US cryptocurrency regulation has become a hot topic in recent months. After years of dismissive dialogue coming from traditional financial institutions and governments, US cryptocurrency regulation is finally coming into the spotlight as major institutions and central banks show increasing interest in blockchain technology and digital currencies.
The federal government of the United States of America is known for enacting strict regulatory measures regarding anything to do with its financial system. Currently, it doesn’t recognize cryptocurrency as legal tender. However, cryptocurrency exchanges are operational, but the states regulate them. So, each regulation regarding cryptocurrency like Bitcoin varies from one state to another. Usually, cryptocurrency activities are decentralized, meaning that the government does not control them since it uses highly encrypted blockchain technology. For instance, it is permissible to purchase Bitcoin anonymously because it uses encrypted wallet addresses rather than revealing the user’s account information.
Advancements in cryptocurrency encryption and anonymity have triggered a series of illicit activities such as black market purchases, tax evasions, and cybercrimes over the years. Following that, the US government is forced to issue various regulations to maintain its financial security and protect investors. If you were wondering where government regulation comes in with regard to cryptocurrencies, now you have an idea. Regulation of cryptocurrencies is beneficial for any country because it opens up new opportunities to engage in dialogue with the crypto ecosystem to eliminate dubious activities.
US Cryptocurrency Regulation
As mentioned earlier, the US cryptocurrency is based on local governments’ regulations. Moreover, the different central authorities elucidate the US cryptocurrency law in various forms. For instance, one of these authorizations, the Financial Crimes Enforcement Network, does not recognize any cryptocurrency as a lawful tender, therefore it is not accepted at any relevant formal commercial activities. But it acknowledges cryptocurrency trades as monetary co-operations. However, every cryptocurrency exchange platform is obligated to follow the regulatory laws and is subject to the digital currency supervisory authorities.
The Cryptocurrency Bill
This year, Paul Gosar of Arizona advanced a proposal to the legislation house acknowledged as the Cryptocurrency Act of 2020 to clarify the legislation and matters encompassing cryptocurrencies. The bill distinguishes digital currencies as a growing industry, and for institutions, businesses, and individuals to participate, there must be explicit guidelines that govern it. Its objective is to define which special authorities will facilitate licensing and certification of crypto trading platforms and how they will do so. Every institution that would like to expedite digital assets deals should liaise with and seek state approval. The cryptocurrency bill of 2020 blueprints the different regulatory bodies of digital currencies. The Financial Crimes Enforcement Network (FinCEN) is the principal jurisdiction and controller of digital currencies.
The proposal further suggests that every cryptocurrency trade be verified in the same way as conventional money. That gives FinCEN the jurisdiction to crack down on any illegal cryptocurrency activity. This could curb any illicit activities associated with digital currencies because the regulatory body will trace individuals affiliated to cryptocurrency trade. The bill seeks to stop illegal actions such as black market sales, funding terrorism, tax evasion, etc. conducted in the form of cryptocurrencies by thrusting statutory authority to supervisory bodies. Bitcoin stakeholders have upheld the proposal to ensure the digital currency industry gets all the clarity it deserves to thrive and end its negativity.
Regulation Forecast 2021
As the different cryptocurrency supervisory authorities compete in overseeing the digital currency activities, there was another hint of strict control measures as we approach 2021. This year, the US treasury secretary addressed the digital currency users, saying that there would be further stringent measures to control the digital money exchange movements that will seek to curb illegal cryptocurrency deals and the crackdown on such users.
Following that, a 2021 Cryptocurrency Intelligence Program plan was proposed to form a new way of tracing digital currency trades to unravel illegal transactions. As the state begins its initial stages of adopting the blockchain technology, the program provides new tax compliance and terms. That is to make it straightforward for the financial system to integrate blockchain technology into its financial system as it focuses on whether to adopt digital money in its financial system. Currently, the pandemic has caused a slow enactment of these regulations because the economy has suffered a plunge as the government battles the virus’s effects.
Although crypto trades are allowed in the US, they are not incorporated into its financial system. As we approach the final stages of the US elections, the digital currency regulations are expected to change, despite uncertainties of who will clinch the big seat.
Even as economic experts argue that digital currency will be the next big success for economies, the US is keen on protecting the dollar’s dominance. The dollar is prominent in the international financial markets, with many countries using it as the global currency. Since there are proposals for the US to adopt blockchain technology, the digital currency laws are subject to adjustment for the better, meaning that mass adoption of cryptocurrency could be implemented on a state level by introducing higher standards of US cryptocurrency regulation.
SPECIAL NOTE: Thank you to our guest writer Judy Smith for contributing this article.
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