Insufficient blockchain security is among the deterrents to cryptocurrency adoption, and concerns about risks like hacks, volatility, and money laundering tend to spark support for strict regulations. However, those may do more harm than good, considering the weak correlation between cryptocurrency adoption rates and regulatory restrictiveness. A recent report by the Atlantic Council reveals that adoption rates remain high in countries with general or partial bans, suggesting that prohibition tends to be ineffective.
The relationship between security, adoption, and regulation may be complex, but the continued adoption of cryptocurrency by criminals is a simple fact. Burkhard Mühl, the head of Europol’s European Financial and Economic Crime Centre, recently warned that criminal misuse of blockchain and cryptocurrency was “becoming increasingly sophisticated” and made assurances that Europol would continue to support EU member states in their investigations, placing a substantial burden on national law enforcement agencies.
Among the major 2025 takedowns coordinated by Europol was an organisation that perpetrated fraudulent cryptocurrency investments, defrauding more than 5,000 people of $540 million in total. These risks are among several factors discouraging cryptocurrency adoption.
Industry prospects and deterrents to cryptocurrency adoption
In addition to the risks, unfamiliarity with the technology deters use of cryptocurrencies. Concepts like seed phrases, private keys, and cryptocurrency wallets don’t necessarily motivate novices to embrace digital assets, which has everything to do with the prohibitive terminology. For example, a crypto wallet secures digital assets, and many wallets are straightforward to operate.
Software wallets are apps users install on their phones or computers that are always connected to the blockchain. When you open an account on a cryptocurrency exchange, you are provided with a wallet you use to move or trade funds, which the exchange controls. These are known as exchange wallets. There are also hardware wallets: physical devices that generate and store private keys offline. Some of them are self-custodial, meaning that the user maintains complete control over their keys and owns their cryptocurrency.
Making sense of complex terms is the first step to adoption, which is accelerating in regions, led by North America and the Asia Pacific. The 2025 Chainalysis Cryptocurrency Adoption Index reveals the US, India, and Pakistan lead adoption globally, with Latin America, Asia Pacific, and sub-Saharan Africa exhibiting the most rapid growth. Restrictive regulations can discourage adoption among ordinary people with a genuine interest in digital assets, but not necessarily among those with criminal intent, while supportive regulations only encourage legitimate adoption. Despite that, the latter have yet to become fact on a global scale.
Most countries still lack comprehensive regulations
Cryptocurrency is legal in 45 of the 75 countries the Atlantic Council studied, partially banned in 20, and completely banned in 10. They are fully legal in 12 G20 countries, which together account for more than 57% of global GDP. All of these countries were considering cryptocurrency regulation at the time of writing. However, both advanced and emerging market economies continue to lag in comprehensive oversight, and just six emerging markets have licensing, consumer protection, anti-money laundering (AML), and tax regulations.
In terms of cryptocurrency adoption, the US is the only advanced economy consistently ranking in the top ten. The Trump administration’s focus on regulatory clarity and fintech innovation could affect other countries’ regulatory frameworks and boost cryptocurrency volumes abroad. The government’s regulatory framework enjoys strong industry support. The Genius Act, signed into law in July, requires stablecoin issuers to comply with AML rules and maintain sufficient reserves.
The Anti-CBDC Surveillance State Act and the Digital Asset Market Clarity Act have passed the House and are under consideration in the Senate. The first would require Congress to approve the Federal Reserve’s creation of a digital currency, while the second would clarify the regulation of different digital assets.
The Bank of England regulates digital assets, service providers, and payment systems in the United Kingdom. Central bank deposits must back stablecoins, which the bank’s regulatory regime governs as a type of “inside money.” Payment providers using stablecoins are expected to adhere to the same standards governing traditional payment systems that use commercial bank funds. When used analogically to fiat, stablecoins must meet the same standards regarding the validity of legal claims, value stability, and redemption.
Despite strong policies and cybersecurity measures, security breaches continue to occur, partially due to a gap between policy and practice indicators. Policy indicators include references to ISO 27001 in company publications, the availability of documented cybersecurity policies, and frequency of privacy policy updates. Reports to the UK Information Commissioner’s Office, staffing ratios, and phishing failure rates are among the practice indicators. Financial services in the UK face additional risks through supply chains and significant social engineering.
The Markets in Cryptocurrency-Assets (MiCA) regulation, which took effect at the end of 2024, created uniform rules for cryptocurrency firms in the EU. The official purpose of the regulation is to protect consumers, keep firms from seeking cryptocurrency-friendlier jurisdictions, and make the market more predictable. MiCA requires cryptocurrency firms to obtain a licence to operate and stablecoin providers to keep sufficient funds in reserve, whose value matches that of the stablecoins they issue.
Under MiCA, any platform introducing a cryptocurrency token must publish a whitepaper that explains how the token works and any associated risks, and blockchain firms must report how much energy they use to operate, as blockchains can consume significant amounts of electricity.
MiCA is not without its share of critics, who point out the challenges of policing the movement of stablecoins in borders and warn that startups may not be able to cover compliance costs, which could hurt innovation in the EU.
Supportive legislation is what’s truly missing
Regulation may be the missing link between security and adoption, but draconian laws are likely to do more harm than good. Miners simply moved their operations abroad after the Chinese government cracked down on Bitcoin, but if the approach had been different, they might have been motivated to remain and pay taxes. Friendly legislation promotes legal cryptocurrency use, but prevents its adoption for criminal purposes.
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