Mateusz Raczyński
min read
Last Update:
March 7, 2024

When it comes to crypto from the regulatory perspective, it’s a wild west almost anywhere in the world. Some see it as an opportunity while others perceive the lack of regulations around crypto as off-putting or even view it as what keeps it from being adopted by the masses.

Who’s right? It’s too early to tell with 100% certainty. What we can do, however, is to take a step back and look at the current state of regulations around crypto, where are they heading, and what ideas have been proposed so far. Based on that, you can see for yourself how digital assets are adopted from the standpoint of finance.


  1. Can crypto be regulated?
  2. Should crypto be regulated?
  3. Regulations for the individuals are clear -ish
  4. Where to run business dealing with crypto?
  5. What is the future for regulatory frameworks?

Can crypto be regulated?

The first question that needs to be answered is whether cryptocurrencies can be regulated as they are decentralized by design. Decentralization is what makes cryptocurrencies immutable. Provided that the networks are distributed enough to make obtaining 51% of their computing power (or 33% in some designs) practically impossible.

Although some blockchains are permissionned, the most widely used cryptos, Bitcoin and Ethereum, are permissionless. Once they were set up, they became living on their own and can’t be controlled by anyone. Of course, Ethereum has been updated in the past but only through forking–the old network was left behind and a new one had to be plugged into it. That made Ethereum Classic and Ethereum and is going to make the current Ethereum a legacy network as soon as Ethereum 2.0 is introduced.

The reason why I mention this fact is that the most widely used cryptocurrencies can’t be regulated on-chain. All the operations and transactions take place freely, without any central party to oversee it.

There are some workarounds, though, and some regulators are actively researching them–if they haven’t introduced them already. Exchanging crypto to fiat is a different story since the governments would like to know the origin of what looks like income, and tax it accordingly.

Transparency is yet another characteristic of digital assets which has been researched as a way to regulate them. Since blockchain is technically a ledger of transactions, every value transfer can be traced across previous wallets and if those wallets can be matched to real identities, they can be–in theory–taxed and regulated.

The technical possibilities don’t equal to practical solutions which is why crypto hasn’t been effectively regulated in similar ways to financial instruments and fiat operations.

Should crypto be regulated?

It depends on how you look at it. Maintaining digital assets unregulated gives power back to the people who are using them. They are in full control and can do whatever they want with their assets. However, total control might be tricky for casual users. It’s best shown by the amount of lost or forgotten keys–according to Chainalysis, up to 20% of the total Bitcoin supply could be lost, worth around 200 billion dollars as of the time of writing. There are multiple stories of people wondering about their key phrases, sitting on millions of dollars without any clue on how to access them.

This is the reason why custodial wallets are so commonly used–even if they are less safe, they leave less responsibility on the owner. In other words, they are safe by the means of keeping the owner safe from... himself!

This urge to protect crypto users from themselves through regulations is similar. When market bubbles burst and people and companies end up broke, regulations are introduced to prevent similar situations from ever repeating. We’re all-in on crypto at Ulam Labs but with the high volatility of digital assets, major market corrections are just part of the landscape. Without regulations, getting into the sphere is almost frictionless and when you combine high volatility with FOMO and inexperienced investors, you end up with lots of people risking their potential life savings. Just as there are overnight crypto millionaires, there are overnight crypto bankrupts.

Let’s go back to the ICO craze of 2017/2018. While slightly less than a half ICOs didn’t survive more than four months after the offering–which is an enormous amount–over $7 billion has been raised this way. Why? Because of the FOMO coming from Bitcoin’s bull run reaching new all-time highs–investors were expecting to find the next Bitcoin and went unguarded into scams or bubbles that eventually burst.

When bad actors want to trick others into crypto-themed scams, regulations are needed at least to provide tools to chase the scammers and help separate the honest crypto businesses from the bad apples.

Leaving crypto self-regulatory might prove to work in the long term but it would mean that many inexperienced, and possibly uneducated, investors might have to learn the hard way. Investing life-time savings for 1,000% of return sounds great until it doesn’t.

Some sort of regulatory framework is therefore needed to minimize the losses of the so-called retail investors but in this case–just regular crypto users if we’re ever to reach mainstream adoption. However, there’s a thin line between making cryptocurrencies safer and having a more trustworthy appeal to newcomers and regulating them in a way that would diminish most of their benefits.

It is expected that although in the short term, crypto valuations can suffer from regulations, in the long term–provided done correctly–regulations can stabilize the market and make crypto investments safer. Higher confidence in the market might move larger capital into the sphere and eventually move the prices further upwards.

Crypto Regulations

Regulations for the individuals are clear -ish

For individuals that invest in Bitcoin, Ethereum, and any new kind of cryptocurrency, the tax situation is clear in many countries now, although most don’t employ any crypto-specific regulations.

For example, in the US, digital assets are treated as property. This means that profits made from transactions are subject to capital gains tax. If you buy anything with crypto, that’s also perceived as bartering and would be subject to capital gains tax, too–on both sides of the transaction.

This isn’t that simple for individuals and might be one of the reasons why as much as 59% of crypto users in the US don’t tax the transactions at all. In 2018, that contributed to $25 billion of untaxed capital gains, and it’s much higher in 2021.

That also applies to mining, although it can be treated as a regular business in which only your net profit is taxed. But then, we have airdrops, Token Generation Events, ICOs, and other forms of selling new cryptocurrencies and those are perceived as securities. Therefore, US citizens have limited access to such investments–only accredited investors can use those to build capital.

The IRS is already investigating the tax matter. For example, by 2018, they have already collected 14,000 Coinbase users activity logs to take a closer look at people’s trading profits. Avoiding tax for crypto gains might eventually end with such activities, or it will be strictly limited.

The situation is similar across the globe. Some regulators perceive crypto as property, other as securities, while others, such as Indonesia, just ban it unless they introduce proprietary regulations–which they did.

It’s different for crypto-related companies, though.

Where to run business dealing with crypto?

Opposed to individuals, businesses are much more controlled entities and as such, they fall into different regulations–if they exist. For businesses that offer crypto-related services and allow for crypto payments, a lack of specific regulations can effectively pause their operations. Without certain rules, accountants can have a really hard time dealing with tax offices, settlements, etc.

Of course, business leaders are creative and flexible enough to cope with such circumstances. In order to run without any legal-related hiccups, they register the businesses around the globe, wherever the situation for dealing with crypto assets is clear.

Here are the top destinations that were widely used in 2021 to register crypto businesses.


At the beginning of 2018, Gibraltar introduced Nine Core Principles regulating Distributed Ledger Technology in a way that wouldn’t limit innovations but also offer regulatory oversight over DLTs and crypto space.

The principles are as follows:

  1. Honesty and IntegrityProviders must never pose a risk to the public or to the reputation of Gibraltar and must act with honesty, integrity, and professionalism to the clients.
  2. Customer CareDLT providers must ensure clear and transparent communication. They need to fully disclose any conflicts of interest and deal with customer complaints and issues quickly.
  3. ResourcesBusiness dealing with DLT need to ensure that financial and non-financial resources are provided. That also refers to capital and insurance.
  4. Risk ManagementProviders should follow a common sense approach to risk management. They need forward-looking risk management practices and always consider the risks to customers and the reputation of Gibraltar.
  5. Protection of Client AssetsClient’s assets should be protected by ensuring adequate storage, data protection, appropriate record keeping, and other measures to provide maximum protection to the client assets.
  6. Corporate GovernanceDLT businesses must have corporate governance rules and procedures to structure, strategy, and corporate culture.
  7. Cyber SecurityDLT providers must ensure that all systems and protocols are of high security standards. All employees, including senior management and board members must be fully aware of cybersecurity threats.
  8. Financial CrimeThe providers need to take proactive stance against financial crime–due diligence and KYC vetting in full accordance with the Proceeds of Crime Act 2015 are required.
  9. ResilienceDLT providers must be prepared for possible contingencies to bring minimal loss and disruption to clients in case of company winding down.

In 2021, Gibraltar announced to start working on the 10th Core Principle, for digital asset exchanges. A working group has been formed to deliver a set of regulations to protect users and ensure market integrity by introducing standards of design, efficiency and transparency. The effects of their work should be published later in 2021.


Switzerland, and especially Zug Canton known also as Crypto Valley, is a home to many well-known crypto projects, such as Ethereum, Tezos, Bitfinex, Cardano, and many others. It’s because Switzerland has classified crypto assets as either assets or property which makes it clear on how to deal with them from the legal point of view.

Exchanges are considered as financial institutions and must comply with AML/KYC and consumer protection obligations. Cryptocurrencies are considere as assets and as such, they are subject to a wealth, income, and capital gains taxes and must be declared on annual tax returns.

In September 2020, a Blockchain Act has been introduced which defines the regulations for exchanges, ICOs, TGEs, and other digital assets.

In Zug, you can pay city fees in Bitcoin since 2016. A business registered in Switzerland can also accept crypto payments and pay in crypto, under specific circumstances.


Although in Malta, cryptocurrencies are not a legal tender, they are regulated as “a medium of exchange, a unit of account or a store of value”. Maltese government has introduced three acts for digital assets - MDIA, ITAS, and VFA, and a blockchain legislation. There is no tax or VAT applications to exchanging fiat for crypto.

Exchanges are legal since 2018, with an AML/CFT-adressed regulations. The Virtual Financial Assets Act regulates operations of crypto exchanges, ICOs, brokers, wallet providers, advisers, and asset managers.


Seychelles are home to many crypto exchanges, however CipherTrace identified most of them as with rather loose approach to KYC. There aren’t any proprietary regulations for crypto assets and businesses here, but the islands are known as a tax haven–corporations which do business outside Seychelles territory and are registered there are not needed to pay income tax.

Some investigations are running over Seychelles-registered exchanges such as BitFinex which might change the landscape in the future.


Singapore is rather open to digital assets and is a home to many crypto businesses, although cryptocurrencies are not considered as legal tender. However, running crypto exchanges and trading is legal and selling Bitcoin falls under Goods and Services Tax (Singapore’s equivalent to VAT) since it’s classified as “goods”.

In 2019, Payment Services Act brought exchanges and other businesses related to crypto under the Monetary Authority of Singapore and requires them to obtain a MAS operating license.


Japan has taken a progressive approach to crypto regulations and created a framework for using cryptocurrencies and other digital assets. Cryptocurrencies are treated as property and fall under the same regulations as, for example, real estate.

However, for exchanges, there is a requirement to obtain a license in order to operate. That’s the aftermath of several major hacks on Japanese crypto exchanges, such as the Coincheck hack where nearly $530 million in digital assets had been stolen.


In Estonia, cryptocurrencies are not a legal tender but crypto exchanges that are registered with the Financial Intelligence Unit are legal.

The country sees being more open to innovations than other EU member-states as its chance. Cryptocurrencies are considered “value represented in digital form” but VAT is not applicable to those assets.

Under regulations from 2017, Estonia defined the framework for dealing with digital assets and included strict reporting and KYC rules. In 2020, the regulations were tightened to treat digital asset service providers the same as financial institutions. Previously, Estonia issued two licenses: the Virtual Currency Exchange Service License and the Virtual Currency Wallet Service License. After tightening the AML regulations, there’s only one Estonian Cryptocurrency Exchange License.

As a fun fact, Estonia intended to introduce their own cryptocurrency called “estcoin”, but after the EU criticism, they stepped down on that idea. However, with their e-residency program, Estonian government still examines ways to use the “estcoin” in that context.


Dubai has been long investing in innovation and Smart Dubai 2021 might be one of the most interesting initiatives. It aims to make Dubai a smart city, with blockchain being one of the key areas of development.

That climate translates to working towards regulating crypto businesses in the region. While there’s still plenty of work to be done in this space, Dubai authorities license crypto-related companies through Dubai Multi Commodities Centre.

European Union

The European Union shared their digital strategy which intends to bring innovative blockchain projects to the state and proposed a golden standard for blockchain:

  • Environmental sustainability: Blockchain technology should be sustainable and energy-efficient.
  • Data protection: Blockchain technology should be compatible with and where possible support Europe’s strong data protection and privacy regulations
  • e-Identity: Blockchain technology should respect and be compatible with, but also enhance the usefulness of, Europe’s evolving e-Identity framework. This includes being compatible with e-signature regulations, such as eIDAS, as well as supporting a sensible, pragmatic decentralised and self-sovereign identity framework.
  • Cyber security: Blockchain technology should be able to provide high levels of cyber security.
  • Interoperability: Blockchains should be interoperable between themselves and with legacy systems in the outside world.

Following that, the EU will launch a pan-European blockchain for public services, promote legal certainty and invest in blockchain research and development.

United States

The US is a little behind more progressive countries, although it is home to Coinbase, one of the largest crypto exchanges. Currently, digital assets are considered as securities and fall under The Commodity Futures Trading Commission regulations.

One of the current priorities when it comes to blockchain is researching the possibility of issuing digital dollar and providing legal framework for digital assets, ICOs, airdrops, etc. It is expected that the regulations won’t be limiting to crypto, although what will be their shape–that’s still an open question.

What is the future for regulatory frameworks?

There’s no doubt that the whole crypto space is moving towards wider adoption and 2021 could be the breakthrough year–so far, crypto is all over the news, bringing more and more people into the space.

Of course, part of that are new mainstream use cases, such as NFTs but there’s also a large portion of people who get into the crypto space to get rich quick. Without regulations, the lesser educated people, or with smaller experience, are at risk of falling for crypto-related scams and lose their savings.

We can therefore expect that more and more countries will either introduce regulations that will serve as a guidance for using crypto products, or they’ll ban the most used digital currencies while introducing their own–like China.

What’s ahead of the curve, and how exactly will the regulations look like? That’s up to legislators but if we can be sure of one thing, it’s this–in 2021 the space has moved so much forward that there’s no stopping now. We expect to see a major step up when it comes to working on regulatory frameworks for crypto around the globe.

Written by
Mateusz Raczyński
Marketing Manager

Build the Top Web3 Dev Team

8 years of experience in one ebook. Check it out