Regulatory Approaches Worldwide: How Regions Supervise Crypto and Web3

A practical map of global frameworks: who needs a license, what rules apply, how stablecoins and market conduct are treated, and where privacy-preserving compliance fits.

Heads-up: This is general education, not legal advice. Rules change and vary by country, business model, asset type, and licensing status. Always confirm with local counsel and your regulator before launching or marketing a product.

TL;DR: Most jurisdictions regulate crypto using a risk-based approach anchored in AML/CFT obligations, licensing or registration for service providers, and topic-specific rules for stablecoins, market integrity, and consumer protection. The European Union has a comprehensive framework (MiCA) rolling out; other hubs (UK, Singapore, Hong Kong, UAE, Japan) have bespoke regimes with strong financial-crime controls. The United States relies on existing securities, commodities, and money-transmission laws with active enforcement. Many countries recognize distinctions between custodial intermediaries and non-custodial software, but facts and control still matter.

1) A global baseline: FATF and common pillars

Most countries map their crypto supervision to Financial Action Task Force (FATF) standards, adapting definitions and controls to local law. Across jurisdictions, you will repeatedly encounter five pillars:

Licensing or registration for service providers that exchange, transfer, safeguard, or broker virtual assets for others (VASPs). Expect ownership disclosures, fitness and propriety checks, and capital or insurance expectations for custodians.
AML/CFT programs with risk assessments, KYC tiers, sanctions and PEP screening, KYT transaction monitoring, suspicious activity reporting, and recordkeeping.
Travel-Rule-style data exchange when value moves between two obligated entities, plus additional measures for transfers to self-hosted wallets.
Market integrity and consumer protection (disclosure, suitability, conflicts of interest, segregation of client assets, incident reporting, and complaints handling).
Topic modules for stablecoins (reserves, redemption, governance), token issuance (whitepapers and marketing rules), and operational resilience (technology risk and outsourcing).

Reality check: Being “non-custodial” helps, but is not an automatic safe harbor. If you intermediate value or hold keys, or you operate a front end with privileged controls or fees, regulators may consider you a VASP based on functions and facts.

2) European Union: MiCA, Transfer Rule, and AML reforms

The European Union’s Markets in Crypto-Assets Regulation (MiCA) creates a harmonized framework for most crypto-asset service providers and issuers. Broadly, MiCA covers:

CASP authorization (crypto-asset service providers) for activities like exchange of crypto assets, custody, portfolio management, and advice. Firms need to meet fit-and-proper, prudential, and organizational requirements, maintain complaints processes, and segregate client assets.
Issuer obligations for asset-referenced tokens and e-money tokens, including reserve, redemption, and governance rules. Whitepapers with clear risk disclosures are required for public offerings outside smaller exemptions.
Market abuse prohibitions (insider dealing, unlawful disclosure, market manipulation) tailored to crypto markets, including surveillance and incident reporting duties.

Alongside MiCA, the Transfer of Funds Regulation extends the Travel Rule to crypto across the EU single market, requiring originator and beneficiary information to accompany transfers between obliged entities with controls for self-hosted wallets. The proposed AML package (AMLR and a new EU AML Authority) strengthens consistency of customer due diligence and enforcement.

Builder notes: Plan for one home state authorization that passports across the EU. Expect technology and outsourcing controls, incident reporting, complaint handling procedures, and marketing rules that prohibit misleading claims.

3) United Kingdom: AML registration, promotions, and stablecoins

The UK approach is modular. Crypto exchange and custody firms must register with the FCA for AML supervision under the Money Laundering Regulations. Separate rules govern financial promotions that communicate crypto investment invites to UK consumers. These promotions must be fair, clear, and not misleading, often requiring risk warnings, appropriateness checks, and cooling-off.

The government is moving toward a regime for fiat-referenced stablecoins used for payments, integrating them into the payments perimeter and applying custody, reserves, and failure-management standards. The FCA also expects robust technology risk management, incident notifications, and clear custody segregation.

Common pitfalls: running UK-facing ads without an authorized or approved promotion route; insufficient consumer journey warnings; poor wallet segregation or reconciliation; and gaps between a marketing claim and actual risk controls.

4) United States: securities, commodities, and money services

The US does not have a single crypto statute. Instead, existing laws are applied depending on the activity and the asset:

Securities laws: token distributions and secondary trading can implicate securities offering and broker or exchange rules if the asset is treated as a security. Issuers may face registration or exemption analysis, and platforms risk exchange or broker-dealer obligations if they list securities.
Commodities and derivatives: spot markets are largely unregulated at the federal level for commodities, but derivatives (futures, swaps) fall under CFTC oversight. Anti-fraud and anti-manipulation authority applies in spot markets.
Money transmission: fiat and crypto exchange or custody for others commonly triggers Money Services Business registration with FinCEN and state-level money transmitter licenses. Expect customer due diligence, transaction monitoring, and recordkeeping.
Sanctions: OFAC screening and controls are required for US persons. High-risk wallet patterns and privacy features draw added scrutiny.

For stablecoins, supervisory expectations focus on reserve assets, attestation, redemption practices, and disclosures. Banks engaging with stablecoin activities face additional prudential expectations. Tax reporting and consumer protection at the state level add further layers.

Builder notes: Map your routes: MSB and state licensing for fiat or crypto/fiat flows; securities analysis for distributions and listings; derivatives analysis for leverage and perpetuals. Maintain a written functions-and-facts memo for each product.

5) APAC spotlights: Singapore, Hong Kong, Japan, South Korea, Australia

Singapore (MAS)

Singapore regulates Digital Payment Token (DPT) services primarily under the Payment Services Act with AML/CFT at the core. Additional expectations address technology risk, segregation, and consumer protection. A dedicated stablecoin framework sets high bars for fiat-referenced tokens (reserve composition, redemption rights, disclosure). Marketing to retail must be responsible, and risk features like staking-as-a-service may require enhanced oversight.

Hong Kong (SFC and HKMA)

Hong Kong’s VASP licensing regime covers centralized trading platforms serving the public with requirements for token-admission policies, custody, insurance, risk disclosures, and ongoing reporting. Retail access is limited to tokens meeting due diligence standards. A stablecoin regime is being developed, with HKMA guidance on reserves, governance, and redemption. Derivatives and futures require additional licenses.

Japan (FSA)

Japan is strict on token listings and exchange conduct, with pre-screening, segregation, and customer asset protection requirements. Stablecoins are treated within the category of electronic payment instruments with issuer and intermediary controls. Travel-Rule compliance is expected, and leverage products have guardrails.

South Korea (FSC)

The Virtual Asset User Protection framework emphasizes segregation of customer assets, reserves, insurance, and strict listing and delisting processes. Travel-Rule obligations apply, and there is active oversight of unfair trading, wash trading, and market manipulation.

Australia (AUSTRAC and Treasury)

Digital currency exchange providers must register with AUSTRAC for AML/CFT. Broader market licensing is evolving through consultation on token mapping and custody standards. Consumer warnings and product intervention powers can limit high-risk offerings to retail. Banking relationships and payments access are practical constraints that require strong risk controls.

6) Middle East and Africa: UAE hubs and selected notes

The United Arab Emirates has two prominent regimes:

ADGM (Abu Dhabi Global Market): a comprehensive framework for exchanges, brokers, custodians, and intermediaries with rules on market conduct, disclosures, and prudential safeguards. Technology and outsourcing risk controls are detailed.
VARA (Dubai): a virtual assets regulator with licensing categories for advisory, broker-dealer, exchange, lending, and custody. Firms must maintain robust AML programs, Travel-Rule compliance, consumer risk disclosures, and incident reporting.

Other regional supervisors are issuing guidance focusing on AML/CFT registration, Travel-Rule implementation, and warnings about unlicensed marketing. Banking access and cross-border marketing remain practical challenges.

7) Americas beyond the US: Canada and Brazil

Canada (FINTRAC and provincial securities regulators)

Crypto trading platforms face securities-style oversight at the provincial level, often operating under pre-registration undertakings while seeking full authorization. AML registration as a Money Services Business is required with Travel-Rule implementation. Custody standards, insurance, leverage restrictions, and retail marketing rules are active supervisory themes.

Brazil (Central Bank and CVM)

Brazil’s legislative framework recognizes virtual asset service providers with the Central Bank as the main supervisor for most activities and the securities authority (CVM) for tokenized securities. AML/CFT, licensing, and consumer protection are core, with clarity improving around stablecoin issuance and tokenized payment instruments. Tax reporting obligations apply for domestic and foreign exchanges above thresholds.

8) India, Switzerland, and Mainland China

India

India applies AML obligations to virtual-asset service providers, including KYC, monitoring, and reporting. There is no dedicated licensing statute for all crypto activities yet, but taxation is significant (including a tax deducted at source on certain transactions). Banks and payment rails may impose additional risk-based controls. Marketing must avoid implying regulatory approval.

Switzerland (FINMA)

Switzerland classifies tokens by payment, utility, asset characteristics and applies existing financial laws accordingly. Custody and trading venues typically require authorization, with rigorous AML/CFT programs via self-regulatory organizations or direct supervision. The DLT Act modernizes securities law to recognize tokenized rights and DLT trading facilities. Stablecoins are assessed case by case based on claims, reserves, and redemption features.

Mainland China

Trading and issuance of crypto assets for the public are heavily restricted. Policies focus on preventing financial risk and illegal fundraising. Teams targeting other markets should avoid Chinese-facing marketing or user acquisition unless they have explicit counsel clearing the model.

9) Cross-cutting themes: stablecoins, custody, DeFi, and marketing

Stablecoins

Reserves and redemption: jurisdictions increasingly require high-quality, short-duration reserves, daily reconciliation, independent attestations or audits, and timely redemption mechanics.
Disclosure: clear statements of risks, reserve composition, and rights of holders; prohibition on implying deposit insurance unless legally in scope.
Issuance and intermediation: issuers may need authorization; intermediaries handling stablecoin payments can fall under payments law. Banks face prudential overlays.

Custody and safeguarding

Segregation: client assets separated from firm assets, on-chain wallet architecture documented, and reconciliations performed at defined intervals.
Key management: hardware security modules, multi-party computation or multisig, dual control, incident response, change management, and audit trails.
Insurance and capital: custodians may need capital buffers or coverage; SOC reports and penetration tests are common expectations.

DeFi and non-custodial tools

Functional analysis: even without keys, if a team controls parameters, fees, or front-end gating, regulators can treat it as an intermediary. Governance, admin keys, and upgrade rights matter.
Front-end obligations: consumer disclosures, access controls for sanctions, and Travel-Rule compatible flows when interfacing with hosted wallets may be expected.
Privacy-preserving compliance: verifiable credentials, decentralized identifiers, and zero-knowledge proofs can express “KYC-verified” or “not-sanctioned” attributes while minimizing data at rest.

Marketing and communications

Fair, clear, not misleading: most regions require balanced risk language and prohibit implying regulatory endorsement.
Targeting rules: some jurisdictions restrict retail access or require appropriateness tests. Geo-block where needed and avoid dark patterns.
Cross-border: publishing a global website can still trigger local promotion rules if it targets residents. Maintain a jurisdiction-by-jurisdiction matrix of permitted claims and disclosures.

10) Builder checklist and documentation pack

Before you onboard the first user in a new market, assemble a concise, regulator-ready pack:

Functions-and-facts memo: what you do, what you do not do, and why you are or are not a VASP/regulated entity in that market. Include data flows and custody diagrams.
Licensing roadmap: registrations or authorizations required, timelines, responsible officers, and interim controls (for example, geo-blocking) while approvals are pending.
AML/CFT program: risk assessment, KYC/KYT standards, sanctions processes, Travel-Rule posture, and case-management procedures. Include vendor due diligence and model risk testing.
Custody and technology controls: wallet design, key ceremonies, change management, business continuity, disaster recovery, and incident handling with timelines.
Disclosures and user journey: risk statements, fee schedules, order-handling policies, supported asset criteria, and complaints handling. Localize language and units.
Governance and training: board approval minutes, designated compliance officer, staff training curriculum, and recurring review cadences.

Pro tip: Keep a “regulator demo environment” that shows your controls live: blocked destinations, sanctions checks, Travel-Rule exchange logs, and KYT alert workflows.

Quick check

What are three common pillars you will see across most jurisdictions regulating crypto?
How does the EU approach differ from the US approach at a high level?
List two controls regulators expect from custodians regardless of region.
Why does “non-custodial” not automatically mean “out of scope” for regulation?
What are two practical steps to make promotions compliant in the UK or similar regimes?

Show answers

Licensing or registration, AML/CFT with Travel-Rule-style obligations, and market integrity or consumer protection (including custody and disclosure).
The EU has a comprehensive, harmonized regime (MiCA and related rules); the US applies existing securities, commodities, and money-transmission laws based on activity and asset, with significant enforcement and state licensing layers.
Segregation and reconciliation of client assets, and strong key management with dual control and incident response; many add insurance or capital buffers.
Because regulators look at functions and facts: if you control parameters, fees, or access, or you effectively intermediate value, the activity can still be regulated.
Use an authorized or approved route for promotions and include mandated risk warnings or appropriateness checks; avoid implying regulatory endorsement.

Go deeper

Concepts: stablecoin reserve design and attestations, DeFi functional perimeter analysis, market abuse surveillance for on-chain venues, and technology risk frameworks for wallets and exchanges.
Design patterns: verifiable-credential onboarding, Travel-Rule gateways with selective disclosure, sanctions-aware session policies in smart accounts, and cross-border promotion matrices.
Operations: case-management metrics, SAR drafting, vendor model validation, crypto incident runbooks, and governance dashboards for boards and regulators.

Regulatory Approaches Worldwide (landscape and comparison lenses)