The US Government and Cryptocurrencies
Cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. As a decentralized form of money, cryptocurrencies have generated much debate in terms of their legal status within different jurisdictions due to their lack of physical form and central authority. Many countries have taken various approaches towards regulating or outright banning digital currencies. This article focuses on the United States government’s stance on cryptocurrency.
Legal Status
In March 2014, the U.S Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidance interpreting how existing regulations apply to certain activities involving virtual currencies like Bitcoin. The ruling determined that any person engaged in “administering,” “exchanging,” or “using” virtual currency must register with FinCEN as a Money Services Business (MSB). Additionally, MSBs are required to implement anti-money laundering programs that comply with Bank Secrecy Act requirements for money transmitters such as recordkeeping requirements and customer identification procedures.
Since then there has been no comprehensive federal regulation regarding cryptocurrencies at either state or federal level; however several states have enacted laws related to cryptocurrencies including New York State’s BitLicense program which requires companies dealing in Bitcoin and other digital assets obtain authorization from the state’s Department Of Financial Services (DFS). While some agencies like DFS are putting forth efforts toward regulating these new forms of payments systems it is still uncertain whether this will result in more wide spread adoption by both businesses and consumers alike throughout America.
Taxation
In Notice 2014–21 released by IRS on March 25th 2014 it was established that Bitcoin should be treated like property when determining taxes based upon capital gains rather than being considered as currency itself; thus making them subject to taxation similar to other investments held by individuals or corporations under current US tax law.. Furthermore, since most crypto exchanges do not keep records they can easily be used anonymously without reporting income generated through trading unlike traditional stock markets where all transactions need documentation for tax purposes making it difficult for governing bodies such as IRS track down those evading taxes using cryptos .
With its ever increasing popularity over recent years cryptocurrency has become an increasingly important topic within global regulatory frameworks; while many countries around the world are actively considering legislation around this technology very little action has been taken here in America yet despite its potential implications both economically and politically speaking . In absence of any sort concrete laws currently exist , users should remain vigilant about staying compliant with applicable rules regarding use crypto funds until authorities provide further clarity moving forward .
