Need tighter crypto governance: In barely fifteen years, a technology born to bypass failing banks has swollen into a market worth almost $4 trillion — larger than the GDP of the United Kingdom. This week’s rally, led by Bitcoin at roughly $120,000 and Ethereum at $3,640, pushed capitalisation past the milestone, buoyed by hopes of regulatory clarity in Washington. Yet the price chart is not the main event. Far more significant is the scramble by lawmakers to fence in an industry whose risks now rival its ambitions.
The United States, long criticised for regulatory drift, has jolted into motion. On July 17, the House of Representatives approved the GENIUS Act for dollar‑backed stablecoins, the market‑structure CLARITY Act, and a bill banning a Federal Reserve central bank digital currency — measures President Trump is eager to sign. Each proposal shifts oversight from an assertive Securities and Exchange Commission to a friendlier Commodity Futures Trading Commission. Detractors see a conflict of interest, given the Trump family’s own token ventures; advocates argue that permissive rules are better than regulatory limbo.
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Crypto regulation gaining ground
Europe stands several steps ahead. Brussels’ Markets in Crypto‑Assets Regulation (MiCA) is already in force, imposing disclosure, reserve and licensing obligations across the single market. Japan treats fiat‑backed stablecoins as “electronic payment instruments” under its amended Payment Services Act, limiting issuance to supervised banks and trust companies since mid‑2023. Hong Kong followed suit in May of this year.
India, by contrast, offers a jigsaw of tax notices, money‑laundering directives and judicial stays. A comprehensive bill first tabled in 2021 remains in legislative purgatory while investors face a punitive 30 per cent tax on gains. Such divergence invites one unpleasant outcome: regulatory arbitrage.
When gaps become gateways
Where capital moves faster than statute, crime follows. Chainalysis estimates that hackers and scammers siphoned more than two billion dollars in the first half of 2025 alone, propelled by a record $1.5 billion raid on ByBit. Stablecoins, designed for price stability, are no safer: their opacity makes them vulnerable to digital bank runs. Terra‑USD’s collapse in 2022 proved how quickly a dollar‑pegged promise can evaporate.
The Financial Stability Board’s roadmap last October warned that patchy adoption of global standards would hinder effectiveness and lead to arbitrage. That prediction is now reality. Day‑traders in Kolkata route rupees through offshore exchanges in seconds, sidestepping local rules, while issuers reincorporate in Caribbean havens beyond MiCA’s reach. Without cooperation, national efforts merely push risk across borders.
Principles the world can agree on
Four precepts already embedded, at least on paper, in MiCA, Japan’s framework and the GENIUS Act deserve universal embrace. First, equivalent activities carrying equivalent risks must face equivalent regulation: a stablecoin promising dollar redemption should hold segregated, high‑quality reserves and submit to independent audits just as a money‑market fund does.
Second, functional oversight should trump turf wars; economic reality, not marketing spin, determines whether a token is a payment instrument, a commodity or a security. Third, transparency must match the technology’s ethos: real‑time attestations and public ledgers deter phantom reserves better than quarterly statements.
Finally, enforcement must travel across jurisdictions through common reporting templates, shared blacklists and reciprocal investigative powers; illicit flows ignore borders, regulators cannot afford to.
Where multilateralism must catch up
The G‑20 has endorsed an IMF‑Financial Stability Board (FSB) implementation roadmap, with a review due by the end of next year, yet deadlines slip while capacity gaps widen. Many emerging economies lack the supervisory muscle to audit codebases or trace offshore wallets. A voluntary approach is unlikely to suffice. Two initiatives could move swiftly.
Expanding the Bank for International Settlements’ Project mBridge, which pilots cross‑border wholesale CBDCs, would enable real‑time screening of suspect wallets. Mandating a global “travel rule” for stablecoin transfers above a low threshold would mirror the Financial Action Task Force standard already applied to banks.
A blueprint for coordinated action
Crypto governance should be treated as infrastructural plumbing, not a speculative footnote. An effective scheme would begin with a tiered licensing model—minimal registration for decentralised software developers, but full prudential supervision for custodians and stablecoin issuers. It would establish cross‑border sandboxes so regulators can jointly supervise controlled pilots of programmable payments, learning rapidly while containing spill‑overs.
Cyber‑resilience tests, akin to banking stress tests, would be compulsory for exchanges clearing daily volumes above one billion dollars. Compliance need not sacrifice commercial secrets: zero‑knowledge proofs allow firms to confirm reserve adequacy without exposing proprietary positions, aligning transparency with privacy. Finally, as securities migrate on‑chain, settlement finality rules and bankruptcy protections must converge to guard investors.
The stakes for India
India cannot afford protracted indecision. With an estimated 97.5 million retail holders, any future crash would land squarely on domestic wallets. Conversely, coherent rules could channel savings into the digital‑rupee stack, slash remittance costs and bolster the GIFT‑City fintech hub. The calculus is similar elsewhere.
The regulatory gold standard is no longer the thickest rule‑book but the one most closely aligned with a credible global floor. Europe has provided a template, America may soon follow; the rest must decide whether to join before the next crisis rather than afterwards.
Crypto prices will rise and fall, as speculative assets always do. The lasting question concerns the architecture of trust. Jurisdictions that embed transparency, accountability and cross‑border cooperation will attract capital; those that chase short‑term windfalls or placate lobbyists invite the next ByBit‑scale disaster.
Policymakers now face a stark test: coordinate swiftly or legislate amid the ashes of collapse. The choice will define whether crypto matures into a backbone of efficient global payments or remains a roulette table whose losses the taxpayer ultimately covers.