How the Feds Could Regulate Crypto (and Why All Is Not Lost for Investors) Threats of impending cryptocurrency regulation have dominated headlines in recent months, but all is not lost for crypto investors. Here are a few protections that stand in the way of a federal crypto showdown.

Each day seems to carry with it a new, ominous headline propounding the imminent demise of cryptocurrency. The death of Bitcoin has been predicted more than 450 times as of this writing. And yet, it seems to have staying power: more than $23 billion of Bitcoin has changed hands in the last 24 hours. Seasoned crypto investors — and their detractors — have weathered ups and downs, and there are doubtlessly more to come. But with each crash (and subsequent boom), the war drum of federal regulation increases in fervor and proximity.

In November, following the well-publicized collapse of FTX, Treasury Secretary Janet Yellen chastised the crypto world in a threat that sent markets in a steep plunge: "The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets." The specific areas of concern she identified included "comingling of customer assets, lack of transparency and conflicts of interest," which she claimed "was at the center of the crypto market stresses observed over the past week."

While a precise federal framework of crypto regulation has not yet been codified into law, she made it clear that the writing is on the wall: "Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services. The federal government, including Congress, also needs to move quickly to fill the regulatory gaps the Biden Administration has identified."