Crypto assets are currently regulated in the U.S. as property by the Internal Revenue Service (IRS), as money by the Department of Treasury's Financial Crimes Enforcement Network (Fincen), as commodities by the Commodity Futures Trading Commission (CFTC), and as securities by the Securities and Exchange Commission (SEC). Additionally, every single state has its own set of laws that may apply to crypto, and some have even adopted unique regulatory approaches towards the matter.

This has produced a set of overlapping rules and confusing requirements that is likely to hamper innovation in the American crypto industry, according to law professor Carol Goforth. Moreover, the expenses associated with complying with all of these obligations can be prohibitive and time-consuming for U.S. crypto businesses such as exchanges. And with the added risk of investigations and enforcement actions, "it is easy to see why the U.S. is not regarded as being receptive to crypto," she explained in her paper.

A Paradigm Shift Is Required

Unfortunately, professor Goforth has determined that it is unlikely that the U.S. will do away with any of the aforementioned bodies or limit the jurisdiction of existing agencies so as to consolidate regulatory power. This is because prior attempts to consolidate functions of different financial regulators have failed, legislators think that existing authorities have differing areas of expertise, and the courts have approved the situation.

It therefore behoves these agencies to get together and make a concerted effort to coordinate enforcement and regulatory oversight based on a more nuanced approach. "This change in perspective requires a paradigm shift that moves away from treating crypto as a single kind of asset, when in reality, it is not. Hopefully, American regulators will realize this, and act on this reality, sooner rather than later," she concluded.