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Reasons for Cryptocurrency Regulations in The United States

The times when cryptocurrencies were viewed as unreliable are long gone. Not only are things becoming more secure and transparent but more people who are not necessarily in tech are joining in the fun.

As the market expands and more people are starting to trade and invest, concerns are rising with the regulatory bodies. And that’s not without reason. Financial crimes are happening both in the real and digital world. All of this called for putting rules and regulations in place that will keep things under control.

Timeline of US cryptocurrency regulations highlighting IRS, SEC, and FinCEN roles.
Source: Coinbackyard

Key Takeaways

  • Cryptocurrency Regulation in the US: Regulatory bodies such as the IRS, SEC, and FinCEN oversee cryptocurrency regulation in the United States.
  • Shift Towards Aggressive Regulation: From 2020, the U.S. Treasury Department adopted a more aggressive stance to minimize financial crime.
  • Taxation by the IRS: The IRS treats cryptocurrencies as property and taxes capital gains. Holding assets for over a year may result in short-term capital gains taxation.
  • SEC’s Viewpoint: The SEC considers the crypto market akin to a stock exchange, enforcing regulations accordingly.
  • Importance of Record-Keeping: Crypto owners in the US are advised to maintain detailed records of their positions for tax purposes.
  • Recognition by FinCEN: FinCEN began recognizing digital assets as viable alternatives to traditional currency in 2012.
  • Regulation under BSA: Cryptocurrencies fall under the same regulatory bracket as conventional money transmitters.
  • CFTC’s Classification: The CFTC classifies cryptocurrencies as commodities, allowing them to be traded on public derivatives markets.
  • Enforcement Actions by CFTC: The CFTC has taken action against unregistered Bitcoin futures exchanges and more.
  • Multifaceted Approach: The CFTC emphasizes the importance of educating consumers, gathering market intelligence, etc. to effectively manage digital assets.

How is Crypto Regulated in the US

The bodies that regulate cryptocurrency are mostly agencies like the Department of Treasury, Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), and Financial Crimes Enforcement Network (FinCEN).

The approach was mainly relaxed until 2020 when the U.S. Treasury Department took a more aggressive stance with crypto markets. The goal was to lower financial crime to a minimum.

Why is There a Need for Crypto Regulation?

The IRS views crypto as property and charges taxes for capital gains. For instance, if you hold an asset for over a year, the IRS can tax you with short-term capital gains.

Unlike the IRS, the SEC treats the crypto market as a form of stock exchange.

If you are a crypto owner in the US, make sure you keep your records regarding positions. Keep all the receipts, exchanges, sales, and other transactions. This is important for tax purposes.

Are there Issues Concerning Cryptocurrency Regulation?

Meanwhile, the Financial Crimes Enforcement Network doesn’t view cryptocurrencies as legal tender. In 2012, it began acknowledging digital assets as a viable alternative to traditional currency.

This categorization placed them in the same bracket as conventional money transmitters. Those are entities that handle currencies, funds, or other forms of value for a currency controlled by someone else. These money transmitters have long been subject to regulation under the Bank Secrecy Act (BSA).

The Commodities Futures Trading Commission (CFTC) has classified cryptocurrencies as commodities, permitting them to be traded on public derivatives markets. Since making this determination, the CFTC has intensified its oversight of the cryptocurrency sector. It has taken action against unregistered Bitcoin futures exchanges and cracked down on activities like wash trading. It also prearranged trades and addressed instances of Bitcoin-related Ponzi schemes.

According to the CFTC, effectively managing digital assets requires a multifaceted approach. This includes educating consumers, gathering market intelligence, ensuring robust enforcement of regulations, and coordinating efforts across government agencies.

April 3, 2024 at 5:00 am

Updated April 3, 2024 at 5:00 am


Remember, investing in cryptocurrencies involves risks, and it’s important to conduct thorough research and seek professional advice before making any financial decisions. (Please keep in mind that this post is solely for informative purposes and should not be construed as financial or investment advice.)


In the United States, the IRS, SEC, and FinCEN are the main bodies regulating cryptocurrency, focusing on taxation, market regulation, and financial crime prevention, respectively.

Regulation aims to minimize financial crimes, ensure tax compliance, and maintain market integrity, making the digital currency space safer and more transparent for investors and users.

The SEC views cryptocurrencies similarly to stock exchanges, applying regulatory measures to protect investors and ensure fair market practices.

Detailed record-keeping helps cryptocurrency owners accurately report transactions for tax purposes, complying with IRS requirements and avoiding legal issues.

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