Tiago Morais Morgado - Introduction to Blockchain Central Governance and Legislation on Transaction Flows

Introduction to Blockchain Central Governance and Legislation on Transaction Flows

As of September 17, 2025, blockchain technology and its associated assets (like cryptocurrencies and stablecoins) are subject to a patchwork of global regulations that balance innovation with risk management. "Central governance" in this context refers to the increasing role of governments, central banks, and regulatory bodies in overseeing blockchain networks, often through centralized frameworks that impose licensing, compliance, and anti-money laundering (AML) requirements on decentralized systems. This contrasts with blockchain's inherent decentralized ethos but aims to mitigate risks like financial instability, illicit finance, and consumer harm.

"Legislation on how many can and shall flow in the blockchain" interprets as regulations governing transaction volumes, flows, and limits—such as reporting thresholds for large transfers, caps on stablecoin issuance or redemptions, cross-border restrictions, and AML "Travel Rule" mandates that track transaction data. These measures ensure transparency and prevent abuse while enabling lawful flows, with global transaction volumes in crypto exceeding $2-3 trillion monthly in 2025. Regulations draw from international standards like those from the Financial Stability Board (FSB) and Financial Action Task Force (FATF), emphasizing "same activity, same risk, same regulation."

This overview draws from key 2025 reports and policies, providing an extensive analysis across jurisdictions. It highlights trends toward harmonization, such as the EU's MiCA framework influencing global standards, and U.S. leadership via stablecoin laws.

Global Overview

Globally, 2025 has seen accelerated regulatory implementation, with over 70% of major jurisdictions advancing frameworks for crypto-asset service providers (CASPs) and virtual asset service providers (VASPs). The FSB's 2023 framework (updated in 2024) promotes consistent governance, requiring robust risk management, client asset safeguarding, and conflict-of-interest mitigation for blockchain activities. IOSCO's recommendations address market manipulation and operational risks in digital assets.

Central banks are deeply involved, with 80% exploring or piloting Central Bank Digital Currencies (CBDCs) on blockchain-like distributed ledger technology (DLT). However, privacy concerns have led to bans or pauses, like the U.S. prohibition on domestic CBDCs. On transaction flows, the FATF's Travel Rule—requiring VASPs to share originator/beneficiary data for transfers over certain thresholds (e.g., $1,000-$10,000)—is now implemented in 60% of jurisdictions, indirectly limiting anonymous high-volume flows. Stablecoin regulations often impose reserve requirements and redemption caps to control systemic risks.

Aspect	Key Global Trends (2025)	Examples of Impact
Governance Structures	Licensing for VASPs/CASPs; DeFi oversight as securities or commodities.	EU MiCA phases: Stablecoins regulated since June 2024; full CASP rules by Dec 2024. Public-private units like TRM Labs' Beacon Network enable real-time illicit flow freezing.
Central Oversight	FSB/IOSCO standards; CBDC pilots in 20+ countries.	Tokenization governance gaps addressed via cross-border data sharing; U.S. Working Group on Digital Assets proposes federal frameworks.
Transaction Limits/Flows	Travel Rule thresholds; stablecoin volume-based "significance" designations.	Reporting for >$10,000 CAD transfers in Canada; non-euro stablecoin volume limits in some EU states; Brazil bans stablecoin transfers to unhosted wallets.

United States

The U.S. has shifted toward pro-innovation policies under the 2025 administration, emphasizing dollar sovereignty and open blockchain access while tightening AML enforcement. The January 2025 Executive Order "Strengthening American Leadership in Digital Financial Technology" supports lawful blockchain use (e.g., mining, self-custody) without censorship, but prohibits CBDCs to protect privacy and stability. It establishes the President’s Working Group on Digital Asset Markets, tasked with regulatory clarity on market structure and stablecoins within 180 days.

Key legislation includes:

• GENIUS Act (July 2025): Restricts stablecoin issuance to insured banks/approved nonbanks with Federal Reserve approval; mandates 1:1 reserves in low-risk assets and Bank Secrecy Act compliance for AML. No explicit volume caps, but audits ensure redemption at par, impacting high-flow stablecoins like USDC.
• CLARITY Act (H.R. 3633, advanced July 2025): Gives CFTC primary role over digital commodities and DeFi, exempting six DeFi categories (e.g., blockchain operations) from securities laws, reducing governance burdens for permissionless protocols.
• Deploying American Blockchains Act (H.R. 1664): Requires Commerce Department support for U.S. blockchain leadership, including R&D funding.

On flows: No federal transaction caps, but state-level limits exist (e.g., New York's BitLicense requires reporting for >$10,000 transfers). FDIC guidance (FIL-7-2025) allows banks to custody digital assets, facilitating higher volumes. Monthly crypto transfers hit $2-3 trillion, with ETFs driving institutional flows. Recent SEC "Project Crypto" (announced September 2025) modernizes on-chain/DeFi rules to boost innovation without volume restrictions. Illinois' August 2025 laws regulate exchanges with fraud safeguards, aligning with traditional finance.

U.S. Measure	Governance Focus	Flow/Limit Impact
Executive Order (Jan 2025)	Working Group for federal framework; bans CBDCs.	Protects open networks; no caps, but AML via BSA.
GENIUS Act	Bank-only issuance; audits.	1:1 reserves control systemic flows; enhances consumer protection for redemptions.
CLARITY Act	CFTC oversight for DeFi/commodities.	Exempts core blockchain ops, enabling unrestricted permissionless transactions.

European Union

The EU leads with MiCA (fully effective 2025), a unified framework for crypto-assets, classifying them as asset-referenced tokens (ARTs), e-money tokens (EMTs), or others. Governance emphasizes consumer protection and market integrity, with ESMA/EBA overseeing authorizations.

Central oversight: ECB's digital euro preparation phase ends 2025, with potential issuance by 2027 on DLT; "significant" ARTs/EMTs (based on volume/frequency) face higher capital/reserve rules. Transfer of Funds Regulation (Travel Rule) mandates data sharing for all crypto transfers by Dec 2024, effectively limiting untraceable flows.

Transaction limits: No hard caps, but volume triggers enhanced supervision (e.g., >€200M issuance for significance). Non-euro stablecoins face redemption limits in some states to protect euro sovereignty. DeFi platforms must comply with securities/AML laws, indirectly curbing high-risk flows.

United Kingdom

Post-Brexit, the FCA enforces crypto marketing bans (lifted partially in 2025 for authorized firms) and a new market abuse regime mirroring EU MAR, applying to trading venues regardless of location. Governance focuses on consumer safety, with quarterly VASP reporting.

Central involvement: Bank of England supervises systemic stablecoins for retail payments; digital pound decision by 2025, potential rollout by 2030. No CBDC issuance yet.

Flows: Fiat-backed stablecoins require full reserves; Travel Rule implementation planned for 2025. No specific volume limits, but MSBs report >£1,000 transfers for AML.

Asia-Pacific

Asia shows diverse approaches, with innovation hubs like Singapore contrasting bans elsewhere.

• Singapore: MAS's Global Layer 1 (GL1) initiative governs shared DLT ledgers for tokenized assets/CBDCs; licensing since 2020 for DPT services. Wholesale CBDC pilots support cross-border flows; no retail CBDC case. Travel Rule by 2026; stablecoin sandbox with reserve rules.
• Japan: FSA reforms (September 2025) integrate crypto into finance, with tax cuts and ETF approvals. Stablecoin issuers under Payment Services Act face daily spending limits (e.g., for money transmitters) and collateral restrictions. No CBDC plans, but cross-bank testing.
• Hong Kong: Stablecoin ordinance (May 2025) requires licensing; spot ETFs for retail. mBridge wholesale CBDC pilot advances tokenized deposits.
• India: RBI pilots CBDC with offline/programmable features; September 2025 tax consultations overhaul cross-border rules, imposing reporting for >₹50,000 (~$600) transfers.
• South Africa: FSCA licenses 138 CASPs; Travel Rule for cross-border from April 2025, monitoring flows to prevent illicit activity. SARB researches CBDC/tokenization.

Asia Measure	Governance	Flow/Limit
Singapore GL1	Shared DLT standards for institutions.	Enables tokenized flows; Travel Rule 2026.
Japan Reforms	FSA mainstream integration.	Daily limits on some stablecoins; ETF boosts volumes.
India Consultations	Tax/CBDC frameworks.	Reporting >₹50,000; cross-border overhaul.

Other Notable Jurisdictions

• UAE: VARA/FSRA frameworks prohibit anonymity-enhanced cryptos; stablecoins backed by dirhams. Travel Rule since 2023 aided FATF delisting; Digital Dirham CBDC via mBridge.
• Brazil: Drex CBDC pilot for smart contracts; 2025 stablecoin regs ban unhosted wallet transfers, restricting cross-border flows.
• Ukraine: Aligning with EU via 2025 bill for AML/transparency; e-Hryvnia pilot legalizes ownership.
• El Salvador: New banking law allows crypto services for high-net-worth, positioning as a hub without volume caps.

Challenges and Future Outlook

Central governance tensions arise from enforcing rules on permissionless blockchains, with tools like Beacon Network enabling rapid illicit flow interventions (e.g., freezing $200M+ in 2025). Transaction legislation prioritizes traceability over outright bans, but risks stifling DeFi innovation. By late 2025, expect U.S. federal stablecoin rules and EU MiCA full enforcement to set global benchmarks, potentially capping high-risk flows while enabling $3T+ monthly volumes. For politically sensitive claims, like U.S. CBDC bans prioritizing sovereignty over efficiency, evidence from executive orders substantiates privacy-focused design over centralized control.