Global crypto regulation enters a period of divergence: US testing ground vs Europe’s conservative wall

From Historical Turning Points to Today’s Dilemma

Fifteen years ago, the emergence of Bitcoin disrupted the monopoly of traditional finance. From an experiment that could be mined with a household computer, it has evolved into a global asset requiring billions of dollars in capital and energy—reflecting both technological progress and a complete shift in regulatory attitudes.

After the 2008 financial crisis, regulators around the world began to realize a problem: an unrestrained financial system can lead to systemic risks. This logic also applies to crypto assets. The series of爆雷 events in 2022 became a turning point, prompting policymakers to seriously reconsider how to treat this emerging asset class.

Rather than a decline of the crypto industry, it marks the beginning of its institutionalization.

The Pragmatic Choice of the United States

The power transition in Washington in 2025 brought about noticeable changes. The new administration’s attitude toward the crypto industry shifted from “hostile” to “inclusive.”

After Paul Atkins took over the SEC, there was a stark contrast to the era of his predecessor Gary Gensler. The new “Project Crypto” plan clearly outlined five major directions:

• Establish a clear federal regulatory framework
• Ensure market competition among custodians and trading venues
• Support on-chain innovation and decentralized finance development
• Create operational space for asset issuance
• Promote commercial viability and innovation exemptions

More importantly, the Treasury Department’s stance is also changing. Stablecoins are no longer viewed as systemic risks but as tools to extend the influence of the US dollar internationally. Stablecoins like USDC and USDT have become significant buyers in the US Treasury bond market, creating a win-win situation that attracts participation from financial institutions.

JPMorgan’s launch of crypto-backed loans in 2025 marked Wall Street’s official opening to this market. With follow-ups from Goldman Sachs, BlackRock, and others, the institutionalization of crypto assets is now irreversible.

Evolution of the Legal Framework

The GENIUS Act (passed in July 2025) mandated that stablecoins must be backed 1:1 by US Treasury reserves, effectively transforming stablecoins from risk assets into tools of geopolitical influence. This provided a legal identity for private stablecoin issuers.

Meanwhile, the CLARITY Act remains stalled in the House. Once passed, this bill, aimed at clarifying the jurisdiction boundaries between the SEC and CFTC, will definitively resolve the securities vs. commodities classification issue, ending the current “temporary guidance” status.

Most critically, the abolition of SAB 121 accounting standards. Originally requiring banks to treat crypto assets as liabilities, its removal directly opens the door for institutional capital and pension funds to enter the crypto market.

Europe’s Regulatory Dilemma

Contrasting with the US’s openness, the EU has taken an opposite route. The comprehensive implementation of the Markets in Crypto-Assets Regulation (MiCA) in 2025 treats startups as sovereign banks, with compliance costs so high that most crypto companies are deterred.

The problem with MiCA lies in its scope mismatch. It requires all crypto asset service providers (CASPs) to establish registered offices within member states, hire qualified resident directors, and implement segregated custody. These requirements copy the MiFID II system designed for traditional finance, creating a “regulatory moat” for emerging industries.

More damaging is the de facto ban on non-Euro stablecoins. Under the guise of “protecting monetary sovereignty,” the EU effectively prohibits the use of USDT and other highly liquid stablecoins in Europe. This not only restricts trading freedom but also creates a “liquidity trap”—forcing European traders to use low-liquidity “Euro tokens.”

Germany’s BaFin has become a compliance machine, while France’s initial ambitions as a “Web3 hub” have hit its self-imposed high walls. As a result, many startups are accelerating their move to Dubai, Jersey, and Zurich.

Switzerland’s Balancing Act

Beyond the US-EU confrontation, Switzerland has found a third way. The Distributed Ledger Technology (DLT) Law (2021) fully recognizes crypto assets legally, while the Virtual Asset Service Provider (VASP) regulations implement international standards like the “Travel Rule,” ensuring anti-money laundering compliance.

The key is that Switzerland’s regulatory framework is clear but not cumbersome, protecting users while providing builders with legal certainty. The reason Zug Valley has become a hub for crypto founders is precisely this balance—neither as exploratory as the US nor as barrier-laden as Europe.

The Era of Global Regulatory Arbitrage

It is foreseeable that the crypto industry will enter a phase of geographical fragmentation:

On the consumer side, focus will be on the US and Europe, with full KYC and tax compliance, deeply integrated with traditional banks. However, protocol layers (developers, foundations, VCs) will migrate to “rational jurisdictions” like Switzerland, Singapore, and the UAE.

This is not industry decline but a reallocation of the global financial landscape. The US, through innovative products like Bitcoin-denominated insurance, crypto collateral, and strategic reserves, will firmly maintain its position as a global financial center. Europe faces the risk of becoming a “financial museum”—with a perfect legal framework but deadly restrictions on actual users.

The Inevitable Institutionalization

From the birth of the US Securities Act in 1933 to the regulatory upgrades after the 2008 financial crisis, history repeatedly shows that financial innovation will ultimately be incorporated into the institutional framework. Crypto assets are no exception.

The key issue is not “whether to regulate” but “how to regulate.” The US has chosen a path of “clear boundaries + innovation friendliness,” while Europe has opted for “comprehensive coverage + strict control.” Both models are legitimate, but markets are voting with their feet.

According to regulations like Criminal Law 305 and related provisions, preventing financial crime requires an institutional framework. The US approach is to retain space for innovation within this framework, while Europe’s approach is to create barriers through the framework itself. The result is clear: talent, capital, and innovation are converging toward the US.

Conclusion

Crypto assets have become a macro asset class, and the question is no longer whether to accept them but how to do so. The US is actively shaping a global financial order favorable to itself; Europe, on the other hand, is caught in a self-protection trap that may ultimately marginalize it.

This is not a technological competition but a systemic one. Jurisdictions that can balance innovation and risk will become the true centers of global financial innovation in the next decade.