Once on the fringe of the global financial system, cryptocurrency has entered the mainstream: Nearly 1 in 5 American adults has purchased cryptocurrency. As crypto grows in popularity, federal and state enforcement agencies are trying to apply existing legal regimes to this new space, while lawmakers are drafting and proposing new legislation. Regulatory interest has been sharpened by recent market downturns, including a widespread depreciation of crypto assets in May 2022, which wiped out nearly $2 trillion in value. Below, we offer a primer for market participants on how to understand crypto in the context of current legal frameworks and potential future regulation.

What Is Crypto?

Most cryptocurrencies are digital assets whose transactions are recorded on a blockchain, which is a shared, immutable ledger distributed across many computers. Cryptocurrencies can be traded for other assets, including traditional currencies; used as a medium of exchange, such as to purchase goods and services; or saved as a store of value. Cryptocurrencies are usually not issued by any central authority, and have gained popularity as a means for cheaper and faster money transfers and decentralized commerce. They have also been criticized as facilitating criminal activities and—for some assets, like bitcoin—requiring enormous energy expenditure to “mine,” or create new coins.

Fitting Crypto Into Current Legal Regimes

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