Definition ∞ Regulation by prosecution describes a governmental approach where legal and enforcement actions, rather than clear, proactive legislation, establish boundaries and expectations for an industry. In the digital asset space, this means authorities clarify what is permissible or prohibited through court cases and penalties against specific actors. This method often creates uncertainty for market participants. It compels adherence through retrospective legal judgments.
Context ∞ The digital asset sector has frequently experienced regulation by prosecution, particularly in jurisdictions where comprehensive crypto-specific legislation is still developing. This approach leads to calls from industry stakeholders for clearer regulatory frameworks to foster innovation and reduce legal ambiguity. News often reports on significant enforcement actions by agencies, which then serve as de facto guidance for the broader market.
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