Regulatory Void Haunts Crypto: 16 Years of Wild West Finance Threatens Global Stability
Decentralization’s dark side: While TradFi gatekeepers obsess over compliance paperwork, crypto’s regulatory vacuum has festered since Bitcoin’s birth—now posing systemic risks even gold-bugs can’t ignore.
• The loophole legacy: How Satoshi’s anarchist dream became too big to fail without adult supervision
• Stability collateral damage: When ’code is law’ meets real-world financial contagion
Wall Street’s worst nightmare? A trillion-dollar shadow market that treats SEC subpoenas like spam folder material. (Bonus jab: At least crypto crashes are faster than traditional banking crises—efficiency!)
National security and economy at stake
Supporters of the stablecoin bill argue that unregulated assets are a clear threat to America’s financial security, and they are right. Without regulatory clarity, firms may move operations offshore to jurisdictions with lax oversight, compromising transparency and reducing the US government’s capacity to monitor capital flows.
According to FBI data, Americans aged 60 and older reported nearly $3 billion in crypto-related fraud losses in the past year. Over $9 billion was lost to crypto scams, more than half of the $16.6 billion in total fraud reported.
FBI: Americans aged 60 and older reported losing almost $3 billion to crypto fraud last year. In total, Americans reported being scammed out of around $9.3 billion via crypto, out of a total $16.6 billion in total reported losses that year. pic.twitter.com/xupom9DeUn
— Molly White (@molly0xFFF) April 23, 2025
The Trump administration has tried to bring regulatory heads together. Still, the debate on who has regulatory authority over crypto between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is far from over.
Europe uneasy over dollar-pegged stablecoin dominance
Earlier this week, European Central Bank (ECB) officials, including President Christine Lagarde and digital payments chief Piero Cipollone, said that the United States’ promotion of dollar-backed stablecoins poses systemic risks to Europe’s economy.
According to a confidential ECB policy paper obtained by Politico, the bank has asked governors to revise the EU’s landmark crypto regulation, the Markets in Crypto-Assets (MiCA) framework.
The ECB is worried that Trump’s pro-crypto initiatives, including the GENIUS Act, the proposed STABLE Act, and a White House executive order for the creation of a strategic crypto reserve, could increase demand for dollar-denominated assets within the EU, undermining European monetary independence.
Projections from Standard Chartered suggest that if the GENIUS and STABLE Acts are implemented, the supply of dollar-backed stablecoins could skyrocket to $2 trillion by 2028, up from the current $240 billion. 99% of stablecoins are already pegged to the dollar and backed largely by US Treasuries
European regulators are now concerned that capital flight could threaten the stability of EU financial institutions.
US regulators warned early of destabilization
Long before the GENIUS Act’s emergence, top US financial bodies issued admonitions about the risks posed by digital assets. In early 2022, both the Federal Reserve Board and the Financial Stability Oversight Council mentioned scenarios of destabilization due to the increasing integration of crypto, particularly stablecoins, into the financial system.
Frequent hacks, operational failures, and mismanagement, most notably seen in the collapse of crypto exchange FTX, compounded those concerns. Without the safety nets available in traditional banking, such as FDIC insurance or Federal Reserve lending facilities, investor confidence in crypto could plummet unexpectedly and trigger cascading losses across markets.
The crypto industry is as close as it has ever been to a $10 trillion valuation, nearly 80% of all US mortgage debt, and over half of total deposits held in American banks. That it has grown that much with minimal regulatory oversight is scary but admirable.
