Cryptocurrency offers an alternative to traditional fiat currency and hard commodities like gold. The cryptocurrency market cap at the time of writing of this article is over $2.4 trillion dollars.[1] There are hundreds of different cryptocurrencies, from well-known ones like Bitcoin (which accounts for more than half of all cryptocurrency value) to little known ones like ViciCoin or Chia (which account for a fraction of a percent of all cryptocurrency value).[2] In 2024, approximately 7% of adults in the United States bought cryptocurrency or held it as an investment.[3] Only approximately 2% used it to buy something.[4] While there is not currently one overarching set of federal regulations for cryptocurrency, there are various federal and state laws that govern the use of cryptocurrency. This article will discuss the status of the current cryptocurrency regulations that exist at the federal level, what’s on the horizon for federal cryptocurrency legislation, and how these laws affect cryptocurrency use and markets.

Current Federal Cryptocurrency Regulation

 The Securities and Exchange Commission (SEC) regulates cryptocurrency under existing securities law. Cryptocurrency businesses must comply with federal money transmission laws under the Bank Secrecy Act (Title 31 of the United States Code).

Other federal agencies that regulate parts of cryptocurrency are the Commodity Futures Trading Commission (CFTC) which oversees digital assets as commodities, the Financial Crimes Enforcement Network (FinCEN) which requires anti-money laundering compliance for virtual currency businesses, and the Internal Revenue Service (IRS) which has established comprehensive tax reporting requirements effective 2025.

In July of 2025, Congress enacted the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, establishing a federal framework for payment stablecoins.[5] Stablecoins are pegged to a stable asset, usually the United States dollar, and are backed by reserves. Examples are Tether or USD Coin. In general, the GENIUS Act framework provides supervisory and enforcement authority over stablecoins.

Notably, stablecoins are not the common, well-known cryptocurrencies like Bitcoin. This is because permitted payment stablecoins are not treated as securities under federal securities laws. In other words, the largest piece of current federal legislation related to cryptocurrency doesn’t cover the vast majority of standard transactional cryptocurrency. Future cryptocurrency legislation aims to fill existing gaps at the federal level.

Potential Future Federal Cryptocurrency Legislation

The Digital Asset Market Clarity Act (or the CLARITY Act) passed the House of Representatives in July 2025, establishing frameworks for regulatory jurisdiction between the SEC and CFTC. It was received in the Senate in September 2025 and as of February 2026 continues to be discussed at Senate Banking Committee meetings.[6]

The bill proposes to establish “the United States as the crypto capital of the world.”[7] It seeks investor protections and tools for law enforcement, as well as protect Americans and keep fueling financial innovation in America.[8] The act aims to protect Americans by delivering transparency, oversight, and accountability. It gives a clear legal outline for the crypto industry and who regulates what between the SEC and CFTC. It would enable innovation while ensuring compliance. Finally, it boasts appropriate sanction framework and gives new tools to law enforcement to deal with illicit finance activity.

This proposed legislation as currently written was not favored by the industry. Cryptocurrency companies argue that the legislation continues to favor traditional banking and finance institutions.[9] The largest point of contention is the restrictions on stablecoin rewards—should stablecoins be able to pay interest-like rewards. Banks argue that if this were allowed, it would decrease the amount of deposits held in the traditional banking system. This of course is exactly what the cryptocurrency industry wants. In fact, it’s one of the goals of cryptocurrency, to move away from traditional banking.

How would this work? If a user held stablecoin and was able to receive interest from that holding, the argument is that the holding would look more like a savings account or money market fund. Banks depend on deposits to function and to make a profit. Deposits also increase the ability to lend and lack of deposits could potentially stress the banking industry. Because, as traditional banks argue, the stablecoins would function as savings accounts or similar to them, they should have to be subject to the same regulation that banks face.

The counterargument from the cryptocurrency industry is that banning these interest rewards really only favors the banks, not the consumer. Plus, if the United States bans stablecoin rewards, users will just move to offshore platforms that offer them anyway. This would decrease the amount of regulatory control that the government has over funds and would overall counter thegoals of benefitting and protecting Americans.

Effect of Federal Cryptocurrency Regulation and Legislation on Use and Markets

As it stands, the GENIUS Act is what exists at the federal level regulating cryptocurrency, but again, it regulates specifically stablecoins. Stablecoins act as regulated digital dollars, a way to store value in an asset that is tied directly to treasury bills or the United States dollar. It defines who can issue stablecoins and in general makes them safer but less flexible and innovative than a cryptocurrency should aim to be.

The CLARITY Act would have the effect of regulating the entire cryptocurrency ecosystem. It would have three main effects. First, it would define when a token is a security or a commodity. A security is an investment contract (like stocks, bonds) regulated by the SEC. According to the Supreme Court’s “Howey Test” a transaction is a security if it is (1) an investment of money; (2) in a common enterprise; (3) with an expectation of profit; and (4) based on the efforts of others.[10] A commodity is something like gold, oil, or wheat, and is regulated by the CFTC. Depending on the classification, different regulations would apply for registration, disclosures, and oversight obligations. In general, securities are much more heavily regulated. Second, it would create a registration path for crypto exchanges, such as Coinbase, giving them added legitimacy as a registered entity recognized by the federal government. Third, it would impact decentralized finance efforts by making overall innovation slower because of red tape hurdles.

Largely, cryptocurrency use remains largely untouched at the basic user level. Cryptocurrency providers and exchanges are the ones that are regulated, and user consumers are left to operate as they do in other contexts. When legislation favors or disfavors something in any context, a related stock or market increases or decreases. The same is true of cryptocurrency. The market remains volatile and if the CLARITY Act passes, the markets will adjust according to whatever the legislation ends up including.

Cryptocurrency is, in part, about rebelling against who controls a store of value, who controls currency. It’s about providing a decentralized financial system that can be independently verified. Future federal cryptocurrency regulation will directly effect cryptocurrency and if this industry stays alive.

Conclusion

 Cryptocurrency is hefty: a $2.4 trillion dollar market can’t be pushed aside. Current federal regulation, the GENIUS Act, focuses on regulating stablecoins. That is an indicator that legislation regulating the entire cryptocurrency ecosystem will eventually be passed. Future federal legislation, the CLARITY Act, aims to do that. The contents of that law will have effects that determine the ultimate future of cryptocurrency.

[1] Cryptocurrency Prices Today By Market Cap, Forbes, https://www.forbes.com/digital-assets/crypto-prices/?page=1.

[2] Id.

[3] Federal Reserve, Economic Well-Being of U.S. Households in 2024, Federal Reserve Research & Analysis (May 2025), https://www.federalreserve.gov/publications/files/2024-report-economic-well-being-us-households-202505.pdf.

[4] Id.

[5] Public Law 119–27 PL 119–27 [S 1582] July 18, 2025 GUIDING AND ESTABLISHING NATIONAL INNOVATION FOR U.S. STABLECOINS ACT

 

[6] 119th CONGRESS, 1st Session United States Library of Congress HR 3633 Reported in House.

[7] The Facts: The CLARITY Act, United States Senate Committee on Banking, Housing, and Urban Affairs (Jan. 13, 2026), https://www.banking.senate.gov/newsroom/majority/the-facts-the-clarity-act.

[8] Id.

[9] Micah Zimmerman, Senate Banking Committee Postpones CLARITY Act Markup After Crypto Industry Backlash, Bitcoin Magazine (Jan. 15, 2026), https://bitcoinmagazine.com/news/senate-banking-committee-clarity-act.

[10] SEC v. W.J. Howey Co., 328 U.S. 293 (1946).