U.S. Crypto AML Update – Recent Developments

Decentralized Finance (DeFi) is a rapidly expanding sector that enables lending, borrowing, and trading of digital assets, payments, and fundraising—all without traditional financial intermediaries. DeFi first exploded in popularity on the Ethereum blockchain in 2017. Since then, interest in the sector has surged: As of January 2025, the Total Value Locked (TVL) - representing the total assets deposited in DeFi platforms - is almost $125 billion, a huge rise from $9 billion in 2020.  

Unlike traditional banking, which relies on centralized intermediaries to record and verify transactions, DeFi leverages blockchain technology to facilitate secure and direct transactions.  

For example, a DeFi user can make a loan to another user, specifying interest and collateral options. The borrower receives immediate access to funds without the typical paperwork, fees, or delays. Typically, these “funds” are tokens that represent value, not fiat currency. 

DeFi AML Implications 

While DeFI offers many benefits, the pseudonymous nature of transactions in DeFi poses significant AML risk, as customer identification is a crucial part of AML compliance. In the U.S., DeFi platforms are generally considered Money Service Businesses (MSBs). This means at the most basic level they must register with Financial Crimes Enforcement Network (FinCEN) and maintain an AML Compliance Program. To operate as a Money Transmitter, an MSB must apply for a Money Transmitter License (MTL) for each state in which it intends to do business. Since state laws differ, DeFi companies must navigate a patchwork of state laws and regulations, abiding by each state’s unique Customer Identification requirements.  

In April 2023, The US Department of the Treasury (Treasury), published “Illicit Finance Risk Assessment of Decentralized Finance”.  This risk assessment asserts that cybercriminals and scammers are using DeFi services to transfer and launder their illicit proceeds, and emphasizes that DeFi services have AML obligations. More recently, The Treasury Department highlighted DeFi monitoring as a 2026 benchmark for progress in its 2024 National Strategy. This underscores that more stringent oversight is on the horizon. 

To proactively combat the risks posed by cybercriminals and scammers, DeFi platforms must establish and maintain an effective AML program that includes customer due diligence (collecting information on customers), reporting of potentially suspicious activity (i.e. having a transaction monitoring protocol in place), and implementation of adequate internal controls to mitigate money laundering risks.  

Changing Regulatory Environment  

Zooming out, regulators have taken an increasingly active role in shaping the DeFi and the greater cryptocurrency landscape. As it stands, the Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN), and state regulators all have varying degrees of regulatory oversight regarding cryptocurrency. Cryptocurrency is a nascent industry that is on the brink of being fully established in the regulatory scene. 

The Emergence of Coordination Amongst Regulatory Bodies 

Up till now, digital currencies have been governed by several separate and distinct regulatory bodies which have varied in authority at both the State and Federal level. Statements from these governing bodies have typically taken the form of "guidance" rather than binding regulations. While there have been several high-profile incidents and fines, the crypto-regulatory landscape is still relatively opaque as regulators race to keep up with technological innovation. This is largely due to the nascent nature of cryptocurrency regulation, including jurisdictional gray areas amongst regulatory bodies. 

Current Regulatory Trends 

In May of 2024, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century (FIT21) Act. This Act, which is awaiting a vote in the Senate, would reinforce the CFTC and SEC’s existing regulatory oversight of digital commodities and digital assets respectively. FIT21 intends to address any jurisdictional gray areas that have been created by the lack of legislation and precedents set by court rulings. In other words, this would function to formalize parts of the 2019 guidance.  With strong bipartisan support in the House, it is expected that a more stringent regulatory framework, with larger penalty fines, will be instituted. 

Underscoring this, SEC Chair Paul Atkins has hinted towards the need for the SEC to adopt a new set of cryptocurrency-related regulations. In a February 2023 podcast discussing cryptocurrency, Atkins claimed, “the U.S. didn’t make our rules accommodating to this new technology”, implying that the SEC framework must be revamped. In the same podcast appearance, Atkins expressed concern over the existing framework for crypto banking, implying his vision for an easier system for Traditional Finance firms getting involved in the cryptocurrency business. 

Implications of the Trump Administration 

Most recently, the first week of the current Trump Administration signalled attempts to further legitimize the Cryptocurrency industry in the United States. An Executive Order published on January 23, 2025, cited the administration’s desire to further establish cryptocurrency as a viable and legitimate asset in the financial services industry. The Executive Order created a Working Group, broadly citing the goal of developing a digital assets regulatory framework touching on market structure, oversight, consumer protection, and risk management. The order also evaluates “the potential creation and maintenance of a national digital asset stockpile” which would seek to create market stability and provide an incentive for further government involvement in Crypto regulation. This Order indicates that Crypto will be supported and is here to stay. 

Sia’s Cryptocurrency Regulation Forecast 

As the regulatory landscape continues to evolve, businesses in the crypto and DeFi sectors face mounting pressure to adapt swiftly. Emerging legislation, enforcement actions, and executive orders, such as the one mentioned above, are reshaping the future of the industry, requiring proactive strategies and well-informed decision-making. 

As it currently stands, the new administration seeks to create a regulatory framework that is conducive to cryptocurrency business in the United States. The roadmap to getting to this point will likely include a full change in the SEC’s longtime approach to cryptocurrency litigation and regulation.  

We are expecting to see big changes to the Crypto-Regulatory Landscape soon, especially given that the Working Group on Digital Asset Markets must submit a report by July 22, 2025. 

The current trends in the regulatory environment point to the necessity of firms to prepare for the cementing of digital assets in the financial services ecosystem.  Under an Atkins-led SEC, we can expect clearly defined regulations that support domestic crypto firms as well as the integration of cryptocurrency in the business models of Traditional Finance firms. For both established firms and those looking to get into the game, it is crucial to stay on top of upcoming regulations to ensure we are innovating in a compliant manner.  

Sia specializes in assisting firms that face challenges in meeting regulatory requirements while looking to expand their business models to include cryptocurrency and crypto users. Our expertise spans a wide range of services designed to enable compliance and facilitate growth in this evolving space. 

Sia is a next-gen consulting firm that combines deep industry expertise with cutting-edge technology and design to address the evolving challenges of our clients. With over 45 offices in 19 countries and more than 2,500 consultants worldwide, we offer global reach and innovative solutions. 

 We offer tailored solutions to help firms design and implement robust BSA/AML policies, conduct thorough risk assessments, and enhance KYC/CDD frameworks. Our team leverages advanced technologies, including AI and machine learning, to optimize compliance processes and ensure alignment with regulatory standards. 

Whether your firm is integrating crypto-related activities, seeking to partner with DeFi platforms, or adapting to new legislation, Sia provides strategic advisory and hands-on support. We work closely with our clients to identify gaps, develop sustainable compliance programs, and position their business for long-term success in the cryptocurrency space.