Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has entered the mainstream. Today, digital assets are held not only by early adopters and tech enthusiasts, but by a broad spectrum of investors, from teenagers trading on mobile apps to the world’s largest financial institutions.

On June 17, 2025, the U.S. Senate passed the GENIUS Act, the first federal legislation focused on regulating stablecoins. This landmark bill marks a major step toward creating clearer rules and a more structured framework for the crypto industry. However, until these regulations are fully implemented, and even after they are, crypto compliance is expected to remain a complex and often daunting challenge, even for the most experienced institutional investors.

Why Crypto Enforcement Actions Matter (Even If GENIUS is Not Law Yet)

Although the GENIUS Act is not yet law, its momentum reflects a significant shift in the regulatory landscape. In the absence of new legislation, regulators have not remained idle. Instead, they have relied on existing laws to assert authority over crypto markets. Many of these laws were written long before the emergence of digital assets. The Securities and Exchange Commission (SEC) has taken the lead by filing numerous lawsuits. These lawsuits allege unregistered securities offerings. At the same time, the Commodity Futures Trading Commission (CFTC) has pursued firms involved in crypto derivatives. These firms operated without proper registration. The Department of Justice (DOJ) has also increased criminal enforcement efforts. Local law enforcement agencies have joined these efforts as well. They focus on fraud, money laundering, and violations of sanctions laws.

Even without new legislation, crypto businesses are already subject to significant legal obligations. Crypto enforcement actions are accelerating across the industry. In 2023 alone, the SEC brought 46 enforcement actions against digital asset companies. These actions resulted in more than $280 million in penalties.

Federal Crypto Compliance Requirements

Until recently, the SEC maintained that existing securities laws provided sufficient notice to crypto companies and asserted that most digital assets qualified as securities. This position led to numerous enforcement actions, primarily alleging unregistered securities offerings. The SEC’s analysis has traditionally relied on the Howey test, established in SEC v. W.J. Howey Co., which defines an “investment contract” as a transaction involving:

1. An investment of money,
2. In a common enterprise,
3. With a reasonable expectation of profits,
4. Derived from the efforts of others.

The third prong focuses on whether profits are expected from the efforts of others. This has often been the focal point in determining whether a digital asset is a security. SEC guidance has emphasized factors such as whether a promoter or sponsor plays a central role. This includes their role in the development or management of the asset or its underlying network.

Recent Changes in SEC Approach

However, the SEC’s stance shifted significantly in 2025. In March, the agency dropped its appeal in the long-running SEC v. Ripple case, effectively ending the litigation. The court had previously ruled that XRP was not a security when sold on public exchanges, though it was when sold to institutional investors. The final settlement included a reduced $50 million penalty and no further restrictions on XRP sales. This retreat from litigation signals a broader recalibration of the SEC’s approach to crypto. In addition, the agency has since dropped or paused enforcement actions against other major players, including Coinbase, Uniswap, and Kraken, and launched a new Crypto Task Force focused on developing clearer, more consistent regulatory guidance.

Despite these changes, legal uncertainty remains. If you are considering an ICO or engaging in the offer, sale, or distribution of a digital asset, it is still necessary to consult experienced counsel. Federal securities laws may still apply, and failure to comply can result in significant liability. Navigating blockchain compliance requires understanding both existing regulations and emerging legal frameworks.

FinCEN Compliance: What Crypto Businesses Need to Know in 2025

At the heart of this regulatory framework is the Financial Crimes Enforcement Network (FinCEN), which enforces the Bank Secrecy Act (BSA) and oversees compliance by entities classified as Money Services Businesses (MSBs). Under FinCEN’s rules, any business that accepts and transmits value may be considered a money transmitter and thus, an MSB.

FinCEN has made it clear that the definition of a money transmitter applies equally to real and virtual currencies. Therefore, most crypto exchanges, custodial wallet providers, and even some DeFi platforms fall under this classification. Accordingly, in 2024, FinCEN expanded its “travel rule” requirements, mandating that institutions transmit identifying information about both the sender and recipient for crypto transactions exceeding $3,000.

While your compliance obligations will vary based on the nature of your crypto business, below are a few key areas that should generally be addressed:

Anti-Money Laundering Regulations

Entities subject to the BSA’s AML requirements are generally required to: maintain risk-based AML programs with certain minimum requirements aimed to deter money laundering, file suspicious transaction reports, and maintain customer identification programs. Due to the anonymity associated with crypto assets, AML compliance can be more difficult. However, failure to comply with AML regulations can result in significant penalties. In 2022, for example, Bittrex was fined more than $24 million by the Office of Foreign Assets Control (OFAC) and FinCEN for failure to comply with the BSA, AML regulations, and other laws.

Know Your Customer Procedures

Crypto exchanges and other virtual asset service providers must have Know Your Customer (KYC) procedures in place that allow investigators to trace cryptocurrency addresses or anonymized account numbers to individual account holders if there is suspicion of criminal activity. These procedures are designed to verify customer identities, conduct due diligence to assess financial behavior and risk, and monitor accounts for suspicious transactions.

Market Manipulation Monitoring

Crypto companies should actively monitor manipulative behaviors, such as insider trading, wash trades, and pump-and-dump schemes. While the U.S. has yet to adopt market abuse regulations that specifically address digital assets, the SEC and the CFTC have both brought enforcement actions for crypto market manipulation under existing federal securities laws. The role of a blockchain lawyer becomes important when companies face regulatory scrutiny or crypto enforcement actions.

Cybersecurity and Data Privacy Laws

Due to their reliance on digital technology, crypto businesses are particularly susceptible to data breaches and cyberattacks. Bad actors also often target digital assets through phishing schemes and other scams. To protect your business and your customers, it is critical to have robust cybersecurity policies and procedures (and test them regularly). Market participants must also determine whether they are subject to the growing number of data privacy laws, including the General Data Protection Regulation(GDPR) and the California Consumer Privacy Act (CCPA).

Audits and Compliance

Taking a proactive approach to testing your compliance measures shows regulators that you are committed to meeting your obligations. In many cases, strong compliance is not only a legal requirement but also a strategic advantage that can lead to broader market access. Regularly evaluating the effectiveness of your compliance program helps build trust with regulators and reinforces your commitment to responsible operations. For example, many exchanges, including Binance, have made significant efforts to demonstrate their dedication to legal standards by actively working with law enforcement agencies to identify and remove bad actors from the market. Furthermore, while not typically required, strong retention policies such as maintaining comprehensive records of trading activity can also help build goodwill with regulators. Crypto litigation guide for investors provides valuable insights for understanding potential legal challenges in the digital asset space.

New York State Crypto Compliance

New York remains the most heavily regulated state in the U.S. when it comes to cryptocurrency oversight. Since introducing its pioneering BitLicense framework in 2015, the New York State Department of Financial Services (DFS) has continued expanding its regulatory approach. The agency has refined its oversight of virtual currency operations throughout the state. To legally operate in New York, entities must obtain either a BitLicense or limited purpose trust charter. Both options require DFS approval under the New York Banking Law. Covered activities include transmitting virtual currency and providing custody or wallet services. The requirements also apply to buying or selling digital assets as a business. Operating an exchange or issuing a virtual currency also requires proper licensing. Notably, these requirements extend to out-of-state businesses that engage in virtual currency activity involving New York residents or entities.

Despite its comprehensive nature, New York’s regulatory regime has faced criticism for being overly burdensome. This is particularly true for startups and smaller firms. Critics also say it’s ineffective at providing actual oversight. In response, DFS has introduced several key regulatory updates. In early 2024, the agency issued updated guidance requiring all BitLicensed firms to revise policies. New York-chartered trust companies must also revise their coin-listing policies and implement formal coin-delisting procedures. The new rules prohibit self-certification of certain high-risk tokens. This includes stablecoins not on the DFS “Greenlist,” privacy-enhancing coins, and tokens with limited circulating supply. This has significantly impacted the availability of popular assets for New York-based users. Assets like USDT, BNB, and USDC have been affected by these changes.

While some argue that New York’s regulatory framework stifles innovation, it remains the most robust and comprehensive in the country. For crypto businesses, compliance with DFS requirements is not only a legal necessity but also required for accessing one of the world’s most influential financial markets.

What’s Next for Crypto Compliance?

As the cryptocurrency industry continues to mature and attract everyday investors, regulatory scrutiny is evolving at every government level. Increasingly, local law enforcement agencies are stepping into the arena. Across the country, district attorneys’ offices are establishing dedicated digital currency units. These units address the growing number of complaints involving crypto-related fraud and misconduct. In jurisdictions like Kings County, prosecutors have issued dozens of seizure orders. They are rapidly advancing their capabilities in tracking and recovering digital assets.

Whether lawmakers and regulators will ultimately strike the right balance between protecting investors and fostering innovation remains an open question. In the meantime, businesses operating in the digital asset space must remain vigilant. Staying informed about legal developments and working closely with experienced counsel is needed. Crypto compliance is not a one-time task; it is an ongoing obligation that must be adapted as the rules continue to change.

The attorneys of Scarinci Hollenbeck’s Blockchain Offerings, Cryptocurrency Defense & Investigations Practice counsel clients on a wide variety of crypto compliance matters, tailoring our legal guidance to your business or crypto project. Our core crypto legal services include advising on regulatory compliance, structuring and launching ICOs, conducting internal compliance audits, and defending against crypto enforcement actions and securities fraud allegations. With a deep understanding of the evolving digital asset landscape and a proactive approach to risk management, we help clients navigate complex regulatory challenges and position their ventures for long-term success.

Contact us today to discuss your crypto compliance needs and protect your digital asset business.