States have been ‘at the forefront’ of efforts to regulate cryptocurrency, experts say
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As the cryptocurrency industry expands, lawmakers are exploring how to support innovation responsibly at the state and federal levels.
The digital asset industry has grown rapidly over the last decade, evolving into a multitrillion dollar industry, one expert says. Its increasing presence has pushed states to address technologies like cryptocurrency in an effort to support the industry’s growth while balancing the need to regulate it.
In 2025, more than 40 states have considered legislation to address digital assets, from preventing fraud to establishing consumer protection standards, said Sabrina Bergen, chief of staff for policy and supervision at the Conference of State Bank Supervisors.
Speaking during a session at the National Conference of State Legislatures summit in Boston last week, Bergen explained that, as states recognize the potential of digital assets like cryptocurrency and how they could reshape how financial services are delivered and consumed, they’ve “been at the forefront of … identifying and managing risks and nurturing innovative developments in that space.”
Illinois has also moved to regulate the cryptocurrency industry this year with lawmakers passing the Digital Assets and Consumer Protection Act in June, which awaits Gov. JB Pritzker’s signature.
If passed, the bill would require businesses engaging in digital asset activity to register with the Illinois Department of Financial and Professional Regulation, which subjects them to the department’s supervision and regulatory oversight, said Jacob Hamilton, interim regulatory innovation officer at the IDFPR, during the session.
The bill, for instance, calls for cryptocurrency companies to maintain capital and liquidity, safeguard customer assets, provide fee transparency, have cybersecurity protections in place and offer adequate customer service, among other requirements.
To ensure state regulations do not impede the advancement of technology, the Illinois legislation exempts certain groups and individuals, such as software developers who are working with the technology without providing financial services to customers, Hamilton explained.
“We wanted to make sure we left open the space for people to develop and innovate and think of new ideas, but at the same time, put protections in place for the consumers that are using digital assets,” he said.
“The good actors in this space want clear rules … and fair guidelines,” said Assembly Member Clyde Vanel during the session. “For the [cryptocurrency] industry to grow, we need the right level of regulation.”
A bill introduced earlier this year in New York, for instance, would establish civil offenses for committing crypto fraud, which the legislation defines as “deceptive or fraudulent practice with the intent to deceive another in relation to the purchase, sale, exchange, transfer, offering, storage, destruction or any relevant act related thereto of virtual tokens.”
Under the bill, sponsored by Vanel, the penalty of committing such fraud includes a civil fine of not more than $5 million, imprisonment of not more than 20 years or both actions.
New York was also the first in the nation to establish a cryptocurrency task force in 2019 with the purpose of studying how to regulate, use and define cryptocurrency.
Keeping pace with cryptocurrency industry developments is essential for lawmakers to adequately regulate it, Rep. Daniel Singh, R-Wyo., added. Similar to the New York task force’s effort to define cryptocurrency to inform legislation, Wyoming lawmakers are working on a taxonomy bill aimed at identifying and defining cryptocurrency-related terms to better understand the industry, he said.
With clearer definitions of cryptocurrency and related terms, lawmakers and the public could more effectively forge future policies and programs aimed at supporting digital innovation, Singh explained.
More broadly, state action is also setting the stage for federal regulation of cryptocurrency, Bergen said. President Donald Trump, for instance, signed the GENIUS Act last month that establishes a national framework for the regulation of stablecoins, which are a digital currency whose values are tied to assets like money or commodities.
“The passage of this act is going to help solidify the [cryptocurrency] industry in a way that consumers feel more comfortable chipping in,” Singh said.
Also in July, the U.S. House of Representatives passed the CLARITY Act, which, among other things, aims to divide oversight of digital assets like cryptocurrency between the federal Securities and Exchange Commission and Commodity Futures Trading Commission.
The federal government’s efforts are a “strong signal” that states’ work to address cryptocurrency is far from over, Bergen said. Now, “states are going to have to think about and carve out their space in the digital asset ecosystem and figure out how to partner and balance with federal regulation in this space.”
“In any industry — it doesn’t matter what industry you’re talking about — as we have new ideas and as there are new ways of conducting business,” Singh said, “it’s the responsibility of the government to make sure that the business practices that are occurring are fair, transparent and accountable.”