Understanding AI Crypto Regulations and Compliance

In 2025, U.S. policy shifted sharply on digital finance. The Executive Order on “Strengthening American Leadership in Digital Financial Technology” sets new expectations for lawfully accessing public blockchains and for stablecoin support. It also rules out a U.S. CBDC.

This piece defines what the new framework means for firms that use automated decision tools and touch crypto flows. Responsibilities usually sit across legal, product, security, and compliance teams.

Read on for a 2025 trend report: what is changing now, why regulators are moving faster, and how teams can build controls that last. We preview the Executive Order, working group timelines, SEC and CFTC positioning, prudential safety guidance, and bank custody shifts after SAB updates.

Audience: U.S.-facing exchanges, wallets, payment providers, custodians, fintechs, and compliance leaders assessing AI-enabled tooling. Expect a practical checklist for governance, documentation, monitoring, and evidence — not theory — and notes on global spillovers that shape U.S. programs.

Why AI and Crypto Compliance Is Tightening Right Now

In 2025, firms face mounting pressure to pair fast product rollouts with clear, auditable decision trails.

What changed: EU timelines mean some obligations start now and high‑risk rules take full effect by 2026. Regulators are using modern tools to scan large datasets for anomalies, shifting oversight from spot checks to continuous surveillance.

Market forces, volatility, and traceability

Market volatility and quick adoption cycles raise operational risk. Pseudonymous ledgers make tracing flows harder, creating financial crime concerns that demand tighter monitoring and faster reporting.

What accountability looks like today

Practical expectations:

• Governance and model documentation that examiners can review.
• Real‑time monitoring and incident logs to show how decisions were made.
• Evidence for enterprise partners before integrations proceed.

Bottom line: innovation still drives growth, but firms that cannot justify controls will face blocked partnerships, de‑risking, or enforcement within a shorter time window.

The US Regulatory Reset for Digital Assets in 2025

The 2025 Executive Order redraws federal priorities for digital assets and sets a faster clock for agency action.

Executive Order: federal priorities and what they mean

The order formalizes policies that support lawful growth of digital assets. It highlights public blockchain access, dollar-backed stablecoins, fair bank access, technology-neutral regulation, and a clear ban on a U.S. CBDC.

Practical meaning: informal tolerance gives way to documented expectations. Operators must show written controls, audit trails, and governance to avoid sudden de-risking.

Working Group deadlines and a compliance calendar

The President’s Working Group on Digital Assets has tight timelines: identify relevant guidance in 30 days, recommend changes in 60 days, and deliver a full report in 180 days.

• Day 0–30: map existing rules and gaps.
• Day 31–60: expect proposed rescissions or modifications.
• Day 61–180: prepare for regulatory or legislative proposals.

Technology‑neutral rules and operational focus

Technology-neutral regulation means regulators will target function and risk: custody, brokerage, payments, and stablecoins rather than specific protocols.

This shifts the test from design novelty to how a product behaves and who holds obligations.

What to do now: inventory products against federal direction, map applicable rules, and flag gaps that could become immediate priorities. Also, treat bank access as critical: even compliant programs can fail without stable banking partnerships.

For a broader timeline and agency signals, see the recent digital digest.

Who Regulates What: The US Agencies Shaping Crypto Oversight

Federal agencies are carving out roles that will determine who must meet which rules when services touch digital assets.

SEC direction changes and the Crypto Task Force

The SEC created a Crypto Task Force in January 2025 led by Commissioner Hester Peirce. This group signals a move toward clearer categorization of assets and more predictable reviews.

What firms should note: expect detailed disclosure and strong controls to demonstrate control maturity.

CFTC positioning on market innovation

Acting Chairwoman Pham is running innovation roundtables focused on commodity-style markets. The CFTC’s position favors structured oversight where products act like derivatives or spot commodity trades.

Prudential regulators and bank access to services

FDIC, OCC, and the Federal Reserve stress safety and soundness. FDIC Acting Chair Travis Hill has signaled more transparent engagement with fintechs, yet banks often require written non-objection and supervisory reviews before offering services.

• Division of labor: securities-like activities (SEC), commodities/derivatives (CFTC), bank safety (prudential regulators).
• Practical takeaway: map which regulator governs each product and update ownership, escalation paths, and documentation.

AI Crypto Regulations and Compliance: What “Good” Looks Like for US Firms

Good operational posture focuses less on a single memo and more on layered practices that prove how decisions are made. For US firms, a strong program blends governance, documentation, monitoring, and resilience into a single risk management ecosystem.

Governance, accountability, and documented controls

Governance basics examiners expect include named owners (model owner, data owner, approver), change control, segregation of duties, and board visibility for high‑impact systems.

Minimum documentation should record model purpose, training data lineage, testing outcomes, approval logs, and an audit trail of incidents and updates.

Operational resilience expectations for systems

Link model operations to uptime targets, failover plans, human override points, and incident response playbooks. These reduce “silent failures” that can trigger customer harm or reporting lapses.

Where teams are seeing the biggest gaps

Common gaps include unmanaged vendor models, weak post‑deployment monitoring, unclear escalation when drift occurs, and poor explainability for customer-impacting outputs.

Practical approach: fold tooling into existing frameworks and standards (for example, NIST guidance) and treat model risk like other operational risks. Foundational KYC/AML controls become harder when automated systems run without strong governance; the next section covers that challenge.

Crypto Compliance Fundamentals: KYC, AML, and Financial Crime Prevention

Regulators expect clear proof that onboarding, screening, and monitoring systems work day to day—not just on paper.

KYC expectations and identity verification trends

Baselines: robust identity checks, liveness tests, document verification, device signals, and fraud scoring. Higher‑risk customers face extra verification and ongoing review.

AML transaction monitoring and suspicious activity reporting

Transaction systems must flag layering, peel chains, mixer exposure, and rapid cross‑chain moves. Alerts should convert to documented cases with clear narratives and timely filing where required.

Sanctions screening and CFT controls

Screen counterparties, wallets, and linked accounts against watchlists. Ongoing screening is essential as lists and risk indicators change frequently.

Risk‑based approach for customers, wallets, and counterparties

Segment wallets and customers by risk, apply enhanced due diligence where transparency is limited, and require source‑of‑fund checks for high‑risk flows.

• Operational reality: integrate systems and tools into daily operations so controls scale.
• Evidence: retain logs, alert outcomes, disposition rationale, and review trails to show consistent adherence to requirements.

Travel Rule Momentum and Cross-Border Data Requirements

Cross-border transfers increasingly demand off-chain identity data to flow with on-chain value. The practical effect is that certain transfers must carry sender and recipient identifiers, creating new data and process requirements beyond ledger entries.

FATF has flagged uneven Travel Rule implementation worldwide. That unevenness matters because counterparties often lack shared messaging standards. When partners cannot exchange required details, transfers may be delayed or blocked, increasing operational friction.

EU transfer standards raising the bar

The EU Transfer of Funds Regulation (Regulation (EU) 2023/1113) requires crypto asset service providers to collect and transmit originator and beneficiary information for all transfers with no threshold exemption. It took effect Dec 30, 2024, with limited transitions allowed into mid‑2025.

What this means for US-facing operations

Even U.S. firms that do not target EU customers may need Travel Rule‑ready workflows when they route through foreign intermediaries or serve international users. Regulators expect documented procedures for data collection, secure transmission, error handling, retention, and escalation when required details are missing.

Programmatic takeaway: build cross‑border controls as a configurable capability. Use jurisdiction rule sets, counterparty readiness scoring, and clear exception handling to reduce disruption and protect customer experience in this global sector.

Custody, Accounting, and Institutional Access After SAB 121 Was Rescinded

Accounting guidance now makes it easier for banks to offer safeguarded asset services at scale. The SEC rescinded SAB 121 and replaced it with SAB 122 on Jan 23, 2025. That shift removes the prior on‑balance-sheet requirement that made custody costly for prudential institutions.

How SAB 121 blocked bank custody

SAB 121 forced custodians to recognize custodied items on their balance sheets as both an asset and a liability. That doubled capital exposure and raised costs for banks subject to safety rules.

What SAB 122 changes

SAB 122 restores a traditional custody approach: safeguarded customer assets are normally treated off‑balance‑sheet. This change materially improves the financial feasibility of custody offerings and helps expand institutional access to regulated custodians.

Limits, exam focus, and next steps for firms

Rescission is not automatic approval. Banks still must satisfy prudential regulators, prove safety‑and‑soundness, and may need a written non‑objection before launching services.

• Key areas examiners will probe: key management, segregation of duties, vendor oversight, cybersecurity, incident response, and reconciliations.
• Next steps for firms: align control expectations, define audit rights, set reporting cadences, and document shared responsibilities across systems and workflows.

Practical tip: custody programs win on evidence — clear policies, testable controls, and stress case reconciliations that show how assets are protected under duress.

Stablecoins and Market Structure: What US Legislation May Prioritize Next

Policymakers treat stablecoins as plumbing that can amplify shocks, making them a near-term legislative priority.

Why stablecoins matter: they tie digital assets to dollar settlement and consumer payments. That link raises systemic risk and consumer protection concerns.

Reserve, redemption, and reporting expectations

Leading proposals, like the Lummis-Gillibrand Payment Stablecoin Act, push for 100% reserves held in highly liquid assets. Rehypothecation would be banned except to meet redemptions. Required redemption at par within one day would protect users.

CFO certification under penalties of perjury forces stronger financial controls. Expect tighter treasury processes, internal audit readiness, and formal reporting workflows.

Market structure and the SEC–CFTC debate

Reform aims to clarify whether an asset is treated like a security or commodity. FIT 21-style splits base oversight on network traits that may evolve over time.

• Practical position: firms should build flexible mappings that adapt if classification changes.
• Strategy: list products and set surveillance to meet the strictest plausible standards to reduce rework.

Trend: clearer rules may expand legitimate markets but will raise baseline standards for transparency, reporting, and control evidence.

AI Governance in the US: Standards, Uncertainty, and Practical Controls

A new federal stance on intelligent systems resets priorities, but operational expectations for managing model risk have not eased.

What changed after the executive review

The 2025 policy review refocused federal aims on sustaining U.S. technology leadership. A broad policy is expected in July 2025 from APST and APNSA.

Practical point: uncertainty at the top does not remove auditor and examiner demands for documented standards and controls.

How NIST frameworks help now

NIST publications, including NIST AI 100-1, offer opt-in frameworks that map control families. They help firms build repeatable risk management steps for models and systems.

Model lifecycle controls and incident playbooks

• Pre-deployment: testing, bias checks, and clear requirements.
• Live monitoring: drift detection, prompt/output checks, and periodic validation.
• Incidents: rollback procedures, customer impact review, regulator notification triggers, and remediation logs.

Bottom line: treat governance as production-critical. Models used for fraud scoring, transaction monitoring, or customer risk ratings must be explainable enough to support SAR decisions and sanctions actions.

Global Signals US Firms Can’t Ignore: EU AI Act and International Baselines

Global rule-making now shapes product design for U.S. firms that sell or route services across borders.

The EU AI Act was adopted in 2024. Some obligations phase in during 2025, while full high‑risk requirements take effect in 2026.

Why it matters: cross‑border customers, EU partners, and multinational operations can pull foreign rules into U.S. product and governance decisions.

Timeline and what “high‑risk” means

High‑risk covers use cases that can harm consumers or markets. Expect heightened documentation, human oversight, quality management, and ongoing monitoring for those systems.

Operationally this means test logs, transparent decision trails, and clear escalation for failures.

Council of Europe and broader expectations

The Council of Europe convention opened for signature in September 2024. It frames a human‑rights based approach that courts and regulators may cite when judging accountability.

• Practical steps: build to common standards, document jurisdiction deltas, and map evidence needs by sector.
• Regulatory reality: domestic regulators increasingly compare firms to international norms when assessing programs and technology choices.

Bottom line: design controls so they meet cross‑border requirements and show examiners how automated decisions are governed, tested, and monitored.

Emerging Technology on the Regulatory Radar Beyond AI and Crypto

Regulators are widening their view to cover adjacent systems that change how value and identity move across networks.

Blockchain and smart contracts: auditability, liability, governance

Smart contracts raise auditability concerns because execution is often immutable. Examiners ask who is liable when code fails, and who controls admin keys.

Governance must cover upgrade paths, change logs, and third‑party audits to prove accountability.

Biometric authentication: privacy, security, data protection risks

Biometric data is uniquely sensitive. Expect rules for encryption, access controls, and short retention windows to limit exposure.

Failing controls creates both compliance risk and reputational harm.

DeFi, decentralized wallets, and tracing

Without traditional intermediaries, tracing flows is harder. Blockchain analytics tools can restore visibility, but controls must adapt to self‑custody realities.

Autonomous agents and bots: manipulation and liability

Autonomous agents can change how markets behave through speed and coordination. Firms must decide who owns agent actions and set guardrails against spoofing‑like patterns.

• Add these technologies to the risk register now.
• Define minimum controls before customer deployment.
• Document how new systems alter asset flows and market visibility.

Operationalizing Compliance: Systems, Tools, and Oversight Models

Moving from policy text to operational practice requires defined owners, evidence feeds, and exception rules. Start by naming the systems that will produce logs and who reviews each output. Define how exceptions get routed and time bounds for resolution.

Real-time blockchain analytics and risk scoring tools

Real‑time analytics should offer entity clustering, exposure scoring, and typology detection. Use these outputs to trigger holds, enhanced due diligence, or filing workflows.

Make sure the toolchain records versioning, tuning changes, and confidence scores so each action is reproducible.

Policy design for volatility, disclosures, and customer communications

Draft policies that set pricing windows, settlement timing, and dispute steps. Publish clear customer disclosures that explain why delays occur and what documents may be requested.

Communications reduce complaints and create a defensible record when investigations arise.

Audits, control testing, and evidence regulators expect to see

Maintain test results, case records, SAR trails, sanctions logs, vendor due diligence, and incident postmortems. These items form the backbone of audit readiness.

• Oversight model: three lines—business owners, risk management, and independent audit—scaled to team size.
• Operational tip: map which tools feed each control and log reviewer actions for every exception.
• Further reading: see how to comply with U.S for a practical checklist.

How to Build a Flexible Compliance Framework That Survives Regulatory Change

When guidance can shift within 30/60/180 days, firms need frameworks that update without multi‑month rewrites.

Modular controls and update-ready governance processes

Modular controls treat identity, sanctions, transaction monitoring, custody, disclosures, and model governance as interchangeable blocks.

Teams replace or retune one block per jurisdiction or product line instead of rebuilding the whole stack.

Partnership strategy with regulators, auditors, and service providers

Engage partners early with clear risk briefs, control designs, and published change plans.

This strategy reduces friction with banks that require safety‑and‑soundness alignment or written non‑objection reviews.

Closing the gap with a time-bound roadmap

Adopt a 30/60/90/180‑day playbook that prioritizes highest‑risk exposures first.

• 30 days: intake and impact assessment.
• 60 days: policy revisions and vendor updates.
• 90 days: testing, training, and initial validations.
• 180 days: full re‑test and audit closeout.

Measure success with KPIs: alert SLAs, case aging, training completion, model validation cadence, and audit issue closure time.

Conclusion

Clearer federal direction in 2025 raises the bar for how digital assets prove they manage risk.

Regulators now expect mature oversight across crypto product lines, with written controls, logs, tests, and incident playbooks that auditors can review.

Bank access improved after SAB 122, yet safety‑and‑soundness reviews still govern real deployment; institutional access will follow evidence, not promises.

Cross‑border pressure — Travel Rule and EU transfer rules — affects operations whenever counterparties or customers touch international flows.

Actionable takeaway: adopt a risk‑based approach, invest in tools that scale monitoring and reporting, and engage auditors and regulators early.

Firms that treat compliance as a product capability will sustain innovation while meeting rising regulator expectations.