Crypto & DeFi Regulation: An Academic Landscape (April 2025)

In this episode we  examine the contrasting global regulatory approaches to cryptocurrencies and DeFi, highlighting the EU's comprehensive MiCA framework versus the US's enforcement-driven strategy and diverse approaches in Asia. Scholarly work identifies key motivations for regulation, including investor protection and financial stability, while grappling with the challenge of nurturing innovation. Legal research extensively analyzes the SEC v. Ripple case, illustrating the complexities of applying existing securities laws to digital assets and underscoring the ongoing need for regulatory clarity. These sources collectively provide an overview of the evolving legal and macroeconomic landscape shaping the future of crypto and DeFi.

Key Concepts and Themes

• Virtual Asset Service Providers (VASPs): Entities conducting specific virtual asset services that often require licensing and regulatory oversight.
• Markets in Crypto-Assets Regulation (MiCA): A comprehensive EU regulatory framework for crypto-assets, aiming for a unified rulebook across member states.
• Asset-Referenced Tokens (ARTs): Crypto-assets designed to maintain a stable value by being pegged to other assets.
• E-Money Tokens (EMTs): Digital representations of fiat currencies, also designed to maintain a stable value.
• Utility Tokens: Crypto-assets that provide access to specific products or services within a DLT system.
• Stablecoins: A category of crypto-assets that aim to maintain a stable value relative to a specified asset or basket of assets; can fall under ARTs or EMTs.
• EU Passport for CASPs: Under MiCA, authorized Crypto-Asset Service Providers (CASPs) in one EU member state can operate across the EU.
• Basel Committee on Banking Supervision: An international body that sets prudential standards for banks, including the treatment of crypto-asset exposures.
• Group 1 and Group 2 Crypto-assets (Basel): Basel framework classifies crypto-assets based on their risk characteristics, with different prudential treatments.
• Prudential Treatment: Regulatory requirements for financial institutions to manage risks, such as capital requirements, liquidity requirements, and risk management practices.
• Decentralized Ledger Technology (DLT): A distributed database that is shared across a network of computers.
• Initial Coin Offering (ICO): A fundraising mechanism where new crypto-assets are sold to the public.
• Security vs. Utility Token: A key distinction influencing regulatory treatment, often based on whether the token represents an investment contract.
• STABLE Act: A proposed US bill focused on regulating stablecoin issuers and establishing auditing mandates.
• Financial Action Task Force (FATF): An inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.