Cryptocurrency Act of 2020
The Cryptocurrency Act of 2020 is a United States federal legislation passed in December 2020 that provides clear guidelines and regulations for cryptocurrencies. The act was signed into law by President Donald Trump and went into effect on January 1, 2021. It seeks to provide clarity and security to the cryptocurrency industry while protecting investors from fraud or manipulation.
The act establishes three distinct categories: digital currencies, digital securities, and stablecoins. Digital currencies are defined as those used as a medium of exchange with no central control or backing by any government or other legal entity; these include Bitcoin, Ethereum, Litecoin, Dogecoin and many others. Digital securities are those that represent ownership interests in public or private companies such as stocks and bonds; they include security tokens issued through initial coin offerings (ICOs). Stablecoins are pegged to existing assets such as the US Dollar or gold; examples include Tether USDT and Paxos Standard PAX.
Under this act, the Financial Crimes Enforcement Network (FinCEN) will be responsible for enforcing anti-money laundering measures relating to cryptocurrency transactions. Companies providing custodial services must adhere to KYC/AML requirements set by FinCEN in order to maintain compliance with this new regulation. In addition, financial institutions offering custody services must meet cybersecurity standards established within the scope of the legislation’s provisions for consumer protection against fraudulent activities associated with cryptocurrencies .
Overall, this groundbreaking piece of legislation brings much needed clarity to an otherwise murky field – allowing both consumers and businesses alike greater peace of mind when engaging in cryptocurrency transactions without fear of criminal prosecution due to non-compliance with financial laws.[1]
