Crypto Regulation: A Patchwork Quilt?

The crypto world in 2025 is a fascinating mix of progress and persistent uncertainty. Global Crypto Policy Review Outlook 2025/26 Report, covering 30 jurisdictions and over 70% of global crypto exposure, paints a picture of stablecoins taking center stage, institutional adoption cautiously advancing, and a global push for consistent regulation. But is it truly consistent? Or are we looking at a regulatory patchwork quilt, stitched together with good intentions but riddled with holes?

Stablecoins Take Center Stage

Stablecoins, predictably, are the focus. Over 70% of the jurisdictions TRM Labs reviewed are working on stablecoin regulation. The US GENIUS Act and the EU's MiCA rollout are cited as examples, alongside progress in Hong Kong, Japan, Singapore, and the UAE. The implication is clear: stablecoins are seen as potential mediums of exchange, and regulators want bespoke frameworks to govern them. But here’s where the cracks start to appear. While most are advancing, what about the jurisdictions that are not prioritizing stablecoins? Are they simply lagging, or do they have fundamentally different views on the role of these assets? It's a question the report doesn't explicitly address.

Institutional Adoption: Proceed with Caution

The report highlights that about 80% of reviewed jurisdictions saw financial institutions announce digital asset initiatives in 2025. This is attributed to increasing regulatory clarity, particularly in the US, EU, and parts of Asia. But let’s dig a little deeper. "About 80%" is a broad statement. What kind of initiatives are we talking about? Are these small pilot programs, or large-scale deployments? And what's the actual volume of institutional investment? The report doesn’t provide concrete figures, leaving room for interpretation.

Basel Committee's Prudential Rules Under Reassessment

Furthermore, the Basel Committee's proposed prudential rules for banks' crypto exposures, initially slated for implementation by January 1, 2026, are now under reassessment. The original framework would have required full capital deductions for most crypto assets, including certain stablecoins on public blockchains. This is a major point. The potential softening of these rules suggests a more accommodating stance toward banks' engagement with digital assets. But does this represent a genuine shift in attitude, or simply a pragmatic response to the growing stablecoin market and the fact that major jurisdictions like the US and UK declined to adopt the original standards? Are regulators truly becoming more comfortable with the risks, or are they just bowing to market pressure?

Combating Illicit Finance Through Regulation

One area where regulation seems to be having a positive impact is in combating illicit finance. TRM analysis found that virtual asset service providers (VASPs), the most widely regulated segment of the crypto ecosystem, have significantly lower rates of illicit activity than the overall ecosystem. This is encouraging, and it underscores the importance of robust regulatory frameworks. However, as the report also points out, crypto's global and borderless nature makes consistency critical to preventing regulatory arbitrage. The North Korea hack on Bybit, which led to the exchange losing over USD 1.5 billion in Ethereum tokens, serves as a stark reminder of the vulnerabilities that exist when gaps in standards implementation persist.

The US GENIUS Act: Landmark Progress?

The report mentions the US leading an acceleration in crypto policymaking and friendlier regulatory attitudes toward digital assets in 2025. The GENIUS Act on stablecoins is cited as landmark progress. But the devil is always in the details. What exactly does the GENIUS Act entail? And how will it be implemented in practice? The report doesn’t delve into specifics, leaving the reader to wonder about the potential implications.

MiCA Implementation Challenges in the EU

I've looked at enough of these "year in review" reports to know that they often gloss over the less palatable truths. The report acknowledges that the implementation of MiCA in the EU has revealed the challenge of maintaining regulatory consistency across the bloc, but it doesn't fully explore the extent of the divergence or the potential consequences. If national authorities are interpreting and enforcing MiCA differently, what does that mean for the long-term viability of a unified European crypto market?

Is Global Consistency Just a Pipe Dream?

The FATF warns that "VASPs in jurisdictions with weak or non-existent frameworks" remain vulnerable to exploitation "without detection or disruption." The FSB cautions that "gaps and inconsistencies" in implementing standards could pose risks to financial stability and market resilience. These are serious concerns, and they raise a fundamental question: Is true global consistency in crypto regulation even achievable, given the diverse political, economic, and cultural contexts in which these regulations are being developed?

Maybe the real takeaway here isn't the progress that's been made, but the distance that still needs to be traveled. The crypto market is evolving at a breakneck pace, and regulators are struggling to keep up. The focus on stablecoins is understandable, but it shouldn't come at the expense of addressing other critical issues, such as DeFi, NFTs, and cross-border enforcement. The regulatory landscape in 2025 is undoubtedly more mature than it was a few years ago, but it's still far from perfect. It's a work in progress, and it remains to be seen whether it will ultimately provide the clarity and stability that the crypto market needs to thrive.

Decentralized Regulation?

The push for global consistency is admirable, but perhaps a touch naive. Expect more regulatory arbitrage and jurisdictional competition as nations vie for a piece of the crypto pie. The "patchwork quilt" might be here to stay.