Cryptocurrency in the United States

There has been a recent explosion of media attention and public interest on cryptocurrencies like Ethereum and Bitcoin, leaving many people with questions like where does cryptocurrency stand in the U.S and what is its legal status? Are there any regulations on cryptocurrency? What are government officials saying?


A recent survey done by LendEDU found that about 78.5 percent of Americans have heard about cryptocurrencies like Bitcoin. Up to 14 percent of this population has owned the cryptocurrency, and a further 40 percent is open to owning it the future. The survey also found out that Millennials were more likely to use and invest in cryptocurrencies.


Are there any regulations on cryptocurrency in the United States?

At the time of this article, there isn’t any coherent direction on regulating cryptocurrency in the United States. The SEC (Securities and Exchange Commission) has recently warned the public on the risks of investing in cryptocurrency. The commission is yet to register any ICO’s (Initial Coin Offerings), and it has halted several. The SEC has also not approved exchange-traded products holding any cryptocurrency or assets relating to cryptocurrencies for trading or listing.


The CFTC (Commodity Futures Trading Commission) was the first regulator in the U.S to allow public trading of cryptocurrency derivatives. CFTC then organized meetings to discuss possible changes on cryptocurrency derivatives, but the meetings never happened. However, CFTC announced that Bitcoin should be treated as a commodity. The commission also announced that the regulation of Bitcoin and any manipulation and fraud involving the cryptocurrency transaction in interstate business are under its authority.


As I covered in a previous article, the IRS (Internal Revenue Service) ruled that for tax purposes, cryptocurrencies should be considered as property, not currency. Investors should keep account of their gains and pay taxes on them.


What is the future of cryptocurrency in the U.S? Will there be regulation?

It is predicted that there will soon be some regulation on cryptocurrency in the U.S. The Secretary of the Treasury, Steven Mnuchin, recently said that he would work with the G20 countries to prevent cryptocurrencies from turning into a digital equivalent the “Swiss Bank Account.” The Banking Law of 1934 made it a criminal act for a Swiss bank to reveal the name of an account holder. Swiss bank secrecy protects the privacy of bank clients, similar to cryptocurrency holders’ identities being protected by the cryptographic wall.


Speaking at the Economic Club, Washington, D.C, on Jan 12th, 2018, Mnuchin warned that he as well as other regulators were considering the possibility that cryptocurrencies may be used in money-laundering. On January 25th, 2018 while defending his stance at the World Economic Forum, Mnuchin said that his priority on cryptocurrencies was ensuring that they are not used for illegal activities.


Treasury Deputy Director, Sigal Mandelker, while speaking in Tokyo at a press conference on January 26th, 2018 applauded Japan, China, and South Korea for their efforts in regulating cryptocurrency and stated that there was “need to have such kind of regulations across the world.”


Also, according to Reuters, there will be a meeting between the Senate Banking Committee and top financial regulators to discuss cryptocurrency regulation. The committee is set to meet with CFTC’s Chair, Christopher Giancarlo and SEC’s Chair, Jay Clayton.


The legal status of cryptocurrencies in the U.S

As noted earlier, the IRS announced that for taxation, cryptocurrencies should be treated as property, not currency. Thus, gains and losses on transactions involving cryptocurrencies must be reported as long-term or short-term gains.


Rather than restricting trading of cryptocurrencies, regulators and government agencies seem to be focusing on the development of regulatory frameworks which recognize that cryptocurrencies exist and address such security law concerns as market manipulation, investor fraud, and money-laundering. In the U.S there are various exchanges where people invest in cryptocurrency, subject to financial reporting, and identity verification under U.S law.


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