Regulation in Question: Will Bitcoin Survive?

Bitcoin and other digital tokens, once hailed as the uncontrollable and decentralized future of money, are proving to be profitable tools for fraudsters, terrorists, and problematic regimes. In response, Congress is now attempting to create an effective legal framework that allows promising innovations to flourish while limiting bad practices.

The goal is right. Unfortunately, this effort is likely to fail if federal market regulators are not given enough authority and resources to do their jobs properly.

Last year, Congress passed a law called the Genius Act, which regulates so-called stablecoins — digital tokens that mimic the U.S. dollar. The risk with these instruments is clear: two companies, Tether Holdings SA and Circle Internet Group Inc., already hold about $261 billion of the total $311 billion market. A mass withdrawal from either of these companies could destabilize financial markets.

Regulators are tasked with ensuring the coins are backed by safe and liquid assets and are easy to redeem. Still, the law divides responsibilities among different oversight agencies, with much of the power resting with the Office of the Comptroller of the Currency under the Treasury Department, an agency that lost about a quarter of its staff in 2025 and is still recovering from a catastrophic cyberattack.

Another proposed regulation, called the Clarity Act, also attempts to streamline crypto oversight. However, its criteria may prove difficult to implement in practice, and the law explicitly limits the Securities and Exchange Commission (SEC)’s authority over tokens, designating most of them as “digital commodities” under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

The CFTC, with a budget one-sixteenth that of the SEC, is already cutting oversight staff and is currently led by only one commissioner out of the five required by law. The new commissioner, Michael Selig, has yet to commit to increasing agency funding through fees on crypto companies, as the law allows.

Meanwhile, the only financial regulator tracking consumer complaints about crypto assets — the Consumer Financial Protection Bureau — is practically dismantled.

So far, the flaws in this approach are already visible to the industry. Crypto entrepreneurs have been inviting regulation for years, hoping to increase trust and adoption of their assets, as well as gain access to banks and retirement accounts.

If “regulation” by weak agencies encourages more Americans to invest in crypto only to find that fraud and crime remain widespread, the effort is likely to backfire.

A better approach would be to create a new legal framework for trading all digital assets that do not fit easily into existing categories, such as Bitcoin and Ether. The SEC and CFTC could jointly craft rules ensuring that all market participants comply with basic safety and stability standards, client protections, disclosure requirements, and governance rules.

Such a set of rules would be more adaptable as technologies evolve and would prevent companies from exploiting legal loopholes.

Nevertheless, any such framework will fail if Congress does not provide industry regulators with the authority, expertise, and resources necessary to ensure crypto safety. Until then, buyers must remain cautious.