Are current crypto regulations in the US different from the rest?
- Politicians and regulators are working to create a regulatory framework for digital values.
- The IRS imposes capital gains tax on assets held for less than one year.
- The cryptocurrency community is suing OFAC for exceeding its authority.
President Biden’s executive order on cryptocurrency regulation is currently in effect in the United States. It focuses on six main goals: protecting consumers and investors, financial stability, combating illicit finance, maintaining American economic leadership and competitiveness, financial inclusion, and responsible innovation.
There are many complications in US cryptocurrency regulations. On the one hand, there are a number of regulators charged with controlling cryptocurrency businesses. Yet it is unclear how their respective roles differ from each other.
Several federal regulations could potentially have some impact on cryptocurrency services. Nevertheless, a different law may apply depending on the type of asset. In addition, each state can adopt its own rules for the use of digital assets.
Politicians and regulators are working hard to create a thorough regulatory framework for digital assets. We have referenced current US crypto laws to ensure your business remains compliant with the laws of all states.
Key aspects of the regulations
The US Treasury Department declared in early 2020 that it would adopt a more aggressive approach to dealing with cryptocurrencies. Reducing financial crime and increasing transparency in an otherwise complex asset class has always been crucial.
Conversely, the SEC views cryptocurrencies as an investment on par with any stock or exchange-traded fund (ETF).
In addition, because the IRS views cryptocurrency as property, it imposes capital gains tax. When investors hold the asset for less than a year, short-term capital gains are assessed, equal to the ordinary tax rate. Investors who keep the asset for less than one year are assessed short-term capital gains equal to the standard tax rate.
The IRS applies the more lenient long-term capital gains taxes to assets held for more than one year. Investors may also want to consider how using cryptocurrency for gifts, donations or payments might affect their taxes.
Cryptocurrency owners must also keep track of their holdings for tax purposes. This covers all acquisitions, sales, exchanges and other dispositions with fair market value of the transaction.
While FinCEN does not view cryptocurrencies as legal tender, it began recognizing digital assets as money in 2012. It categorizes them with conventional money transmitters, which exchange a store of value for a currency controlled by another person. The Bank Secrecy Act (BSA) has typically governed money transmitters.
Cryptocurrencies can be traded on open derivatives markets since they are classified as a commodity by the Commodities Futures Trading Commission (CFTC). The CFTC has acted against unregistered Bitcoin futures exchanges, implemented regulations prohibiting wash trading and scheduled trades, and addressed a Ponzi scheme after this claim was made.
The CFTC believes that strong enforcement, market intelligence, consumer education and intergovernmental cooperation are necessary components for an effective response to digital assets.
Regulators in the US different from the rest?
Although digital assets can be controlled by several
regulatory bodies, depending on their nature, US regulations are very different from those in the rest of the globe.
Entities that the BSA classifies as “financial institutions” are subject to AML/CFT liability. This includes, among others: The money services industry, Introduction of commodity brokers, futures commission traders, securities brokers/dealers and mutual funds.
FinCEN issued guidance in 2019 that considered how the Bank Secrecy Act (BSA) could be applied to typical business models, including the transfer of digital assets (convertible virtual currencies in FinCEN terms).
Conclusion
Five cryptocurrency companies, including FTX US, recently received a cease and desist letter from the FDIC asking them to stop scamming people using their name and logo. The FDIC declared that it neither covers cryptocurrencies nor provides insurance to bitcoin exchanges. It covers only losses caused by the demise of insured institutions and insures only deposits in FDIC-covered banks.
The US Treasury’s Office of Foreign Assets Control (OFAC) published a virtual currency guideline to encourage awareness of and compliance with due diligence standards and sanctions obligations. However, the cryptocurrency community has criticized OFAC for banning Tornado Cash and is suing it for exceeding its authority.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional money exchange systems. She is also fascinated by the blockchain technology and its function.
