Cryptocurrency regulation in the US and the Czech Republic: A comparative analysis of enforcement and effectiveness

Brandejský, Tomáš Article Cryptocurrency regulation in the US and the Czech Republic: A comparative analysis of enforcement and effectiveness World Economy and Policy (WEP) Provided in Cooperation with: Prague University of Economics and Business, Faculty of International Relations (FIR) Suggested Citation: Brandejský, Tomáš (2025) : Cryptocurrency regulation in the US and the Czech Republic: A comparative analysis of enforcement and effectiveness, World Economy and Policy (WEP), ISSN 2788-0672, Prague University of Economics and Business, Faculty of International Relations, Center for European Studies, Prague, Vol. 4, Iss. 1, pp. 1-23 This Version is available at: https://hdl.handle.net/10419/317797 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ 1 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY CRYPTOCURRENCY REGULATION INTHEUS AND THECZECH REPUBLIC: ACOMPARATIVE ANALYSIS OFENFORCEMENT AND EFFECTIVENESS* Tomáš Brandejskýa Abstract Thearticle “Cryptocurrency Regulation intheUS and theCzech Republic: AComparative Analysis ofEnforcement and Effectiveness” examines theregulatory frameworks inboth countries asthey address therising risks offraud associated with crypto-assets like cryptocurrencies and Non-Fungible Tokens (NFTs). The United States adopts a proactive approach, leveraging multi-agency cooperation and existing legal frameworks toregulate this space, whereas theCzech Republic takes amore conservative stance, awaiting theimplementation ofEU regulations, notably theMarkets inCrypto-Assets (MiCA). This comparative study highlights thestrengths and weaknesses ofboth systems. TheU.S. regulatory environment is characterized by adaptability and advanced enforcement tools such as blockchain analytics, but suffers from overlapping authorities and inconsistent legal interpretations. TheCzech Republic, though still developing its legal framework, has demonstrated competence inseizing and monetizing fraudulently obtained crypto-assets, although its response times tofraud cases are slower. Thearticle concludes by offering recommendations for theCzech Republic toenhance its regulatory framework, including adopting investigative methods from the U.S. and acting more proactively inthefight against crypto-related fraud. This analysis contributes totheongoing debate onhow tobest regulate emerging financial technologies inthis rapidly evolving market. Keywords: cryptocurrency regulation, NFT fraud, comparative analysis, enforcement effectiveness, MiCA Regulation, blockchain analytics, investor protection JEL Classification: K24, K42, G28 1. Introduction As crypto-assets, i.e. cryptocurrencies and Non-Fungible Tokens (NFTs), gradually become part of the global financial system, the risk of an investor becoming a victim of fraud also increases.1,2 The United States and the Czech Republic are therefore developing regulatory frameworks to address these issues, but their approaches differ significantly. The United States * The article was written as part of the IGS grant project “Prevention of Crypto Asset Fraud and Failure of Related Service Providers in an International Context” at the Prague University of Economics and Business, where the author, Mgr. Tomáš Brandejský, is a third-year PhD student. a Prague University of Economics and Business 1 Kshetri, N. (2022). Scams, Frauds, and Crimes in the Nonfungible Token Market. Computer, 55(4), 60-64. https://doi.org/10.1109/MC.2022.3144763 2 Trozze, A., Kamps, J., Akartuna, E. A., Hetzel, F. J., Kleinberg, B., Davies, T., & Johnson, S. D. (2022). Cryptocurrencies and future financial crime. Crime Science, 11(1). https://doi.org/10.1186/s40163-021-00163-8 1 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY 2 has adopted a proactive strategy based on multi-agency cooperation and has creatively adapted existing legal frameworks to cryptoassets, while the Czech Republic is more or less waiting for harmonisation at EU level and is very cautious about applying existing financial law rules to cryptoassets. As part of the harmonisation process, the Czech government has submitted a draft Digital Finance Act3, which is intended to implement EU regulations in the area of digital finance, namely the Digital Operational Resilience Act (DORA)4 on digital operational resilience of the financial sector, which applies to cryptoasset service providers, among many other entities, and the Markets in Crypto Assets (MiCA)5 regulation on cryptoasset markets, but which does not apply to NFTs. The relevant parliamentary print is in its second reading at the time of writing. The Czech Republic and the USA were chosen for this comparative analysis due to the stark contrast in their approaches to cryptocurrency regulation and enforcement. The United States has taken a proactive stance, adapting existing legal frameworks and employing multi-agency cooperation to address the challenges posed by cryptocurrencies and NFTs. In contrast, the Czech Republic has adopted a more conservative approach, largely awaiting the implementation of EU regulations, such as MiCA. The main purpose of this comparison is to assess which country has a better regulatory approach, with the assumption that the US model offers valuable lessons for the Czech Republic. By analyzing the strengths and weaknesses of each system, the article aims to provide guidance to the Czech legislator on how to improve their regulatory framework and enforcement mechanisms in the rapidly evolving cryptocurrency market. Although there is a sufficient amount of literature on US law and the procedures of US authorities in dealing with cryptocurrency fraud6,7,8,9, similar literature focusing on Czech law and the procedures of Czech authorities is noticeably lacking. Nor is there any comparative analysis between the Czech and US approaches. Given that the US authorities arguably have 3 Chamber of Deputies of the Parliament of the Czech Republic (2024, 3 May). Draft Act on the Digitization of the Financial Market. Parliamentary Print 692. https://www.psp.cz/sqw/historie.sqw?o=9&T=692. 4 Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience in the financial sector (“DORA Regulation”) is effective from 16 January 2023. From this date, obliged entities have 24 months to reflect the new rules in their processes. 5 Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets for cryptoassets (“MiCA Regulation”) is applicable from 30 June 2023 and will become applicable in its entirety from 30 December 2024. 6 Saha, S., Ahmed Rizvan Hasan, Mahmud, A., Ahmed, N., Parvin, N., & Hemal Karmakar. (2024). Cryptocurrency and financial crimes: A bibliometric analysis and future research agenda. Multidisciplinary Reviews, 7(8), 2024168-2024168. https://doi.org/10.31893/multirev.2024168 7 Trozze, A., Davies, T., & Kleinberg, B. (2022). Explaining prosecutorial outcomes for cryptocurrencybased financial crimes. Journal of Money Laundering Control. https://doi.org/10.1108/jmlc-10-2021-0119. 8 Dimitris Kafteranis, Huseyin Unozkan, & Umut Turksen. (2023). COMPLIANCE AND ENFORCEMENT CHALLENGES IN TRADING OF NON-FUNGIBLE TOKENS. International Journal of Law in a Changing World, 2(3), 18-51. https://doi.org/10.54934/ijlcw.v2i3.57 9 Nolasco Braaten, C., & Vaughn, M. S. (2019). Convenience Theory of Cryptocurrency Crime: A Content Analysis of U.S. Federal Court Decisions. Deviant Behavior, 42(8), 1-21. https://doi.org/10.1080/01639625.2019.1706706 3 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY the most experience in this area due to the size of their crypto market as well as their proactive enforcement approach, a comparison of these approaches could offer valuable insights for improving Czech regulatory practice. This article therefore seeks to compare the current legislation and enforcement approaches to cryptoasset fraud in the Czech Republic and the United States. Through the method of comparative analysis, the article will explore the strengths and weaknesses of the respective legislation and assess the approach of the authorities in each country to cryptocurrency fraud. By understanding these differences, the article aims to identify possible recommendations for Czech practice. Ultimately, then, this analysis aims not only to highlight the successes and failures of the two countries under review, but also to offer guidance on how the Czech Republic can improve its regulatory framework to more effectively address the ever-evolving fraudulent schemes in the cryptoasset market. 2. US legal environment In the United States, the responsibility for regulating and overseeing the cryptocurrency market is divided between federal and state authorities. At the federal level, the Securities and Exchange Commission (SEC)10, the Commodity Futures Trading Commission (CFTC)11, and the Department of Justice (DOJ)12 oversee the cryptoasset market based on whether a particular cryptoasset is classified as a security, a commodity, or whether a crime has been committed in connection with the cryptoasset. The Financial Crimes Enforcement Network (FinCEN)13 ensures compliance with anti-money laundering (AML) regulations, while the Internal Revenue Service (IRS)14 oversees the taxation of cryptoasset profits. Under the Supremacy Clause of the U.S. Constitution15, if state laws conflict with federal laws, federal laws prevail.16 However, in areas where federal law is silent, such as business licensing, states can enact their own regulations. On this basis, some states have imposed strict licensing requirements on cryptocurrency businesses, such as New York with its BitLicense legislation17, while in contrast, for example, Wyoming takes a much more accommodating, “crypto-friendly” stance18. Thus, while the SEC may, for example, regulate whether an NFT is a security or a derivative, states may impose additional requirements on how businesses 10 U.S. Securities and Exchange Commission (“SEC” or “Securities Commission”) 11 Commodity Futures Trading Commission (“CFTC”) 12 United States Department of Justice (“DOJ”) 13 Financial Crimes Enforcement Network (“FinCEN”) 14 Internal Revenue Service (“IRS”) 15 U.S. Constitution (“U.S. Constitution”), Article VI, Clause 2 16 Susan Low Bloch, & Jackson, V. Federalism: a reference guide to the United States Constitution. Praeger, An Imprint Of Abc-Clio, Llc. 17 Baker, B. (2017). Application of the New York BitLicense to Initial Coin Offerings. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3319540 18 Andhov, A. (2021). Wyoming’s Wild West Blockchain Laws and a Start-up Lobby. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3898451 4 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY operate within their jurisdiction. This dual system requires companies and individuals to know and comply with both federal and state laws, creating a complex and difficult regulatory environment. 2.1 Cryptoassets assecurities Federal securities regulation, which is primarily contained in the Securities Act19 and the Securities Exchange Act20, applies to cryptoassets if they meet the criteria of the so-called Howey test21. The Howey test assesses whether investors are entering into an investment contract when they buy cryptoassets, i.e. whether they are investing money in a common enterprise with the expectation of a profit generated primarily from the efforts of others. The most important cryptocurrencies, such as bitcoin and ether, are not considered securities by the Securities Commission, mainly because they are decentralised (i.e. not controlled by a single entity). While investors buy bitcoin and ether for profit, they do not expect to profit from the efforts of other persons, but from an increase in price, mainly based on higher market demand in the future.22 In contrast, the cryptocurrency Ripple (XRP) is a security according to the SEC, as are many other cryptoassets issued in fundraising.23 However, the unique characteristics of cryptocurrencies, such as decentralization and technological complexity, challenge the traditional notions of investment contracts and the roles of promoters and investors. Some legal scholars and industry experts argue that the Howey test, developed in a vastly different economic and technological context, may not be adequately equipped to assess the nuances of cryptocurrency investments. They contend that applying a nearly century-old test to a nascent and rapidly evolving technology like cryptocurrencies could lead to misinterpretations and hinder innovation. The Securities Act requires that, if a cryptoasset is a security, the initial coin offering (ICO) must be registered in advance as an offering of the security with the SEC and disclosures must be made to potential investors. The Securities Exchange Act then regulates the sale of securities and other information and reporting obligations. In addition, it also contains Rule 10(b) and Rule 10b-5, which prohibit fraud, market manipulation and insider trading in the trading of securities. Enforcement of these rules is the responsibility of the Securities and Exchange Commission, which has the power to investigate and bring actions against persons involved in fraudulent schemes or unregistered securities offerings and is very active in doing so (see the list 19 Securities Act of 1933, 15 U.S.C. § 77a et seq. (1933). 20 Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (1934). 21 U.S. Supreme Court (n.d.). SEC v. Howey Co., 328 U.S. 293 (1946). Justia Law. https://supreme.justia.com/cases/federal/us/328/293/ 22 SEC Declares Bitcoin and Ether as Non-Securities. (n.d.). Cassels. https://cassels.com/insights/sec-declares-bitcoin-and-ether-as-non-securities/ 23 SEC.gov | SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering. (2020). Sec.gov. https://www.sec.gov/newsroom/press-releases/2020-338 5 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY on the SEC’s dedicated website at24). To this end, the SEC has several powers, including the ability to initiate a court order to cease and desist or freeze assets or impose civil penalties for securities law violations in federal court. However, the SEC often resolves these cases through settlements in which the fraudsters voluntarily agree to pay a fine and comply with the rules pro futuro, which provides immediate remedies without the need to go to trial. For example, BlockFi agreed to a $100 million settlement for failing to register its crypto lending product in advance.25 This was one of the largest settlements in a cryptocurrency-related enforcement action. The Securities and Exchange Commission also operates the so-called FinHub (Office of Strategic Hub for Innovation and Financial Technology), where it works with entrepreneurs and financial technology developers to find a rational way to regulate the cryptocurrency market.26 In addition, the SEC has a whistleblowing program that encourages people with information about fraudulent schemes to cooperate by sharing in the seizure of funds (10 to 30%)27. For investors, the SEC has created a cryptoasset information page28, which also includes a description of the most common ways that fraudsters try to defraud those interested in investing in cryptoassets. 29 2.2 Cryptoassets ascommodities and their derivatives The Commodity Futures Trading Commission (CFTC) regulates the derivatives market (futures, options and swaps), including derivatives based on crypto-assets, under the Commodity Exchange Act30 . Thus, the CFTC’s authority extends only to crypto-assets that are considered commodities, including, for example, bitcoin and ether.31 Although the CFTC generally does not oversee the spot market for commodities (where commodities are sold without delay), its jurisdiction also extends to fraud and market manipulation in the spot market for commodities. 24 Crypto Assets. (n.d.). Sec.gov; U.S. Securities and Exchange Commission. https://www.sec.gov/securities-topics/crypto-assets 25 SEC.gov | BlockFi Agrees to Pay $100 Million in Penalties and Pursue Registration of its Crypto Lending Product. (n.d.). Www.sec.gov. https://www.sec.gov/newsroom/press-releases/2022-26 26 SEC.gov | Office of Strategic Hub for Innovation and Financial Technology (FinHub). (2023). Sec.gov. https://www.sec.gov/about/divisions-offices/office-strategic-hub-innovation-financial-technology-finhub 27 SEC.gov | Whistleblower Program. (n.d.). Sec.gov. https://www.sec.gov/enforcement-litigation/whistleblower-program 28 Crypto Assets. (n.d.-b). Investor.gov; U.S. Securities and Exchange Commission. https://www.investor.gov/additional-resources/spotlight/crypto-assets 29 5 Ways Fraudsters May Lure Victims Into Scams Involving Crypto Asset Securities - Investor Alert. (2024). Investor.gov; U.S. Securities and Exchange Commission. https://www.investor.gov/ introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/crypto-scams 30 Commodity Exchange Act of 1936, 7 U.S.C. § 1 et seq. (1936). 31 Davis, D., & Kim, A. (2024, July 9). Ether’s Legal Status Clarified? CFTC Scores Win as Court Backs Agency’s Commodity Classification. Katten. https://quickreads.ext.katten.com/post/102jcc8/etherslegal-status-clarified-cftc-scores-win-as-court-backs-agencys-commodity#page=1 6 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY Notable CFTC cases include actions against prominent cryptocurrency exchanges such as Binance, FTX and Coinbase.32 The CFTC also frequently publishes warnings about common cryptocurrency fraud schemes or motivates potential whistleblowers by offering financial rewards. To detect suspicious transactions, the CFTC uses, among other things, analysis of market activity in commodities markets. Similar to the SEC, the CFTC has created an initiative to work with the private sector on fintech and cryptoassets, called LabCFTC. Thus, it can be concluded that the CFTC is able to apply to cryptoasset fraud without much difficulty even legislation that was enacted before the emergence of cryptoassets. 2.3 Criminal dimension ofcryptoasset fraud The Department of Justice (DOJ) and its principal investigative arm, the Federal Bureau of Investigation (FBI), are responsible for criminal enforcement related to cryptocurrency and NFT fraud33. Cryptocurrency fraud is prosecuted primarily as wire fraud34, i.e., fraud committed through communications technology. However, these cases are often linked to money laundering charges. Prosecution can lead to imprisonment, fines or confiscation of assets. While the SEC and CFTC may bring civil actions for violations of securities or commodities market rules (e.g., failure to register a securities offering), the Department of Justice focuses on crimes that intentionally cause fraud or harm. It is not uncommon for a single fraudulent scheme to be simultaneously prosecuted by both the DOJ (e.g., as wire fraud) and the Securities Commission for violations of securities trading rules. As a result, these agencies often coordinate their efforts, share information, and sometimes even conduct joint investigations.35 The Department of Justice also established a Crypto Enforcement Unit in 2019 that specializes in prosecuting cryptocurrency fraud. In addition to standard legal tools, prosecutors also use blockchain data analysis to identify and prosecute complex fraud schemes and cases of market manipulation.36 The DOJ’s work is particularly critical in large-scale cases like OneCoin and BitConnect, where fraudsters have bilked investors out of billions of dollars. The DOJ has also been successful in tracing and seizing cryptoassets related to criminal activity. For example, 32 CFTC Charges Binance and Its Founder, Changpeng Zhao, with Willful Evasion of Federal Law and Operating an Illegal Digital Asset Derivatives Exchange | CFTC. (n.d.). Www.cftc.gov. https://www.cftc.gov/PressRoom/PressReleases/8680-23 33 Federal Bureau of Investigation (“FBI”) 34 Wire fraud is a federal crime that involves the use of an electronic communication, such as the Internet, email, or telephone, to intentionally deceive a third party and enrich oneself at that person’s expense. In the case of cryptocurrency fraud, it often involves phishing scams, Ponzi schemes, and fake investment opportunities offered online. 35 Allen, B., Brez, Z., Kalil, C., Kasulis, J., & Mouritsen, S. (2024). DOJ and SEC crypto exchange enforcement in the United States. Globalinvestigationsreview.com. https://globalinvestigationsreview. com/review/the-investigations-review-of-the-americas/2025/article/doj-and-sec-crypto-exchangeenforcement-in-the-united-states 36 Criminal Division | Crypto Enforcement. (2022, July 5). Justice.gov. https://www.justice.gov/criminal/criminal-fraud/crypto-enforcement 7 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY the tracing and seizure of a significant portion of the ransom (a total of 63.7 bitcoins worth $2.3 million) paid by Colonial Pipeline Co. as ransom in connection with the most serious ransomware attack in the U.S. to date, which led to fuel shortages throughout the East Coast.37 2.4 Strengths and weaknesses The strengths of the U.S. approach undoubtedly include a proactive enforcement approach and the use of new technologies and advanced data analytics to detect fraudulent activity. US regulators are also known for cracking down on cryptocurrency fraud regardless of the nationality of the perpetrators. They base their jurisdiction on the often hypothetical argument that fraudulent activity also affects US citizens, without identifying the specific citizens involved.38 Critics of this approach rationally point out that these are only U.S. regulators, not global surveillance organizations. On the other hand, the global approach of the US authorities is to be welcomed, as their actions ultimately protect the citizens of other countries and compensate for any inaction by their national authorities. In any case, the US legal system offers a robust basis for dealing with cryptocurrency fraud. These include the Securities Act, the Securities Exchange Act and the Commodity Exchange Act. The relevant provisions allow for broad interpretation, giving regulators the chance to adapt to the evolving nature of cryptoassets. The way in which the US authorities try to inform the public about the risks and the efforts to establish cooperation with whistleblowers through economic motivation can also be appreciated. Another strength of the American approach is definitely interinstitutional cooperation. Cooperation between different regulatory authorities (SEC, DOJ, CFTC, FinCEN) ensures that different aspects of the market are covered, from securities and commodities regulation to anti-money laundering efforts. This approach allows for comprehensive oversight of both the cryptocurrency and NFT markets.39 On the other hand, the US approach to cryptocurrency fraud has its weaknesses. The involvement of multiple authorities invariably brings with it overlapping powers and inconsistent interpretation of regulations, which can confuse market participants and deter legitimate businesses from entering the market. Examples include exchanges such as Coinbase and Binance, which have faced lawsuits from both the SEC and the CFTC.40 Inconsistent interpretation can also sometimes lead to loopholes in the law that fraudsters can exploit. Thus, while 37 Bing, C. (2021, June7). U.S. seizes $2.3 million in bitcoin paid to Colonial Pipeline hackers. Reuters. https://www.reuters.com/business/energy/us-announce-recovery-millions-colonial-pipelineransomware-attack-2021-06-07/. 38 For the first time, U.S. courts did so with respect to cryptoassets in SEC v. Traffic Monsoon, LLC, 245 F. Supp. 3d 1275 (D. Utah 2017). 39 Tan, C. (2024). Rights in NFTS and the flourishing of NFT marketplaces. International Journal of Law and Information Technology, 32(1). https://doi.org/10.1093/ijlit/eaae018 40 O’Melveny & Myers LLP. (2024, October 18). The Ever-Shifting Landscape of U.S. Crypto Regulation. OMM.com. https://www.omm.com/insights/alerts-publications/the-ever-shifting-landscape-of-uscrypto-regulation/ 8 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY U.S. regulators have been proactive in enforcing the law, the regulatory environment still has some room for improvement. While the SEC has taken a strong stance against certain cryptocurrency projects and individuals, some critics argue that their enforcement actions have not always been consistent or effective. For example, the SEC has been criticized for its handling of the Ripple (XRP) case, with some arguing that the agency overstepped its authority and caused unnecessary harm to investors. The SEC has also been accused of being slow to act in cases of alleged fraud, such as the BitConnect scheme, which operated for over a year before facing regulatory action. Furthermore, the SEC’s support of Sam Bankman-Fried, the founder of the now-defunct FTX exchange, has raised questions about the agency’s judgment and its potential susceptibility to influence. Bankman-Fried was a vocal advocate for cryptocurrency regulation and a major donor to political campaigns, and some critics argue that this may have influenced the SEC’s favorable treatment of him and his company. The collapse of FTX, which was once one of the largest cryptocurrency exchanges in the world, has also cast a shadow over the US regulatory landscape. The company’s implosion, which resulted in billions of dollars in losses for investors, exposed significant weaknesses in the US regulatory framework and raised questions about the ability of regulators to effectively oversee the cryptocurrency market. These criticisms highlight the challenges and complexities of regulating the cryptocurrency market, even in a country with a well-developed legal system like the United States. While the US has been a leader in cryptocurrency regulation, there is still room for improvement in terms of consistency, effectiveness, and the ability to adapt to the rapidly evolving nature of the market. 3. Legal environment intheCzech Republic The Czech legislation on crypto-assets is much more stringent than the American one. Cryptoassets do not yet have a comprehensive legal framework in the Czech Republic, although this will change to a large extent once the MiCA regulation41 and hopefully adaptive legislation comes into force. On the other hand, it cannot be said that cryptoassets are in a legal vacuum either. Crypto-assets are not considered money, currency or commodity in the Czech Republic, yet in the sense of Section 489 of the Civil Code42 they are things in the legal sense, namely intangible, movable and fungible. In the case of NFTs, it is usually an unrepresentable thing. Crypto-assets are not even a commodity under the Commodity Exchange Act because they do not have a tangible substance. Czech law also does not recognise digital securities other than book-entry securities. In some cases, however, cryptoassets may meet the definition of electronic money under the Payment Act. The first defining characteristic of electronic money is that it is a monetary value that represents a claim against the issuer. This definition is met in particular by some stablecoins, whose value is typically pegged to official currencies 41 The MiCA portion of the regulation took effect on June 30, 2024, and the full regulation willtake effect on December 30, 2024. 42 Act No. 89/2012 Coll., Civil Code, as amended. 15 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY In December 2023, Czech police filed criminal charges against Richard Watzke and Henry Ertner, the founders of the XIXOIO project, on suspicion of fraud under Section 209(1) and (5) (a) of the Criminal Code. The criminal prosecution itself commenced in November 2022, while the formal filing and subsequent reporting occurred later. The accused were alleged to have made false promises of savings appreciation through investments in the XIXOIO ecosystem, while deliberately providing misleading information to investors. The funds extorted from the 2,931 victims exceeded CZK 339 million (USD 14.6 million) and EUR 571,000 (USD 624,635.43), and were allegedly used to operate the company, pay commissions, purchase real estate, or pay for the expensive living expenses of the project’s founders.76 According to available information, the prosecution has not yet been completed at the time this article was submitted. 4.5 Case Studies: AComparative Perspective The case studies presented above serve a multifaceted purpose within the broader comparative analysis of cryptocurrency regulation and enforcement in the United States and the Czech Republic. Firstly, the cases function as illustrative exemplars, offering concrete examples of the diverse and evolving nature of fraudulent schemes prevalent in the cryptocurrency market. They underscore the potential for investor harm and the need for robust regulatory frameworks to mitigate such risks. Secondly, the inclusion of cases from both jurisdictions facilitates a comparative analysis of regulatory responses and enforcement approaches. By examining the outcomes of these cases, the article assesses the effectiveness of each system in deterring fraudulent activities, prosecuting perpetrators, and recovering investor funds. Thirdly, the case studies provide empirical evidence to inform recommendations for enhancing the Czech regulatory framework. Drawing on lessons learned from the US experience, the article suggests specific measures to improve and strengthen enforcement capabilities in the Czech Republic. Evaluation ofCases and Regulatory Systems: • OneCoin and BitConnect: These cases illustrate the transnational nature of cryptocurrency fraud and the associated jurisdictional challenges. The US response, characterized by multi-agency collaboration and the adaptation of existing laws, demonstrates both the strengths and potential complexities of their approach. • Insider Trading Cases (Nathaniel Chastain and Ishan Wahi): These cases highlight the adaptability of US securities laws to address novel forms of insider trading in the cryptocurrency market. They underscore the importance of proactive enforcement and the potential for leveraging blockchain technology to detect and prosecute illicit activities. • XIXOIO: This case exposes the limitations of the current Czech regulatory framework, which is characterized by a reactive approach and a lack of specialized tools for addressing 76 Ibehei, J. (2023b). Indictment of persons in connection with the XIXOIO case. Policie.cz. https://www.policie.cz/clanek/obvineni-osob-v-souvislosti-s-pripadem-xixoio.aspx 16 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY cryptocurrency-specific fraud. It emphasizes the need for greater regulatory clarity, proactive enforcement, and public awareness campaigns to protect investors in the Czech Republic. The case studies also delineate the crucial distinction between outright scams, such as OneCoin and XIXOIO, and regulatory investigations arising from legal ambiguities surrounding the application of existing laws to novel cryptocurrency products and practices. This distinction underscores the importance of developing clear and comprehensive regulations in the Czech Republic to provide legal certainty and reduce the potential for exploitation due to regulatory gaps. In summary, the case studies serve as integral components of the comparative analysis, providing empirical evidence, illustrating key concepts, and informing recommendations for regulatory improvements. They contribute to a deeper understanding of the challenges and opportunities in regulating the cryptocurrency market, ultimately aiming to enhance enforcement and foster a more secure and transparent cryptocurrency ecosystem. 5. Comparative analysis oftheUS and Czech approaches tocryptocurrency fraud The approaches of the United States and the Czech Republic to regulating cryptocurrency fraud differ significantly, and each has its own strengths and weaknesses. The United States boasts a robust legal framework, which has been adapted to the rapid rise in popularity of cryptoassets through flexible interpretation of existing securities and commodities laws. For example, the US Securities and Exchange Commission (SEC) applies the Howey test to cryptoassets, which has traditionally been used to determine whether a financial asset constitutes a security. This proactive legal interpretation allows the US to regulate and protect investors without having specialized legislation at the beginning of the crypto boom. In addition to this legislative adaptability, US authorities, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ), have worked extensively together to monitor various aspects of the cryptocurrency market. Their efforts are supported by the use of advanced technological tools, such as blockchain analytics and other data-driven investigative techniques, to help detect fraudulent activity and trace cryptoassets from illegal activity. In addition, U.S. authorities assert jurisdiction over international cases where fraud affects U.S. citizens even when the fraudulent activity occurs outside the U.S., allowing for global reach of their enforcement efforts. The manner in which U.S. regulators seek to warn the public about the risks of fraud in the cryptoasset market or to economically incentivize potential whistleblowers is also inspiring.77 However, the US approach is not without problems. The involvement of multiple regulators, each with overlapping jurisdiction, can create confusion among market participants and also 77 Eakeley, D., Guseva, Y., Choi, L., & Gonzalez, K. CRYPTO-ENFORCEMENT AROUND THE WORLD. Retrieved October 12, 2024, from https://southerncalifornialawreview.com/wp-content/ uploads/2021/05/Eakeley-and-Guseva_Final-2021.pdf 17 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY lead to gaps in enforcement. Legitimate businesses may also be deterred from entering the market. Moreover, while existing laws have been adapted to address crypto-related fraud, they were designed for traditional financial instruments and are not always tailored to address the unique characteristics of crypto-assets, leaving room for improvement in the legal framework. Czech legislation, on the other hand, does not yet offer a specialised, but not very adaptable legal framework comparable to that of the United States, although this can be expected to improve substantially with the upcoming implementation of MiCA. Nevertheless, the Czech authorities have in several cases been able to address cryptocurrency fraud by prosecuting offenders under traditional legal offences such as theft, embezzlement and fraud. This approach, although not specifically tailored to cryptoassets, has provided a degree of legal protection. In addition, the Czech authorities have demonstrated competence in seizing and monetising crypto-assets, which is an extremely important element in the fight against digital crime, as the crime must not be economically rewarding. Despite these enforcement efforts, the Czech regulatory framework for cryptoassets remains underdeveloped. The lack of clear legal definitions of cryptoassets and their classification as securities, commodities or other financial instruments, and the involvement of traditional authorities such as the CNB, the Ministry of Finance and the Financial Analysis Office, hinder the creation of a safe environment. In addition, public authorities can be criticised for being slow to react to suspicious investment opportunities, as illustrated by the XIXOIO case, where state intervention came more than two years apart, unnecessarily leading to significant investor losses. Although experts pointed out suspicious aspects of the project from the beginning, the relevant state authorities (Ministry of Finance, Czech National Bank) limited themselves to warnings and declarations that the matter did not fall within their competence. The criminal prosecution against the founders of the project in November 2024 is ongoing and the XIX token can still be purchased on the project’s website. This approach contrasts with the more proactive stance of US regulators, who often act in a timely manner to prevent escalation. Another area where the Czech authorities could draw inspiration is the use of modern technological tools. Unlike their US counterparts, Czech law enforcement agencies have not adopted blockchain analytics and other data-driven methods to detect fraud, which creates room for fraudulent activities to go undetected for longer. The introduction of advanced investigative methods would enable Czech authorities to detect and investigate cryptocurrency fraud more effectively. While Czech law enforcement agencies have been somewhat slower to adopt blockchain analytics and other data-driven methods compared to their US counterparts, it’s important to acknowledge that these tools are not entirely absent from their investigative arsenal. The Czech police have, in fact, utilized blockchain analysis in certain high-profile cases, demonstrating a growing awareness of their potential value in combating cryptocurrency-related crime. However, the use of these technologies remains limited due to factors such as resource constraints, technical expertise gaps, and a historical reliance on traditional investigative techniques. As the cryptocurrency market continues to evolve and the sophistication of cybercrime increases, wider adoption of blockchain analytics and other data-driven methods will be crucial for Czech law enforcement agencies to effectively detect, investigate, 18 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY and prosecute cryptocurrency fraud. However, the Czech public authorities should take a more proactive stance in dealing with suspicious investment projects and act in a timely manner to mitigate potential damage to investors. Finally, greater international cooperation and the exercise of jurisdiction even in the case of cross-border fraud would also strengthen Czech efforts to combat cryptocurrency fraud. While it could be argued that the Czech Republic does not need such a robust regulatory framework, as it is a much smaller market compared to the US, it is clear from practice that fraudsters are targeting Czech investors. In summary, therefore, while the US excels at proactive and coordinated enforcement, backed by advanced technology and international reach, the Czech Republic has the potential to strengthen its regulatory and enforcement capabilities as it moves towards a more comprehensive legal framework for cryptocurrencies. If the Czech Republic draws inspiration from the strengths of the U.S. approach, it can more effectively combat cryptoassets frauds. 6. Conclusion Both the US and Czech legal environments have strengths and weaknesses in combating cryptocurrency fraud. The U.S. benefits from a proactive and flexible regulatory approach with strong enforcement capabilities that are enhanced by advanced technology and international cooperation. In contrast, the Czech Republic is still developing a specialised legal framework, although it has demonstrated competence in the seizure and monetisation of crypto-assets derived from criminal activity. However, slower responses to clear cases of fraud point to the need for a more proactive approach. However, with the transposition of the MiCA Regulation, improvements in the Czech legal environment can be expected to provide a more comprehensive framework for dealing with these cases. Nonetheless, drawing lessons from the U.S. approach could further enhance enforcement in the Czech Republic. List ofliterature 1. Academic Resources Allen, B., Brez, Z., Kalil, C., Kasulis, J., & Mouritsen, S. (2024). DOJ and SEC crypto exchange enforcement intheUnited States. Globalinvestigationsreview.com. https://globalinvestigationsreview.com/review/the-investigations-review-ofthe-americas/2025/article/doj-and-sec-crypto-exchange-enforcement-in-the-united-states Andhov, A. (2021). Wyoming’s Wild West Blockchain Laws and aStart-up Lobby. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3898451 Baker, B. (2017). Application oftheNew York BitLicense toInitial Coin Offerings. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3319540 Bartlett, J. (2023). TheMissing Cryptoqueen. Ebury Publishing. Bose, P., Das, D., Gritti, F., Ruaro, N., Kruegel, C., & Vigna, G. (2023). Exploiting Unfair Advantages: Investigating Opportunistic Trading intheNFT Market. ArXiv (Cornell University). https://doi.org/10.48550/arxiv.2310.06844 19 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY Chohan, U. (2018). Bitconnect and Cryptocurrency Accountability. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3131512 Dimitris Kafteranis, Huseyin Unozkan, & Umut Turksen. (2023). COMPLIANCE AND ENFORCEMENT CHALLENGES INTRADING OFNON-FUNGIBLE TOKENS. International Journal ofLaw inaChanging World, 2(3), 18-51. https://doi.org/10.54934/ijlcw.v2i3.57 Eakeley, D., Guseva, Y., Choi, L., & Gonzalez, K. (n.d.). CRYPTO-ENFORCEMENT AROUND THEWORLD. 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International Journal ofLaw and Information Technology, 32(1). https://doi.org/10.1093/ijlit/eaae018 Trozze, A., Kamps, J., Akartuna, E. A., Hetzel, F. J., Kleinberg, B., Davies, T., & Johnson, S. D. (2022). Cryptocurrencies and future financial crime. Crime Science, 11(1). https://doi.org/10.1186/s40163-021-00163-8 Zhang, A. R., Raveenthiran, A., Mukai, J., Naeem, R., Dhuna, A., Parveen, Z., & Kim, H. (2019). TheRegulation Paradox ofInitial Coin Offerings: ACase Study Approach. Frontiers inBlockchain, 2. https://doi.org/10.3389/fbloc.2019.00002 2. Newspaper articles Bing, C. (2021, June 7). U.S. seizes $2.3 million inbitcoin paid toColonial Pipeline hackers. Reuters. https://www.reuters.com/business/energy/ us-announce-recovery-millions-colonial-pipeline-ransomware-attack-2021-06-07/. 20 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY CTK. (2019, September 5). Court reconsiders bitcoin theft toembezzlement, programmer gets 9 years - iDNES.cz. IDNES.cz. https://www.idnes.cz/brno/zpravy/soud-programator-tomas-jirikovskybitcoiny-zpronevera.A190905_121842_brno-zpravy_krut Davis, D., & Kim, A. (2024, July 9). Ether’s Legal Status Clarified? CFTC Scores Win asCourt Backs Agency’s Commodity Classification. Katten. https://quickreads.ext.katten.com/post/102jcc8/ ethers-legal-status-clarified-cftc-scores-win-as-court-backs-agencys-commodity#page=1 Kateřina Vaníčková. (2024, May 4). State sends over 4 bitcoins toauction, starting price exceeds CZK 6 million - iDNES.cz. IDNES.cz. https://www.idnes.cz/zpravy/domaci/stat-majetek-prodejvirtualni-mena-miliony-korun-bitcoin-aukce.A240504_103127_domaci_vank O’Melveny & Myers LLP. (2024, October 18). TheEver-Shifting Landscape ofU.S. Crypto Regulation. OMM.com. https://www.omm.com/insights/alerts-publications/ the-ever-shifting-landscape-of-us-crypto-regulation/ Penman, A. (2016, February 10). Here’s why hyped-up web currency OneCoin is virtually worthless. TheMirror. https://www.mirror.co.uk/news/uk-news/ who-wants-onecoin-millionaire-you-7346558 Úšela, J. (2021, December 10). He has acult inthecompany, but he doesn’t understand technology, former employees say. We profile thehead ofthecontroversial Xixoio company. Deník N. https://denikn.cz/764062/ve-firme-ma-kult-technologii-ale-nerozumi-rikaji-byvalizamestnanci-prinasime-profil-sefa-kontroverzni-firmy-xixoio/ Yang, Y. (2018, May 29). China prosecutes 98 people, recovers US$268 million inOneCoin cryptocurrency investigation, report says. SCMP.com; South China Morning Post. https://www.scmp.com/tech/article/2148114/ china-prosecutes-98-people-recovers-us268-million-onecoin-cryptocurrency 3. Press releases $4 Billion Crypto-Promoter Ordered toHalt Fraudulent Sales. (2022). Texas.gov; Texas State Securities Board. https://ssb.texas.gov/ news-publications/4-billion-crypto-promoter-ordered-halt-fraudulent-sales 5 Ways Fraudsters May Lure Victims Into Scams Involving Crypto Asset Securities - Investor Alert. (2024). Investor.gov; U.S. Securities and Exchange Commission. https://www.investor.gov/ introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/ crypto-scams CFTC Charges Binance and Its Founder, Changpeng Zhao, with Willful Evasion ofFederal Law and Operating anIllegal Digital Asset Derivatives Exchange | CFTC. (n.d.). Www.cftc.gov. https://www.cftc.gov/PressRoom/PressReleases/8680-23 Co-Founder OfMultibillion-Dollar Cryptocurrency Scheme “OneCoin” Sentenced To20 Years InPrison. (2023, September 12). Justice.gov; U.S. Attorney’s Office, Southern District ofNew York . https://www.justice.gov/usao-sdny/pr/ co-founder-multibillion-dollar-cryptocurrency-scheme-onecoin-sentenced-20-years-prison Crypto Fraud Victims Receive Over $17 Million inRestitution from BitConnect Scheme. (2023, Jan. 12). Justice.gov; Office ofPublic Affairs. https://www.justice.gov/opa/pr/ crypto-fraud-victims-receive-over-17-million-restitution-bitconnect-scheme Emergency Cease and Desist Order (BitConnect), (Texas State Securities Board, Jan. 4, 2018). https://www.ssb.texas.gov/sites/default/files/BitConnect_ENF-18-CDO-1754.pdf 21 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY Former Coinbase Insider Sentenced InFirst Ever Cryptocurrency Insider Trading Case. (2023, May 9). Justice.gov; U.S. Attorney’s Office, Southern District ofNew York. https://www.justice.gov/usao-sdny/pr/ former-coinbase-insider-sentenced-first-ever-cryptocurrency-insider-trading-case Former Coinbase Manager and His Brother Agree toSettle Insider Trading Charges Relating toCrypto Asset Securities. (2023). Sec.gov. https://www.sec.gov/newsroom/press-releases/2023-98 Former Employee OfNFT Marketplace Sentenced ToPrison InFirst-Ever Digital Asset Insider Trading Scheme. (2023, 22 August). Justice.gov; U.S. Attorney’s Office, Southern District ofNew York. https://www.justice.gov/usao-sdny/pr/ former-employee-nft-marketplace-sentenced-prison-first-ever-digital-asset-insider Former Law Firm Partner Sentenced To10 Years InPrison For Laundering $400 Million OfOneCoin Fraud Proceeds. (2024, January 25). Justice.gov; U.S. Attorney’s Office, Southern District ofNew York . https://www.justice.gov/usao-sdny/pr/ former-law-firm-partner-sentenced-10-years-prison-laundering-400-million-onecoin-fraud Ibehej, J. (2023a). Investment fraud worth more than CZK 1 billion - Police oftheCzech Republic. Policie.cz. https://www.policie.cz/clanek/investicni-podvod-za-vice-nez-1-miliardu-korun.aspx Ibehei, J. (2023b). Charges against persons inconnection with theXIXOIO case - Police oftheCzech Republic. Policie.cz. https://www.policie.cz/clanek/obvineni-osob-v-souvislosti-s-pripademxixoio.aspx Onthepossibility for investment funds toinvest incryptoassets. (2021). Czech National Bank. https://www.cnb.cz/cs/dohled-financni-trh/legislativni-zakladna/ stanoviska-k-regulaci-financniho-trhu/RS2023-05/. Media Communication Department. (2024). Thegovernment approved theDigital Finance Act | Ministry ofFinance. Ministry ofFinance. https://www.mfcr.cz/cs/ministerstvo/media/ tiskove-zpravy/2024/vlada-schvalila-zakon-o-digitalnich-financich-55549 NOTICE - OneCoin - Financial Supervision Commission. (2015, September 30). Financial Supervision Commission. https://www.fsc.bg/saobshtenie-onecoin/ SEC.gov | BlockFi Agrees toPay $100 Million inPenalties and Pursue Registration ofits Crypto Lending Product. (n.d.). Www.sec.gov. https://www.sec.gov/newsroom/press-releases/2022-26 SEC.gov | SEC Charges Ripple and Two Executives with Conducting $1.3 Billion Unregistered Securities Offering. (2020). Sec.gov. https://www.sec.gov/newsroom/press-releases/2020-338 Up to$5 Million Reward Offer for Information Leading toArrest and/or Conviction ofCryptocurrency Fraudster Ruja Ignatova - United States Department ofState. (2024). United States Department ofState. https://www.state.gov/up-to-5-million-reward-offer-for-information-leading-toarrest-and-or-conviction-of-cryptocurrency-fraudster-ruja-ignatova/ Notice onthepresentation ofXIXOIO. (2021). CNB.cz; Czech National Bank. https://www.cnb.cz/cs/dohled-financni-trh/ochrana-spotrebitele/upozorneni/ Upozorneni-k-prezentaci-spolecnosti-XIXOIO/. Ministry ofFinance warning ontherisks ofinvestment tokens | Ministry ofFinance oftheCzech Republic (2024). Ministry ofFinance oftheCzech Republic; Department ofFinancial Markets II. https://www.mfcr.cz/cs/financni-trh/ bankovnictvi-a-dohled/platebni-sluzby-a-vyporadani-obchodu/aktuality/2021/ upozorneni-ministerstva-financi-na-rizik-43725 22 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY 4. Legislation Commodity Exchange Act of1936, 7 U.S.C. § 1 etseq. (1936). Regulation (EU) 2022/2554 oftheEuropean Parliament and oftheCouncil of14 December 2022 ondigital operational resilience inthefinancial sector Regulation (EU) 2023/1114 oftheEuropean Parliament and oftheCouncil of31 May 2023 onmarkets for cryptoassets Chamber ofDeputies oftheParliament oftheCzech Republic (2024, 3 May). Draft Act ontheDigitization oftheFinancial Market. Chamber ofDeputies Print 692. https://www.psp.cz/sqw/historie.sqw?o=9&T=692. Securities Act of1933, 15 U.S.C. § 77a etseq. (1933). Securities Exchange Act of1934, 15 U.S.C. § 78a etseq. (1934). U.S. Constitution Act No. 253/2008 Coll., onCertain Measures against theLegalization oftheProceeds ofCrime and theFinancing ofTerrorism, asamended Act No. 256/2004 Coll., onCapital Market Business, asamended. Act No. 40/2009 Coll., Criminal Code, asamended Act No. 455/1991 Coll., onTrade Enterprise (Trade Licensing Act), asamended. Act No. 89/2012 Coll., Civil Code, asamended. 5. Court decisions and legal actions Complaint against BitConnect, Satish Kumbhani, Glenn Arcaro, and Future Money Ltd, (U.S. Securities and Exchange Commission, September 1, 2021). https://www.sec.gov/files/litigation/complaints/2021/comp-pr2021-172.pdf U.S. Supreme Court (n.d.). SEC v. Howey Co., 328 U.S. 293 (1946). Justia Law. https://supreme.justia.com/cases/federal/us/328/293/ 6. Website Criminal Division | Crypto Enforcement. (2022, July 5). Www.justice.gov. https://www.justice.gov/criminal/criminal-fraud/crypto-enforcement Crypto Assets. (n.d.-a). Sec.gov; U.S. Securities and Exchange Commission. https://www.sec.gov/securities-topics/crypto-assets Crypto Assets. (n.d.-b). Investor.gov; U.S. Securities and Exchange Commission. https://www.investor.gov/additional-resources/spotlight/crypto-assets SEC.gov | Office ofStrategic Hub for Innovation and Financial Technology (FinHub). (2023). Sec.gov. https://www.sec.gov/about/divisions-offices/ office-strategic-hub-innovation-financial-technology-finhub SEC.gov | Whistleblower Program. (n.d.). Www.sec.gov. https://www.sec.gov/ enforcement-litigation/whistleblower-program 7. Other sources XIXOIO a.s. Product terms and conditions oftoken XIX ofXIXOIO a.s., valid from 1 August 2021. https://media.graphassets.com/wH9xgS9GSTiBgk9To4c2 23 Ročník / Volume 4 | Číslo / Issue 1 | 2025WORLD ECONOMY AND POLICY Mgr. Tomáš Brandejský is a PhD candidate in his third year at the Prague University of Economics and Business, specializing in financial law and regulation. His research focuses on the legal aspects of cryptocurrency markets, with a particular interest in the prevention of fraud involving cryptoassets and NFTs. As part of the IGS grant project “Prevention of Crypto Asset Fraud and Failure of Related Service Providers in an International Context”, he explores regulatory responses to emerging financial technologies, comparing enforcement practices in the US and the Czech Republic.