Since its inception, the history of cryptocurrency has gone through various stages of adoption by local governments. The US is also one of the countries trying to integrate the sudden phenomenon into the existing system. In the USA, cryptocurrency has undergone a transformation from a tool of criminals to part of the banking system. It may not be a perfect solution, but it's definitely a compromise and an opportunity to reach more people.
Cryptocurrency regulation in the USA
The United States has one of the most developed legislation on cryptocurrencies. Despite the fact that there are still many unresolved problems, the government has been very consistent in developing rules, the main ones of which have been developed since 2014. The most active period of their production was from 2014 to 2019. Undoubtedly, the main reason for creating strict regulations is the need to suppress criminal activity. It is still debated that cryptocurrencies, and Bitcoin in particular, have been used to finance some illegal transactions. This may not be a significant selling point for crypto enthusiasts, but it has become a major catalyst for discussion of regulatory options.
There are several institutions that are engaged in creating rules to regulate cryptocurrency. These include the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission and the Treasury Department, the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN). The next level of regulations is made by local governments and varies from state to state. To date, approximately 70% of states have introduced some kind of regulation regarding cryptocurrencies and/or digital assets.
It is interesting that despite all attempts at regulation at various levels and for various reasons, the American government continues to say that all types of technology and innovation are very important to the country and therefore must be implemented in a safe manner.
Cryptocurrency
The main problem with cryptocurrency legislation is that the world of cryptocurrencies is very diverse. Thus, the rules are usually divided into several parts. The U.S. government does not recognize cryptocurrencies as legal tender, but the Internal Revenue Service considers them “a digital representation of value that functions as a medium of exchange, unit of account, and/or store of value.” And in accordance with this assumption, tax policy exists.
The SEC considers cryptocurrencies to be securities, meaning existing securities laws apply to digital wallets and investors.
The CFTC also has a special approach to Bitcoin and Ethereum. They are considered commodities, and public trading of virtual and crypto derivatives is permitted.
Cryptocurrency Exchanges
Cryptocurrency exchanges are legal and regulated by the Secretary of Banks Act. This means a number of requirements that must be met. First of all, exchanges must have a FinCEN license, implement AML/CFT, support the Sanctions program, maintain records and provide reports. In 2020, FinCEN proposed additional requirements for the information collected. Since then, exchanges have been required to collect data on the people responsible for managing exchange services, digital assets and digital wallets.
Taxes
The United States has also developed legislation on the taxation of cryptocurrencies. However, not all transactions with cryptocurrencies are subject to taxation. Let's take a closer look at the cases that require attention:
- Sale of cryptocurrency for dollars;
- Exchange of one cryptocurrency for another;
- Payment for goods and services cryptocurrency.
In this article you can find more detailed information about taxes on cryptocurrency in the US and other countries.
Crypto support
Some states support the adoption of cryptocurrency. They provide great freedom to everyone working in the industry, and this solution attracts many developers and enthusiasts.
- California. The state has long been known for its pro-cryptographic policies. Many crypto companies are created or have their headquarters there (Coinbase, Audius, Gemini, etc.).
- Wyoming. This state has more than 20 laws that should simplify the development of the crypto industry.
- Texas. This state actively supports mining, ensuring low electricity prices.
Of course, there are more states. And the number of states declaring their support is growing. Moreover, people seeking higher government positions often use cryptocurrency to find additional support.
Dollar and cryptocurrency
Probably, of all the countries in the world, the United States has the most painful relationship with cryptocurrency. Throughout global financial history, the United States has remained one of the most influential players, and the US dollar has always been the most sought-after currency. With the emergence of ideas about a decentralized financial system, tensions related to American influence in the global market have increased. We can see examples of countries that openly state their desire to become independent from the US dollar, such as El Salvador and Honduras. Additionally, more and more experts are reporting that Bitcoin has the potential to replace the US dollar in international trade. This is likely one of the reasons for the accelerating development of the digital dollar.
According to the study Coinbase, about 58% of Americans have heard of Bitcoin, and 37% of those surveyed know about Bitcoin. According to a study published by the Pew Research Center, 16% of Americans say they have ever invested, traded or used cryptocurrencies. Back in 2015, only 1% of adults surveyed said they had never heard of or knew anything about cryptocurrency. These are signs of the growing popularity of Bitcoin and the whole idea of cryptocurrency in America.
Order of the President
In addition, in the current economic situation, which is terrifying with rising inflation, people are looking for a way to save their money so that, despite everything, they can provide for their families. Undoubtedly, these problems push them into the crypto world, which seems to be able to help.
Thus, we have the opportunity to witness several more cryptographic laws issued by the government. For example, the Executive Order on Ensuring the Responsible Development of Digital Assets, signed by Joe Biden, President of the United States, on March 9. This decree does not have any specifics regarding the regulatory process, however, it recognizes that digital assets have a huge impact on the global economy and that the United States must comply with this in order to continue its development. The decree also contains a list of cabinets and other officials who will be involved in the process of integrating digital assets. Undoubtedly, the order also pays attention to environmental issues associated with digital assets.
This decree makes it clear that various types of digital assets have become a significant part of the American and global economy. This also indicates the US government's readiness to consistently work on the integration process. In essence, this gives an official start to building a new type of economic relations.
