What are the cryptocurrency regulations in the US?
Cryptocurrencies are currently unregulated in the US, though this may change, and investors would be well advised to keep an eye on developments as closely as they monitor their investments.
In 2013, the Financial Crimes Enforcement Network (FinCEN), part of the US Treasury, said that cryptocurrencies and other virtual currencies are not legal tender anywhere in the USA. That doesn’t mean that they can’t be used as payment, only that the business or person that you are paying is not obliged to accept them as payment. If both parties agree to a payment in cryptocurrency and whatever is being sold is legal, then the transaction is legal.
However, although your bank might refuse to accept a loan payment in Bitcoin, it cannot refuse to accept payment in US dollars because the dollar is legal tender.
Money laundering rules apply
FinCEN added that the use of virtual currencies comes under its definition of ‘money services businesses’ and that anti-money laundering, recordkeeping and reporting responsibilities apply to companies concerned.
Otherwise, there are moves towards regulation – not necessarily out of a desire to curb cryptocurrencies – but largely because a marketplace in which the rules are clearly set out should protect vendors and customers. Attitudes vary by state, however.
Meanwhile, the Securities Exchange Commission (SEC) has said that it views cryptocurrencies as a security, which therefore considers everything from the currencies to exchanges and wallet providers to fall within its jurisdiction. The SEC is not the only body taking an interest, though. The Commodity Futures Trading Commission says that it considers cryptocurrencies to be a commodity and that it intends to take a “do no harm” approach to regulation.
Cryptocurrency and tax
Avoiding over-regulation might depend on the industry demonstrating that it can regulate itself. There were moves in the first half of 2018 to establish a self-regulatory organisation (SRO) to oversee cryptocurrencies. SROs are common in US financial services and are generally funded by membership fees.
Aside from regulation, another aspect of the law affecting cryptocurrency investors is tax law. The US Internal Revenue Service (IRS) says that it views cryptocurrencies as property, rather than currency, and expects investors to report their taxable gains from transactions.
Once again, do keep in mind that this is a new technology and rules and regulations can change at any time.