Crypto Regulation Is Coming and That's Actually Good

I'm going to say something that might get me cancelled in certain Telegram groups. Crypto regulation isn't just inevitable. It's actually a net positive for the industry. Not all regulation. Not bad regulation. But clear, reasonable rules that tell builders what they can and can't do.

Before you close this tab, hear me out. I've been in crypto since 2017. I've watched the "regulation is coming" narrative shift from "the sky is falling" to "actually this might work" to "the sky is falling again" and back multiple times. And the more I've watched, the more convinced I've become that the lawless Wild West era of crypto needed to end for the technology to reach its potential.

The Current Mess Is Worse Than Regulation

Right now in early 2026, the crypto regulatory landscape in the US is a patchwork of conflicting guidance, enforcement actions, and unclear jurisdictions. The SEC says most tokens are securities. The CFTC says some are commodities. State regulators have their own rules. And individual judges keep reaching different conclusions.

This uncertainty is worse than actual regulation. Here's why.

Builders don't know what's legal. Good faith projects spend millions on legal fees trying to figure out if their token is a security. Many don't even try and just launch offshore. Some of the best teams avoid the US entirely, which means American users and investors miss out.

Scammers thrive in ambiguity. When there are no clear rules, bad actors exploit the gray areas. They launch fraudulent tokens, knowing that enforcement is slow and inconsistent. Clear regulations would make it easier to prosecute actual fraud while giving legitimate projects a path to compliance.

Institutions are sitting on the sidelines. Trillions of dollars in institutional capital can't touch most crypto assets because there's no regulatory framework for them to follow. Banks, pension funds, and insurance companies want to invest but their compliance departments won't let them until rules are clear.

The lack of regulation isn't protecting crypto. It's holding it back.

What Good Regulation Looks Like

When I say regulation is good, I'm not talking about banning crypto or restricting who can use it. I'm talking about frameworks that:

Define what a security token vs a utility token vs a commodity token is. The current ambiguity is poisonous. If you're launching a token, you should be able to look at a clear set of criteria and know exactly which rules apply. Right now, you have to guess and hope the SEC doesn't come after you later.

Require disclosures, not permission. Good regulation says "you must tell investors X, Y, and Z about your project." Bad regulation says "you can't launch without government approval." The disclosure model works well for stocks. It would work well for tokens too. Let projects launch freely but require them to provide truthful information about team holdings, vesting schedules, treasury management, and use of funds.

Protect consumers from fraud without restricting access. Most crypto fraud (rug pulls, fake airdrops, Ponzi schemes) is already illegal under existing law. The problem is enforcement, not the absence of rules. Better enforcement against actual criminals helps everyone.

Create clear tax reporting guidelines. Crypto tax reporting is a nightmare. Which transactions are taxable events? How do you value tokens received as staking rewards? What about airdrops? DeFi yield? Most crypto users want to pay their taxes correctly and literally can't because the rules aren't clear enough.

The FIT21 Framework and What It Means

The Financial Innovation and Technology for the 21st Century Act (FIT21) passed the House in May 2024 and has been working its way through the legislative process. While it's not perfect, it represents the most serious attempt at crypto specific legislation in the US.

Key elements: it creates a framework for determining when a digital asset is a security vs a commodity, gives the CFTC primary jurisdiction over digital commodity markets, establishes disclosure requirements for token projects, and creates a pathway for platforms to register as "digital commodity exchanges."

The crypto industry initially had mixed reactions. Some saw it as too restrictive. Others saw it as exactly what was needed. My take: it's imperfect but vastly better than the current confusion.

With the new administration taking a more crypto friendly stance, there's momentum behind getting something passed. Whether it's FIT21 or a revised version, the direction is clear: real regulation is coming to US crypto markets.

How Regulation Helps Prices (Yes, Really)

Crypto people often argue that regulation will crash prices. The evidence suggests the opposite.

Bitcoin ETFs. The approval of Bitcoin ETFs in January 2024 was a regulatory action. The SEC approved a regulated product. The result? Over $45 billion in new capital flowing into Bitcoin. The price hit new all time highs.

Japan's approach. Japan implemented comprehensive crypto regulation in 2017. The result wasn't a market crash. It was the development of one of the most robust crypto markets in the world, with regulated exchanges and strong consumer protection.

The FTX effect. The lack of regulation allowed FTX to operate a fraudulent exchange for years. When it collapsed, it destroyed $8 billion in customer funds and triggered a market crash that wiped out hundreds of billions in value. Regulation that required audited reserves and separated customer funds would have prevented this entirely.

Regulation doesn't kill markets. Uncertainty kills markets. Clear rules, even strict ones, create the confidence that institutions need to participate. And institutional participation drives prices higher than any retail rally ever could.

What Regulation I'm Worried About

Not all regulation is created equal. There are legitimate concerns about bad regulation that would actually harm the industry.

DeFi restrictions. If regulators try to force KYC on DeFi protocols, it would fundamentally break the permissionless nature of decentralized finance. A DEX can't verify your identity because there's no central operator to do the verification. Treating every smart contract like a financial institution doesn't work.

Staking restrictions. The SEC's action against Kraken's staking service in 2023 was a negative example. Treating staking yields as unregistered securities creates problems for Proof of Stake networks. Staking is a technical function, not an investment product, and regulating it as a security doesn't make sense.

Mining bans. Some jurisdictions have considered or implemented bans on cryptocurrency mining due to energy consumption. While environmental concerns are valid, outright bans push mining to less regulated jurisdictions without reducing total energy use.

Overreach on self custody. Any regulation that restricts people's ability to hold crypto in their own wallets crosses a fundamental line. Self custody is a basic property right. Requiring people to use custodial services to hold their own assets is like requiring people to keep cash in a bank. It should never be mandated.

The Builders Already Know This

Talk to serious crypto founders and most of them will tell you privately that they want regulation. Not because they want government control, but because they're tired of the uncertainty.

Coinbase, Circle, and other major crypto companies have spent years lobbying for clear rules. They're not doing this because they want to be restricted. They're doing it because regulatory clarity removes the biggest risk to their businesses: not knowing if the government will suddenly decide they're breaking a law that didn't exist when they started.

When Coinbase filed its petition with the SEC asking for clear rulemaking, that was a company saying "please regulate us properly." That should tell you something about how bad the current ambiguity is.

My Prediction

Within the next two to three years, the US will have a workable crypto regulatory framework. It won't be perfect. Some rules will be too strict. Others won't be strict enough. There will be arguments and lawsuits and revisions.

But the net effect will be positive. More institutional money will enter. More legitimate projects will launch in the US instead of offshore. Consumer protection will improve. Scammers will find it harder to operate. And the overall crypto market will be larger and more stable than it is under the current regime of regulatory uncertainty.

The crypto industry doesn't need no rules. It needs the right rules. And for the first time in crypto's history, there's a real chance of getting them.