin-denominated life insurance products have begun to emerge, and the future seems bright.

The Old World: Innate Risk Aversion

Just as the Church once burned scientists at the stake, European authorities today have enacted complex and obscure laws that may only deter entrepreneurs. The gap between the vibrant, rebellious spirit of American youth and the rigid, conservative, and sluggish Europe has never been so vast. When Brussels had the opportunity to shed its habitual rigidity, it chose to remain stagnant.

MiCA, to be fully implemented by the end of 2025, is a "masterpiece" of bureaucratic intent and a "disaster" of innovation.

MiCA is marketed as a "comprehensive framework," a term that in the Brussels context often means "comprehensive torture." It does offer clarity, clarity so profound it makes you want to escape.

MiCA's fundamental flaw lies in its "misclassification": it treats crypto founders as if they were sovereign banks to regulate. The compliance costs are so high that they could cause most crypto startups to fail.

A memo from Norton Law Firm objectively analyzes the regulation:

Structurally, MiCA is an "exclusion mechanism." It forces digital assets into a highly regulated category and imposes a cumbersome compliance framework on crypto asset service providers comparable to the Markets in Financial Instruments Directive II (MIDA II), which was originally intended to regulate financial giants.

According to its third and fourth sections, the regulations impose a strict 1:1 liquidity reserve requirement on stablecoin issuers, effectively prohibiting algorithmic stablecoins through legal means (presumably by declaring them "insolvent" from the outset). This in itself could trigger new systemic risks—imagine being declared "illegal" overnight by Brussels?

Furthermore, issuers of "significant" tokens will face enhanced regulation from the European Banking Authority, including capital requirements that could deter startups. Today, it is virtually impossible to establish a crypto business in Europe without a top-tier legal team and capital comparable to traditional financial giants.

For intermediaries, Part Five completely rejects the offshore and cloud exchange model. Service providers must establish physical offices in EU member states, appoint resident directors who have passed the "fitness test," and implement strict asset segregation and custody. The "white paper" requires technical documents to be transformed into legally binding prospectuses, with any material misrepresentation or omission leading to strict civil liability, thus completely piercing the industry's cherished anonymity—the "corporate veil." Instead, it would be better to simply open a digital bank.

Although MiCA introduced "rights of passage," allowing service providers approved in one member state to operate throughout the European Economic Area, this "homogenization" came at a high cost.

It has built a regulatory "moat," and only institutional players with extremely strong capital can afford the huge costs of anti-money laundering integration, market abuse monitoring, and prudent reporting.

MiCA not only regulates the European crypto market, but also effectively prevents entrepreneurs who lack legal and financial resources from entering the market, which is precisely the situation for most crypto founders.

Above EU law, Germany's regulatory body BaFin has become a mediocre "compliance paperwork machine," its efficiency limited only to processing paperwork for an increasingly ailing industry. France's ambition to become Europe's "Web3 hub" has hit a wall it built itself. French startups aren't writing code; they're voting with their feet. Unable to compete with the speed of the US or the innovation of Asia, they're causing a massive brain drain to Dubai, Thailand, and Zurich.

But the real death knell was the stablecoin ban. Under the pretext of "protecting monetary sovereignty," the EU effectively banned non-euro stablecoins like USDT, effectively killing the most reliable sector of the DeFi ecosystem. The global crypto economy relies on stablecoins. By forcing European traders to use illiquid "euro stablecoins" that are unwanted outside the Eurozone, Brussels has dug itself a "liquidity trap."

The European Central Bank (ECB) and the European Committee on Systemic Risk (ECB) have urged the EU to ban the "multiple issuance" model (where global stablecoin companies treat tokens issued both within and outside the EU as interchangeable). The ESRB, led by ECB President Christine Lagarde, warned that a run on EU-issued tokens by non-EU holders could "amplify financial risks within the EU."

Meanwhile, the UK is considering capping individual holdings of stablecoins at £20,000, while there is a lack of regulation for higher-risk "shit coin." Europe's risk-averse strategy urgently needs radical reform, otherwise regulation itself could trigger systemic collapse.

The reason may be simple: Europe wants its citizens to remain bound to the euro, unable to participate in the US economy to escape its own stagnation or even recession. As Reuters quoted the European Central Bank as warning:

Stablecoins could siphon valuable retail deposits from Eurozone banks, and any run on stablecoins could have a wide-ranging impact on global financial stability.

Ideal Model: The Swiss Model

Some countries have successfully avoided the binary dilemma of "over-regulation" versus "under-regulation" by freeing themselves from partisan struggles, foolish decisions, and outdated laws, and have found a path that embraces all parties. Switzerland is a prime example of this.

Its regulatory framework is diverse, effective, and user-friendly, making it popular among practitioners and users.

• The Financial Markets Surveillance Act: Enacted in 2007, it integrates banking, insurance, and anti-money laundering regulatory agencies to establish an independent and unified Swiss Financial Markets Authority.
• The Financial Services Act focuses on investor protection and creates a level playing field for all types of financial service providers through strict codes of conduct, customer classification, and information disclosure.
• Anti-Money Laundering Law: The core framework for combating financial crime, applicable to all financial intermediaries (including crypto service providers).
• The Distributed Ledger Technology Act: Passed in 2021, it amended ten federal laws and formally recognized the legal status of crypto assets.
• Virtual Asset Service Providers Regulations: Strictly enforce FATF rules with a "zero tolerance" attitude.
• Article 305(2) of the Swiss Criminal Code explicitly defines money laundering as a criminal offense.
• Industry standards: issued by the Capital Markets and Technology Association, are not mandatory but are widely adopted.
• The regulatory system is clearly structured and has well-defined powers and responsibilities: parliamentary legislation, FINMA issuing detailed rules, self-regulatory organizations conducting daily oversight, and the money laundering reporting office reviewing suspicious reports and transferring them for prosecution.

Therefore, the Zug Valley has become a "holy land" for crypto entrepreneurs. Its clear framework not only allows for innovation but also provides a clear legal umbrella, giving users peace of mind and reassuring banks willing to take on manageable risks to cooperate with.

The United States embraces and utilizes

The new world's acceptance of cryptocurrencies is not purely driven by a thirst for innovation (France has yet to send a man to the moon), but rather by a pragmatic choice under fiscal pressure. Since relinquishing dominance of the Web2 internet to Silicon Valley in the 1980s, Europe seems to view Web3 as just another "tax base" to be harvested, rather than an industry that needs nurturing.

This repression is structural and cultural. Against the backdrop of an aging population and an overburdened pension system, the EU cannot tolerate the rise of a competitive financial industry beyond its control. This is reminiscent of feudal lords imprisoning or killing local nobles to eliminate potential threats. Europe has a tragic "self-destructive tendency," sacrificing the potential of its citizens to prevent uncontrolled change. This is foreign to the United States, where culture values ​​competition, ambition, and a Faustian will to power.

MiCA is not a "development" framework, but a "death sentence." It aims to ensure that if European citizens engage in crypto transactions, they must do so within a national surveillance grid, guaranteeing governments a share, much like an obese monarch trying to squeeze every last drop out of the peasantry. Europe is positioning itself as the world's "luxury consumer colony" and "eternal museum," inviting astonished Americans to reminisce about an irretrievable past.

Switzerland and the UAE, on the other hand, have transcended historical and structural flaws. They lack the imperial baggage of defending global reserve currencies and the bureaucratic inertia of the G27. By exporting "trust" through laws like the Distributed Ledger Technology Act, they have attracted foundations with core intellectual property rights, such as Ethereum, Solana, and Cardano. The UAE is following suit, which explains why more and more French people are "invading" Dubai.

We are heading into an era of "radical jurisdictional arbitrage".

The crypto industry will see a geographical split: consumers will remain in the US and Europe, accepting full identity verification, high taxes, and integration with traditional banks; while the core protocol layer will migrate entirely to rational jurisdictions such as Switzerland, Singapore, and the UAE.

Users will be located all over the world, but founders, venture capitalists, protocols, and developers will have to consider leaving their home markets and finding more suitable places to build.

Europe's fate may be sealed: it will become a "financial museum." It's building a glamorous yet useless, even fatal, legal system for its citizens. One can't help but wonder: Brussels' technocrats, have you ever bought Bitcoin or transferred stablecoins across blockchains?

Cryptocurrencies becoming macro assets is inevitable, and the United States will maintain its position as a global financial center. With Bitcoin-denominated insurance, crypto asset collateral, crypto reserves, unlimited venture capital support, and a vibrant developer ecosystem, the US is building the future.

Concluding remarks filled with concern

In short, the "Brave New World" that Brussels is building is less like a coherent digital framework and more like a clumsy patchwork, attempting to awkwardly graft 20th-century banking compliance provisions onto 21st-century decentralized protocols, and its designers are mostly engineers who know nothing about the temperament of the European Central Bank.

We must actively advocate for an alternative system that prioritizes practical needs over administrative control. Otherwise, we will completely stifle Europe's already anemic economy.

Unfortunately, cryptocurrency isn't the only victim of this "risk paranoia." It's simply the latest target of a well-paid, complacent bureaucracy. Wandering the lifeless, postmodern corridors of the capital, their heavy-handed regulation only exposes their lack of real-world experience. They've never experienced the tedium of account verification, the hassle of obtaining a new passport, or the difficulty of applying for a business license. Thus, despite Brussels' plethora of so-called "technocrats," crypto-native founders and users are forced to contend with a group mired in incompetence, capable only of creating harmful legislation.

Europe must turn around and act immediately.

While the EU is busy binding itself with red tape, the US is actively planning how to "standardize" DeFi, moving towards a framework that benefits all parties. Achieving some degree of "recentralization" through regulation is inevitable; the collapse of FTX was a warning sign all along.

Investors who have suffered heavy losses crave justice; we need to break free from the current "Wild West" cycle of meme frenzy, cross-chain bridge vulnerabilities, and regulatory chaos. We need a structure that allows traditional capital (Sequoia, Bain, BlackRock, Citigroup, etc., have already taken the lead) to enter safely while protecting end users from predatory capital.

Rome wasn't built in a day, but while encryption experiments have been underway for fifteen years, the institutional foundations remain mired in problems. The window of opportunity to build a functional encryption industry is rapidly closing; hesitation and compromises in war will cost everything, and both sides of the Atlantic need swift, decisive, and comprehensive regulation.

If this cycle is indeed coming to an end, then now is the best time to salvage the industry's reputation and compensate serious investors who have been harmed by bad actors for years.

Those weary traders from 2017, 2021, and 2025 are demanding a thorough reckoning and a final answer to the problems of cryptocurrency; and most importantly, for our world’s most beloved asset to reach its deserved, new historical high.

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