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Your Guide to U.S. Policy on Cryptocurrencies

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As the demand and use of cryptocurrencies rise, so does the ability of various governments to regulate them. Therefore, every country has separate standards, implying that certain governments back cryptocurrencies, while others don’t. For instance, the US alone handles more than 26% of the Bitcoin volume, according to Cryptocompare. With such a high market cap the US policy on cryptocurrencies not only becomes a requirement, but a necessity for the regulation of the crypto assets.

Need for policy on cryptocurrencies

The introduction of Bitcoin triggered significant innovation in uncharted areas. Currently, cryptocurrencies enjoy massive success with a complete market cap of $740 billion. Currently, there are more than 1400 different kinds of cryptocurrencies. Similarly, thousands of are created relating to these new digital assets.

Therefore, cryptocurrencies emerged as an unparalleled rival to traditional currencies. The disruption of the FinTech market by cryptocurrencies is helping to assess existing socio-economic theories and monetary models.

Therefore, companies and organizations more or less understand the technical aspects of the cryptocurrencies. This led to widespread institutional adoption. However, some ambiguity remain regarding the legality of cryptocurrencies.

In fact, cryptocurrencies create various legal hurdles for lawmakers such as:

  • The risk and danger of money laundering.
  • Regulating trade in foreign exchange considering the legal status of: securities, digital property, commodities, or other forms of assets.
  • Taxation issues.

The effect of legislation regarding cryptocurrencies on monetary policy

The monetary policy provides guidelines to central banks regarding the control of the country’s money supply. Banks achieve this by modifying the interest rates and compulsory bank reserves, issuing government bonds, and more. However, central banks only control the fiat money they issue, making the dollar the only US currency with legal tender.

Decentralized cryptocurrencies by-pass the conventional financial systems. Therefore, central and state banks have no control over them. Instead, the protocol rules in a decentralized cryptocurrency ecosystem acts as their monetary policy.

Consequently, if users continue to exchange dollars into cryptocurrencies, they could adversely influence the circulation of money. Eventually, this can fracture the country’s economy. However, currently this scenario is not likely considering the low adoption rate of cryptocurrencies. Nevertheless, the rising utilization of digital assets increases its disruption potential, necessitating improved regulations by the US government.

U.S policy on cryptocurrencies at state level

The US government has issued no regulations involving the use of cryptocurrency and the blockchain, in contrast to several states in the USA. For instance,

  • To regulate smart contracts and the blockchain, Arizona passed its Arizona House Bill 2417.
  • The data in a blockchain can be used as evidence in court without authentication according to a bill passed in Vermont.
  • Delaware also took a positive step towards embracing blockchain technology.

U.S policy on cryptocurrencies at Federal level

The ULC comprises a body of people with legal expertise appointed by the state government, including judges, lawyers, legislators, law professors, and legislative staff.

On October 9, 2017, the ULC (Uniform Law Commission) drafted a URVCBA ( Uniform Regulation of Virtual-Currency Business Act) at federal level.

The aim of URVCBA is the creation of a statutory structure that will enhance the unification regulations across different states. However, it regulates  “virtual currency business activity,” not cryptocurrency specifically.

According to the ULC , the definition of ‘virtual currency business activity’ refers to:

(1) exchanging virtual currencies for bank deposits, cash, or another virtual currency;
(2) transferring virtual currencies from one to another customer; or
(3) certain fiduciary or custodial services by which assets or properties under the control of custodians are identified as “virtual currencies.”

U.S policy on cryptocurrencies as per FinCEN

In the US, the primary CTF and AML legislation is known as BSA (Bank Secrecy Act), for which the FinCEN is the main enforcing agency. BSA pertains to securities, casinos, and other money servicing businesses.

In march 2013, FinCEN provided interpretive guidelines to explain the BSA with relation to cryptocurrencies, by which:

“A virtual currency is an exchange medium which operates as a currency in certain environments. However, this currency lacks other attributes of a real currency. Moreover, it possesses an equivalent value like a real currency or can act like a real currency substitute.”

Therefore, Bitcoin is one decentralized virtual currency according to FinCEN.

U.S Policy on cryptocurrencies as per the SEC

The SEC (US Securities and Exchange Commission) is an authority responsible for regulating securities, as well as derivatives thereof. The Securities Act of 1993 details their main legislation points.

The regulations by the SEC focus on two Bitcoin aspects:

(a) investments purchased using Bitcoin, and (b) investments in Bitcoin.

In the beginning of March 2018, the SEC indicated that digital currency should be viewed as a security. It aims to apply security relevant laws to all aspects of cryptocurrency ranging from the exchanges to crypto wallets. The agency focuses on ICO (Initial Coin Offerings), and strives to strictly regulate these as evidenced by the recent subpoenas obtained by the SEC.

U.S Policy on cryptocurrencies as per CFTC

The CFTC (Commodity Futures Trading Commission) is a regulatory body that oversees the on-off exchange trades with futures contracts. The CEA (Commodity Exchange Act) provides power to the CFTC.  It enjoys oversight over options, derivatives contracts, and futures, irrespective of the involvement of virtual currencies.

As per the CFTC, Bitcoin qualifies to be a commodity. CFTC states that virtual tokens can be classified as derivatives, contracts or commodities based on the specific circumstances and facts.

Christopher Giancarlo, the CFTC Commissioner is famous as a crypto friendly regulator. In  written testimony presented to the Senate Banking Committee, he advocated a “do-no-harm approach” towards ledger technologies.

U.S Policy on cryptocurrencies as per IRS

The IRS issued its guidelines in March 2014, explaining how the current tax principles would apply to virtual currencies like Bitcoin. According to the IRS, for tax purposes Bitcoin is regarded as a “property.”

The utilization of virtual currency depends on the means of their realization. In most cases, this refers to the fair market amount for the property received.


Different regulatory bodies in the USA have different definitions and policies for cryptocurrencies. As per SEC, virtual currencies are securities in some situations, while the CFTC treats them as commodities. For the IRS they are taxable like a property. Other entities categorize virtual currencies as money and funds, while many remain unsure of its status.

However, whatever policies pertain to cryptocurrencies, its important for investors to be aware of the regulations to avoid any unexpected loss.

Digital assets are volatile and small changes in the policies governing them has the potential to create large fluctuations in their prices.


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