Why Bitcoin Shouldn't Be Regulated Like Crypto
“Why Bitcoin Shouldn't Be Regulated Like Crypto“ Forbes, 19 January 2026
Regulatory frameworks continue to treat bitcoin and other cryptoassets as a single category, a decision that has shaped how digital asset policy is written, enforced, and interpreted across multiple jurisdictions. As regulatory approaches develop, the debate increasingly centers on regulatory design: how well existing frameworks map onto systems that differ fundamentally in structure, governance, and risk.
The persistence of a unified “cryptoasset” classification reflects how regulation often develops in response to emerging technologies. Early policy responses tend to prioritize speed, consistency, and administrative clarity, particularly when markets evolve faster than formal rule making processes. In the case of digital assets, surface level similarities such as the use of cryptography, digital wallets, and online platforms made broad categorization a practical starting point.
However, as regulatory frameworks mature and move from high level principles toward detailed operational rules, the limitations of this approach become more apparent.
Bitcoin has now operated as a decentralized network for over 15 years, without an issuing entity, central governance structure, or discretionary monetary authority. Many other cryptoassets, by contrast, rely on identifiable development teams, ongoing issuance decisions, and intermediated systems for operation and access.
In the United States, think tanks such as the Bitcoin Policy Institute have developed detailed frameworks outlining bitcoin’s unique attributes, including its decentralized design and monetary characteristics to help inform policy and regulatory approaches distinct from other digital assets.
One practical consequence of regulating under a single umbrella is that it can flatten risk distinctions that regulators themselves are trying to communicate to consumers. In the UK, consultation responses have pointed to situations where the regulatory framing treats a decentralized monetary network and a highly speculative token as though they sit in the same risk bucket, despite their very different characteristics, levels of issuer control, and maturity. Even when the intention is caution, the effect can be consumer confusion, because the framework implicitly suggests that “cryptoassets” are interchangeable from a risk perspective, when in practice they are not.
These differences are structural and not philosophical. Modern financial regulation is built around assumptions of accountability, control, and organizational responsibility. Disclosure regimes typically presume the existence of an entity capable of providing information, making representations, and being held responsible for outcomes. Supervisory frameworks often depend on intermediaries that can be licensed, monitored, and sanctioned where necessary. When these assumptions are applied to a decentralized network with no central operator, the fit is not always straightforward.
This tension becomes most visible when rules designed for issuer led assets are applied uniformly across all digital assets. Requirements related to disclosures, governance, and ongoing compliance may be well suited to tokens issued by companies or foundations, but they can be difficult to interpret or implement in the context of a permissionless network. The result is regulatory friction where rules struggle to map cleanly onto the systems they are intended to govern.
Cryptoasset lending and borrowing is a useful case study for how that friction appears in implementation. Traditional consumer credit rules are designed around unsecured borrowing, affordability assessments, arrears, and forbearance, with the aim of reducing default risk and protecting borrowers from unaffordable debt. By contrast, many bitcoin backed lending models are structured around collateralisation, short durations, and automatic liquidation when loan to value thresholds are breached. In that context, a framework built for missed repayments and payment plans can struggle to map neatly onto a product where the core consumer risk is often collateral liquidation during market moves rather than the inability to repay a debt in the traditional sense.
Recent policy consultations illustrate this challenge. Responses from industry participants and policy groups have increasingly focused on classification and function rather than market behaviour. These submissions do not argue for the absence of regulation, but for greater precision in how different digital asset systems are defined and assessed. The emphasis is on aligning regulatory obligations with observable risk characteristics, governance models, and modes of operation, rather than applying uniform requirements.
Su Carpenter, Executive Director at CryptoUK, told Forbes “As the UK develops its cryptoasset regulatory framework, it is increasingly clear that not all cryptoassets present the same risks or operate in the same way. Differences in issuance, functionality and use cases are not always reflected in the current approach, which risks imposing a one size fits all regime. A proportionate, ‘same risk, same regulation framework depends on regulators recognising these distinctions if the UK is to remain a competitive and credible jurisdiction.”
Several reponses argue that a more risk aligned approach would distinguish between the asset being used and the activity being offered, rather than applying restrictions across an entire category.
The issue also extends beyond disclosure and supervision. Surveillance frameworks, reporting obligations, and compliance regimes are often designed around account based systems and intermediated financial relationships. Applying these models to bearer style assets or peer to peer networks can raise practical questions about feasibility, proportionality, and effectiveness. These questions are increasingly relevant as regulators seek to balance consumer protection, market integrity, and financial stability objectives.
Another recurring point in consultation feedback is that restrictions placed on regulated domestic firms do not necessarily reduce activity; they often change where that activity takes place. When onshore providers face tighter prohibitions or disproportionate compliance burdens, consumers who still want access to certain products may migrate to offshore venues or decentralized protocols that sit outside the regulator’s direct reach. In practice, this can weaken consumer protection by shifting usage away from supervised firms and toward environments with less transparency, fewer safeguards, and limited recourse in the event of failure.
At the same time, there are signs that regulatory thinking is beginning to differentiate more clearly between digital asset types. Discussions around custody standards, settlement processes, and energy usage increasingly treat bitcoin as distinct from other cryptoassets. In some cases, regulatory documents now reference differing risk profiles and operational characteristics, even where formal frameworks remain generally scoped. This shift is incremental rather than comprehensive, but it reflects growing recognition that a single category may not adequately capture the diversity of systems now operating under the “crypto” umbrella.
Importantly, this is not a debate about innovation versus regulation, nor about the merits of one asset over another, it is a question of regulatory design. Effective regulation depends on accurate classification, particularly when rules become more granular and enforcement more active. Where classifications obscure meaningful differences, the risk is that regulation becomes either overinclusive or ineffective, imposing burdens that do not address actual risks while failing to account for those that do.
The consequences of this approach are already visible in the UK. Freddie New, Chief Policy Officer at Bitcoin Policy UK said “At present in the UK, consumers new to the space are presented with a universe of thousands of coins, all of which - so the regulator tells them - are equally worthless. This includes both Bitcoin and every meme coin in existence, and the message the FCA sends to consumers arguably puts them at great risk of harm were they to invest in a worthless meme coin rather than the digital asset equivalent of a blue chip company.”
As governments and regulators continue to refine their approaches to digital assets, the challenge may be less about how quickly frameworks are implemented and more about how precisely they reflect the systems they seek to regulate. As digital asset systems continue to diverge, whether the “cryptoasset” category remains fit for purpose has become a question of regulatory effectiveness, not ideology.