Encrypted funds may gain regulatory "exemption thresholds" due to enhanced on-chain audit capabilities. Blockchain's transparent, immutable ledger enables real-time transaction verification, reducing fraud and improving compliance. Smart contracts and decentralized data storage streamline audits, potentially lowering regulatory scrutiny for funds meeting stringent on-chain standards. However, exemptions depend on jurisdictions and regulatory frameworks. For instance, the U.S. GAO notes gaps in crypto oversight, suggesting exemptions require robust legislation. Canada's CSA Regulatory Sandbox offers temporary relief for compliant firms, while the EU's DAC8 emphasizes tax transparency. Auditors must adapt to blockchain's unique risks, like private key security, to ensure trust. Enhanced auditability could justify exemptions, but regulators demand consistent, secure implementation.