What is crypto regulation?

Since the collapse of several major crypto companies in recent years, the importance of regulation has only grown. With new laws like MiCA in the EU and updated frameworks in the U.S. and UK, crypto regulation is entering a new phase. But what rules are already in place? How do they compare to traditional banking laws? And why is regulation so essential for the crypto industry? Find out everything you need to know about the current state of crypto regulation in this Bitpanda Academy lesson.

Regulation vs. legislation

Although the words “regulation” and “legislation” are often used interchangeably in everyday conversation, semantically speaking, they actually describe two separate parts of the same process.

Legislation is the collective term for the process of preparing and setting laws. Lawmakers propose and create rules that are meant to manage the behaviour of people, institutions or industries. Legislation is legally binding, meaning that the issuers of a law can impose punishments in case the rules are not followed.

Regulations are more specific. The biggest difference between legislation and regulation is that regulation is more concise and is imposed with a specific topic or industry in mind. Furthermore, authorities different from the government can impose regulations only when a piece of legislation authorises such authority to do so. 

Crypto regulation vs. bank regulation

Bank regulation

As we now know, regulation is the setting of specific rules to govern the conduct of groups or institutions, which means that banking regulation is designed to check the behaviour of banks. Specifically, banking regulation is meant to increase transparency towards customers and clients,  reduce risk, prevent fraud or nefarious activities, and increase social responsibility. The European Banking Authority alone counts 28 regulatory topics within its scope, including accounting and auditing, credit risk, investment firms, payment services and electronic money, just to name a few.

Licensing is the process by which companies can start banks. The licence allows them to operate as a bank and to provide financial services. Getting a licence from the governmental regulator means that the regulator will have oversight over the bank’s activities and ensure that the bank remains compliant with the rules. This is called supervision.

Since banks and fiat currencies have existed far longer than cryptocurrencies and digital asset exchanges, much more regulation is already in place. Still, the amount and strictness of regulation vary between countries.

Crypto regulation

Cryptocurrencies and digital assets have existed for years now, but until recently, the sector has gone largely unregulated. Initially, this might have been because cryptocurrencies were designed to be a decentralised asset, meaning they are not tied to any official institution or government and are therefore free from their control. Even today, creators of cryptocurrencies might feel that regulation is at odds with their intent.

But concern over the regulation of cryptocurrencies and digital assets has only been growing. 2022 was an especially difficult year for crypto. The market reflected the loss of consumer trust, and more than one crypto company went under due to fraudulent activities and mismanagement of funds. While some players in the crypto industry might not like the increased regulation, others see it as recognition and think it will spur on competition between traditional financial institutions and their crypto-native counterparts, as banks are starting to dip their toes into the digital asset space.

What crypto regulation currently exists?

Crypto regulation in Europe

Markets in Crypto-Assets Regulation (MiCAR)

The Markets in Crypto-Assets Regulation, also known as MiCAR, is an EU-wide, cross-jurisdictional regulatory framework for digital assets that was passed by the European Parliament in 2023. The official implementation date was on December 30, 2024. 

MiCAR represents a major milestone in the efforts to create a comprehensive and enforceable regulatory framework for crypto assets in the EU. The introduction of MiCAR addresses the long-standing lack of clear rules in the crypto industry, providing a balanced legal framework that ensures transparency, mitigates risks and fosters accountability. By providing legal clarity, unified licensing requirements, and harmonised practices across member states, MiCAR creates a more secure and predictable environment for all market participants.

Virtual Asset Service Provider (VASP)

Currently, most European countries advise crypto companies to register as a virtual asset service provider (VASP) with the local regulator. Registering as a VASP with a country’s regulator means that a crypto company has a valid and locally recognised Anti-Money Laundering (AML) framework, which is registered with the local authorities. This registration also allows crypto companies to directly market their services in that country.

To obtain a VASP registration, crypto companies must undergo a rigorous inspection by the local regulator, demonstrating the company’s entire business model and compliance with AML and KYC requirements, as well as proving that all of their internal systems and processes are transparent and compliant. 

In Europe, VASP registrations are not transferable between countries, meaning that in order to be fully recognised as a crypto business, a company has to repeat the review and inspection process anew in each jurisdiction that provides such a registration. The time between applying and receiving a registration can take a few years, underlining that being a fully regulated crypto company takes a lot of effort, determination, and patience

Crypto regulation in the United Kingdom

As of 2025, the UK has introduced comprehensive crypto regulation aimed at aligning digital assets with traditional financial markets. Under new legislation, crypto exchanges, brokers, and custodians must register with the Financial Conduct Authority (FCA) and comply with stricter standards for transparency and consumer protection. The government also plans to ban the use of credit cards for crypto purchases and require platforms to report detailed transaction and user data to HMRC. These measures reflect the UK’s shift from lagging behind to taking a leading role in shaping a secure and innovation-friendly crypto environment.

Crypto regulation in the U.S.

In the first half of 2025, the U.S. has taken major steps toward clearer and more supportive crypto regulation. A recent executive order laid the groundwork for a national digital asset strategy, including the creation of a strategic Bitcoin reserve and efforts to strengthen the country’s position in the global crypto market.

Regulatory agencies have shifted focus from heavy enforcement to building a clearer framework, with new initiatives aimed at supporting innovation while protecting consumers. A key piece of legislation, the CLARITY Act, is working to clearly define which government bodies oversee different types of crypto assets, reducing the confusion that has slowed regulation in the past. At the same time, earlier restrictions on using crypto in retirement plans have been rolled back, showing a broader acceptance of digital assets in traditional finance.

Crypto regulation in the rest of the world

In the rest of the world, crypto and digital asset regulation finds itself in various states of progress. Some countries, like China, have banned cryptocurrencies outright, whereas others, like India, appear content to let things go unregulated for a while longer, as there is no framework or legislation even being proposed.

The future of crypto regulation

The future of crypto regulation is already taking shape with the rollout of comprehensive frameworks like MiCA in the EU and new legislation in the United States and the United Kingdom. These developments mark a shift towards greater clarity, consumer protection, and institutional acceptance of digital assets.

At Bitpanda, we continue to support strong, smart regulation. We believe that clear rules and oversight are essential for building trust, driving innovation, and helping the industry grow in a sustainable way.

To learn more about how Bitpanda is regulated, see our article on licences and registrations.