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Crypto went from niche tech to everyday buzz. You can buy coffee, fund a startup, or even shop online. But along with the excitement has come a darker side: scammers promising quick profits, fake token launches, and exchanges that disappear overnight.
So what’s actually being done to protect people? Is it the Wild West? Well, the truth is that there are laws that cover crypto fraud but they don’t always work the way you might expect. Some are old rules written for traditional investments, while others are brand-new efforts to catch up with this fast-changing market.
Today we’ll look at how crypto fits into existing laws, what new regulations have been introduced, and what all of this means for you.
Who Regulates Crypto in the U.S.?
Unlike traditional investments, crypto doesn’t fall neatly into one legal category. As a result, several government agencies share oversight. The Securities and Exchange Commission (SEC) takes the lead when a token acts like a security, which means it represents an investment contract or promises returns tied to someone else’s efforts.
The Commodity Futures Trading Commission (CFTC) steps in when digital assets behave more like commodities, focusing on futures and derivatives markets. Then there is FinCEN, the Financial Crimes Enforcement Network, which enforces anti-money laundering rules and requires financial institutions to identify their customers to prevent illicit activity.
Because crypto overlaps these areas, enforcement can be confusing. For example, a single project might fall under both securities laws and anti-money laundering rules, but lack clear classification. Scammers exploit this uncertainty. They build projects that sit in legal gray zones, making it harder for regulators to act quickly. This regulatory patchwork is one reason Congress began passing laws like 2025’s GENIUS Act: to bring clarity where there was none.
U.S. Laws That Fight Crypto Fraud
Even without new crypto-specific laws, several existing regulations have already been used to prosecute fraud. The Securities Act of 1933 and the Securities Exchange Act of 1934 give the SEC power to regulate investment contracts. When projects like BitConnect and Centra Tech promised high returns but delivered nothing, the SEC stepped in using these very laws. These acts are old, but they still apply whenever a crypto token is sold to the public as an investment.
The Anti-Money Laundering/Countering the Financing of Terrorism laws (formerly known as Bank Secrecy Act also play a role. It requires exchanges and platforms to verify identities, report large or suspicious transactions, and keep records that help law enforcement trace illicit funds. Similarly, the Federal Trade Commission (FTC) protects consumers from deceptive advertising and unfair business practices, which includes misleading promotions for crypto products.
Cases like Centra Tech show how these laws work in practice. That company claimed it had partnerships with Visa and Mastercard for a crypto debit card. The claims turned out to be fake, leading to federal charges. It’s a clear reminder that existing fraud laws still have teeth, even in the new world of digital assets.
Why the GENIUS Act Matters
The GENIUS Act, which stands for Guiding and Establishing National Innovation for U.S. Stablecoins, is the first major federal law focused entirely on stablecoins. Signed into law in July 2025, it represents a major shift in how digital assets are treated. Before this act, stablecoin issuers often operated in a legal gray area. Now they face clearer rules.
The law creates a special category for payment stablecoins that are backed one-to-one with liquid assets like cash and short-term Treasury bills. Only regulated financial institutions can issue stablecoins in the United States. This includes national banks and federal savings associations overseen by the Office of the Comptroller of the Currency, as well as state-chartered banks and credit unions that meet federal oversight and reserve requirements. Qualified trust companies and similar licensed institutions may also be approved as issuers.
Issuers must hold full reserves and publish regular audits to prove those reserves exist. They also have to follow strict marketing guidelines to avoid making misleading claims. Unlike high-yield crypto products, regulated stablecoins cannot offer interest or rewards that might entice risky behavior.
Importantly, the GENIUS Act also brings foreign issuers under U.S. oversight if they target American customers. It requires compliance with anti-money laundering and know-your-customer standards under the Bank Secrecy Act. By closing loopholes and demanding transparency, it aims to prevent the kinds of fraudulent token launches that have cost investors millions.
This is an important milestone. It signals that lawmakers are serious about creating a safer environment for digital payments and reducing the chances of stablecoin-related fraud.
Learn more about the GENIUS Act here.
What Other Countries Are Doing
The U.S. is not alone in tightening crypto rules. Around the world, governments are responding to fraud and market instability. The European Union’s MiCA framework came into effect in late 2024. It requires issuers of stablecoins and crypto service providers to meet strict licensing and disclosure standards. Countries like Japan and Singapore also require companies to partner with banks or obtain special licenses to operate legally.
Meanwhile, jurisdictions like Hong Kong are extending their reach with extraterritorial rules that apply even to foreign projects tied to their currencies. These steps show that crypto regulation is becoming more coordinated globally but is still fragmented. Scammers exploit weak spots by operating across borders. That makes international cooperation essential yet challenging.
The GENIUS Act aligns the U.S. more closely with European and Asian approaches, but it also shows that crypto regulation is far from complete. More laws will likely follow as governments try to balance innovation with investor safety.
What This Means for Investors
So how do these changes affect you? In one sense, clearer rules mean you are less likely to fall victim to fraud when dealing with regulated stablecoins or trusted platforms. Issuers now have to prove they hold real reserves and give accurate information about their products. That helps cut down on outright scams.
But regulation cannot eliminate risk entirely. Fraudsters move faster than the law. They find new ways to package old schemes. Even legitimate projects can lose value or collapse if they are poorly managed. That is why it remains essential to do your own research, watch for red flags like vague promises or secretive teams, and stick with well-established partners.
Final Thoughts: What Comes Next
Crypto is evolving, and the law is finally starting to catch up. The GENIUS Act shows that lawmakers are serious about building guardrails for digital assets. But more is coming. Future legislation, like the proposed CLARITY Act, will likely address tokens that function as securities and further define which agencies regulate them.
For now, investors should stay informed and remain cautious. Regulation can improve safety, but personal awareness is just as important.
At 1st Source Bank, we don’t offer or endorse cryptocurrency investments, but we know that many of our clients have questions. Our role is to be your trusted financial partner. That means we’re here to help you understand potential dangers, spot red flags, and make informed decisions.
We’ve written articles to help you stay aware of scams and fraud in the digital world. Explore our resources on crypto and fraud, or for broader tips on security and protecting your accounts, visit our security advice section.
Our team is always available to answer questions about account safety, fraud prevention, and other financial security topics. When you’re unsure about a situation, talking with a knowledgeable banker can give you peace of mind and help you avoid costly mistakes.