Crypto Policy in 2025: Regulators Catching Up, But Are They Looking in the Right Places?
Introduction: A Seemingly Rosy Picture of Crypto Regulation in 2025
2025 was supposed to be the year crypto grew up. At least, that’s the narrative the industry's been pushing. Looking at the TRM Labs report, "Global Crypto Policy Review & Outlook 2025/26," you see a lot of checkmarks in the "regulatory clarity" column. Stablecoins are in focus, institutional adoption is supposedly fueled by this clarity, and everyone's patting themselves on the back about reducing illicit finance. But let's dig into the numbers, because the surface gloss doesn't always match what's happening underneath.
Stablecoin Regulation: Progress or Containment?
The report highlights that over 70% of jurisdictions reviewed progressed stablecoin regulation in 2025. The US, with its GENIUS Act, and the EU, with its MiCA rollout, are presented as prime examples. But is this a victory or a containment strategy? Stablecoins, by design, are supposed to be less volatile (hence the "stable" part). They're pegged to fiat currencies, mostly the US dollar. So, aren’t we just legitimizing a shadow banking system built on top of existing, regulated currencies?
Institutional Adoption: A Genuine Embrace or Strategic Maneuvering?
The report mentions stablecoins becoming the "entry point for institutional adoption." Sure, it's easier for big players to dip their toes into crypto with something that doesn't swing wildly like Bitcoin. But it also creates a dependency. These institutions aren’t suddenly embracing the decentralized ethos of crypto; they're just finding a slightly more efficient way to move dollars around, and the real innovation in blockchain is getting sidelined. The question I keep asking is, are we solving a problem or just creating a new, more complex one?
Eighty percent of the reviewed jurisdictions saw financial institutions announce digital asset initiatives in 2025. That sounds impressive until you realize "announce" doesn't equal "implement." How many of these initiatives are actually generating substantial value, and how many are just press releases designed to appease shareholders who are now demanding crypto exposure? The Basel Committee's reassessment of crypto exposure rules for banks is a key example. The original framework, slated for 2026, would have required full capital deductions for most crypto assets. The fact that this is being reconsidered suggests regulators are feeling the pressure to soften their stance, not necessarily that they're convinced of crypto's inherent stability.
And this is the part of the report that I find genuinely puzzling. The report celebrates regulatory clarity leading to institutional adoption, yet simultaneously notes that major jurisdictions like the US and UK declined to adopt the Basel standards. So, is regulatory clarity the cause of adoption, or is it the result of powerful institutions lobbying for favorable treatment? The report doesn't seem willing to address that discrepancy.
Illicit Finance: Is Regulation Truly Curbing Criminal Activity?
The report claims that regulated VASPs (Virtual Asset Service Providers) have significantly lower rates of illicit activity than the overall crypto ecosystem. This is attributed to robust crypto regulation. But let's be real: regulated VASPs are supposed to have lower rates of illicit activity. That's the whole point of regulation. The more interesting question is, where is the illicit activity going?
The report mentions North Korea's $1.5 billion hack of Bybit, with the stolen funds laundered through unlicensed OTC brokers and decentralized exchanges. Regulation isn't stopping illicit activity; it's just pushing it to the fringes, and, arguably, making it harder to track. The FATF warns about "VASPs in jurisdictions with weak or non-existent frameworks," but that's a global problem, not a localized one. As long as there are regulatory loopholes somewhere, criminals will find them.
The Global Patchwork: A Fragmented Regulatory Landscape
The sheer volume of jurisdictional developments detailed in the report (Argentina expanding VASP registration, Brazil finalizing its VASP regime, Canada enforcing stablecoin rules, etc.) highlights the fragmented nature of crypto regulation. Every country is doing its own thing, often with conflicting approaches. The EU is pushing MiCA, the US is…well, the US is doing a bit of everything. This creates opportunities for regulatory arbitrage, where companies shop around for the most favorable jurisdiction.
And that’s before considering the Crypto Market Update: Strategy Faces MSCI Index Removal, SEC Freezes Ultra-Leveraged ETF Approvals, or the SEC Freezes Ultra-Leveraged ETF Approvals. All the regulatory action in the world can’t change the fact that crypto’s fundamental volatility makes it a risky asset, and regulators are constantly playing catch-up.
Conclusion: The Need for Smarter, Not Just More, Regulation
Regulate the Regulators, Not the Code.
The TRM Labs report paints a picture of progress, but it's a heavily curated image. Yes, there's more regulation, but that doesn't necessarily equal a safer, more stable, or more innovative crypto ecosystem. It might just mean a more complex and centralized one, where the original promise of decentralization is slowly being eroded. The key isn't more rules; it's smarter rules, rules that address the fundamental risks without stifling innovation. Until regulators start thinking outside the traditional financial box, they'll always be one step behind.