Bitcoin & other cryptocurrencies are not new to the market. Their decentralized nature has attracted wrongdoers over their period of existence. As a result, many countries are strengthening their laws regarding cryptocurrency. Let us check how Cryptocurrency Regulation in the USA has incorporated into their judicial system.
Current Regulations for Digital Tokens in the USA
Initially, in the USA cryptocurrency was not a legal trade. People were still in denial that cryptocurrency might replace the Fiat in the future. However, now there are few exceptions in the country. As the regulations vary by state, there is no consistent legal approach for cryptocurrency in the USA. Depending on the federals and state regulations, the laws vary in the USA. Let us go through the current Cryptocurrency Regulation in the USA
In the USA, there is a mixed type of treatment for cryptocurrency by state and federal governments. While the promises and benefits of this technology are still cynical, a number of policymakers have acknowledged over the regulation risk of the currency. Also, others have passed legislation to increase investment in technology.
FinCEN or Financial Crimes Enforcement Network does not consider cryptocurrency as legal. Since 2013, the network has considered it as a substitute for currency and considers it as money transmitters. In contrast, IRS or Internal Revenue Service counts cryptocurrency as property and has declared tax guidance as well for the currency.
Wyoming legislature has exempted cryptocurrency from property taxation. It is considered as the most crypto-friendly American state. Another state of America Colorado has passed a bill to promote blockchain for government record-keeping. Several other states like Arizona, Georgia have started accepting taxes on a cryptocurrency exchange in November 2018.
Some American states like New Mexico and California have issued warnings about cryptocurrency investment and New York has restricted the currency. So, we can say that there is a mixed response to cryptocurrency in the USA.
Internal Revenue Service or IRS has declared in March 2014 that it will be tax virtual currency like Bitcoin or any other cryptocurrency as “property” not as currency.
As per IRS Notice 2014-21 every individual or group has to:
- Keep a detailed record of cryptocurrency sale and purchase
- Have to pay taxes on every sale and purchase made through cryptocurrency
- Pay taxes on the market value of any mined cryptocurrency
- Pay tax for the gains made by the sale of any cryptocurrency for cash
For any individual filing, the federal ITR the loss or gain made through virtual currency is counted under “capital asset”.
The rule of cryptocurrency mining is straightforward in the USA. As per the rule of any individual either own or use the cryptocurrency in the USA, then he should also be able to mine it in his own location. Moreover, if owing the cryptocurrency is considered illegal in your area then mining will also be prohibited. In some of the jurisdictions of the USA, cryptocurrency possession is illegal. New York, Pittsburgh, has imposed a ban on cryptocurrency mining temporarily that was lifted in March 2019.
The exchange regulations of cryptocurrency are also an uncertain legal territory. Only one regulatory body SEC or Security and Exchange Commission considers cryptocurrency as a security measure and in March 2018 it declared that it will apply security law for digital wallets and exchanges.
In contrast, CFTC or Commodities Future Trading Commission (CFTC) follows a friendly approach for bitcoin traders. It allows traders to trade publicly.
In the future, cryptocurrency regulations can make sure extreme consumer protection and even streamline their regulations as well. The US Treasury has declared an urgent requirement of crypto regularities to limit criminal activities. Further, In Jan 2018, a new FSOC working group was formed to explore continuously evolving and growing the US cryptocurrency marketplace.
Cryptocurrency is an exciting concept that has the power to alter global finance. In the USA or overseas users may have to pay some taxes on the currency as per the laws of their own state or province. USA has a highly developed economy in terms of nominal GDP and cryptocurrency is highly popular in the country as the market of cryptocurrency has many possibilities for development.
Many large companies in the USA like Microsoft, Subway, Overstock have started accepting digital currencies. However, it can be said that still the legislations have been established in the country and many laws and regulations have been formed for virtual transactions in the country. The real overall image of the currency is still under discussion in several American regions, but the investors are taking high interest in the investment of this virtual currency.
Below is the graphical representation of the US States with crypto regulations.
Our Take on Cryptocurrency Regulations in the USA
To summarise, USA cryptocurrency regulations are far better than most of the countries. As you see, crypto laws are being accepted in most American states. We will update this article with every new update. And assuming that the cryptocurrency industry continues its steady rise to mainstream prominence, it’s only a matter of time before crypto in the U.S. receives the regulation it has long demanded.