Crypto Law 101

“Where innovation meets regulation, knowledge becomes your strongest currency”

Introduction

As cryptocurrencies become more mainstream and decentralized finance (DeFi) platforms grow in influence, legal frameworks are struggling to keep pace with innovation. Crypto law has emerged as a crucial field, bridging the gap between traditional legal principles and a digital-first financial ecosystem. For law students like myself, understanding the foundations of crypto regulation isn’t just a niche interest, it’s becoming essential for staying relevant in the legal profession of the future.

This guide offers a beginner-friendly overview of what crypto law is, why it matters, and how it’s shaping the next chapter of legal practice.

What is Crypto?

Crypto is short for cryptocurrency, a type of digital or virtual currency that uses cryptography to secure transactions. Unlike traditional money issued by governments (like the Indian Rupee or US Dollar), cryptocurrencies operate on decentralized networks based on blockchain technology, a distributed ledger that records transactions across many computers.

The most well-known cryptocurrency is Bitcoin, created in 2009, but there are thousands of others, including Ethereum, Solana, and USDT (Tether). Some are used as money, while others power smart contracts, decentralized apps (dApps), or DeFi platforms.

At its core, crypto challenges the way we think about money, ownership, and trust. It removes the need for central authorities like banks or governments and replaces them with code, math, and community-driven systems.

However, because crypto moves fast and doesn’t follow traditional rules, it raises new legal questions and that’s where crypto law comes in.

What Is Crypto Law?

Crypto law refers to the legal rules, regulations, and frameworks that govern the use, trading, and development of cryptocurrencies and blockchain technologies. This includes how governments define digital assets, how they're taxed, what laws apply to exchanges and wallets, and how crimes such as fraud or money laundering are prevented. These legal rules, issued by governments, shape how cryptocurrencies are regulated, and they vary from nation to nation.

Legal Status of Cryptocurrency in Different Countries.

El Salvador

El Salvador, led by its pro-crypto President Nayib Armando Bukele Ortez, the country’s 81st president, made history in 2021 by becoming the first nation to adopt Bitcoin as legal tender alongside the U.S. dollar. This landmark move aimed to boost financial inclusion and attract foreign investment. To facilitate Bitcoin transactions, the government launched its own digital wallet, Chivo. The law also exempts Bitcoin transactions from capital gains tax and actively promotes crypto-related tourism and innovation. Although public adoption has been limited initially, it has been gradually increasing, especially with Bitcoin’s recent surge to $120,000 as of July 18, 2025. Despite international criticism from institutions like the IMF, which highlighted potential risks to financial stability, El Salvador remains committed to its crypto initiatives, advancing projects such as Bitcoin bonds and the ambitious Bitcoin City.

United States

The United States has a complex and fragmented approach to cryptocurrency regulation, with several federal and state agencies involved. While crypto is legal, it is subject to varied classifications. Bitcoin is considered a commodity by the Commodity Futures Trading Commission (CFTC), whereas the Securities and Exchange Commission (SEC) treats many tokens as securities. The Internal Revenue Service (IRS) taxes crypto as property, requiring capital gains reporting. Major enforcement actions have been taken against unregistered offerings and exchanges, prompting ongoing debates about regulatory clarity. Though no single law governs the crypto space nationwide, efforts are underway to introduce comprehensive federal legislation, especially in the wake of industry scandals and market instability. Though with the rise of President Donald Trump, who is very pro crypto as seen in his campaign during the elections, we can be sure to see many changes in the space coming from the nation that leads the world today.

China

China, unlike the other 2 countries mentioned above, maintains one of the most restrictive approaches to cryptocurrency, rooted in a long-standing policy of state control over financial systems and digital infrastructure. Since 2021, all cryptocurrency trading and mining activities have been banned, with the People's Bank of China (PBOC) declaring crypto transactions illegal and foreign exchanges barred from operating within the country. Authorities cite concerns about financial fraud, capital flight, energy consumption, and social instability as reasons for the clampdown. Yet, despite the ban, underground trading and peer-to-peer activity persist, particularly among tech-savvy youth and crypto-curious investors navigating through VPNs and offshore platforms. At the same time, China has accelerated development of its central bank digital currency (CBDC), the digital yuan (e-CNY), which is now in pilot use across dozens of cities and integrated into public services, transit systems, and select retail payments. Rather than embracing decentralized assets like Bitcoin, China is promoting a highly centralized digital currency model that reflects its broader governance philosophy, prioritizing control, stability, and surveillance over financial innovation. While formal crypto adoption remains off-limits, China's blockchain sector continues to grow under tight government regulation, focusing on enterprise use, digital identity, and smart governance applications.

India

In India, cryptocurrency is legal but strictly regulated, with a focus on taxation and compliance rather than prohibition. Although digital assets are not recognized as legal tender, the government imposes a flat 30% tax on crypto profits and a 1% tax deducted at source (TDS) on transactions. Regulatory bodies like the Reserve Bank of India (RBI) remain sceptical, favouring a global regulatory consensus. The country is also piloting a central bank digital currency (CBDC), the e-rupee, through the RBI. Crypto businesses must follow strict Know Your Customer (KYC) and anti-money laundering (AML) norms under the Prevention of Money Laundering Act, signalling India's shift toward tighter regulation without an outright ban.

Why Crypto Law Matters for Law Students.

As the legal world adapts to fast-changing technologies, understanding crypto law is no longer just a future skill; it’s something law students need to start thinking about today. Whether we realize it or not, digital assets are already reshaping how people buy, sell, save, invest, and interact across borders. This shift is creating new challenges that traditional legal systems weren’t designed to handle, and that’s exactly where young legal minds can make a difference.

For students like us, crypto law opens up exciting and unconventional career paths from financial regulation and tech law to policy-making, compliance, and even international arbitration. It's a field where the law meets innovation head-on, demanding fresh thinking and cross-disciplinary awareness. With crypto impacting areas like property rights, taxation, smart contracts, and even criminal law, there’s no shortage of legal questions waiting to be answered.

What makes it especially exciting is that it's still early days. Unlike other established fields, crypto law is still being shaped, which means students who enter now aren’t just learning the law, they could help define it. Whether one is passionate about corporate governance, social justice, consumer protection, or international law, there’s a place for your skills and interests in the evolving world of crypto regulation.

Conclusion

As cryptocurrencies continue to disrupt traditional finance and challenge established legal norms, the role of crypto law has never been more vital or more exciting. For law students and future legal professionals, this field offers a unique opportunity to engage with some of the most dynamic and uncharted issues of our time. From global regulatory debates to national tax regimes and digital currency innovation, crypto law sits at the intersection of technology, policy, and human behaviour.

Understanding it isn’t just about keeping up with trends, it’s about shaping how societies govern value, trust, and digital ownership in the years to come. As we move toward a more digitized financial future, those with the legal insight to navigate and contribute to this transformation will be at the forefront of meaningful change. The rules of tomorrow are being written today, and that is what excites me the most with the right knowledge, we can be part of writing them.

References:

1.     Tapscott, D., & Tapscott, A. (2016). Blockchain Revolution.

2.     Chivo Wallet FAQ, Gobierno de El Salvador.

3.     Bitcoin City Proposal, Gobierno de El Salvador, 2022.

4.     Donald Trump Campaign Rally Transcript, 2024.

5.     China’s Digital Yuan: A New Era of State Currency, Brookings, 2022.

6.     Careers in Crypto Regulation, Harvard Law Bulletin, 2024.

7.     ABA Tech & Law Review, 2023 Edition

This article is authored by Kiboto K Chishi, who attended the “Law Over Coffee” workshop organized by Lets Learn Law. The views and opinions expressed in this piece are solely those of the author.