Bitcoin familiarity is at an all time high, but trust remains an issue, and there is still a lot of uncertainty surrounding the legal status of the world’s most popular cryptocurrency. In many jurisdictions, Bitcoin legislation is patchy and fluid, even a decade after BTC’s invention.
The United States of America is no exception, especially as it is made up of a mosaic of states, each with its own laws. for example, in some places bitcoin trading is legal, while in others the practice is questionable. but the relative flexibility of US regulators to date has still attracted most of the industry’s innovation.
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Here, we take a look at the legality of bitcoin in the US, and the various activities associated with it, and update on recent developments.
the legal status of bitcoin in the united states under federal law
The two agencies most concerned about bitcoin at the federal level are the United States Securities and Exchange Commission (SEC), an independent agency of the federal government that enforces federal securities laws and regulates the securities markets, and the commodity futures trading commission (cftc ), which regulates the US derivatives markets, including futures, swaps, and some options.
Crucially, the sec has declared that bitcoin is not a security. meanwhile, the cftc declared, in 2015, that it is a raw material, like gold, and therefore subject to its regulations.
the legal status of bitcoin in the united states under state law
largely due to the fragmented legal system in the us. In the US, the situation regarding bitcoin is irregular; there are countless laws, and they vary from state to state.
Hawaii, for example, banned all cryptocurrency trading in 2014, but relented in 2018, now requiring anyone involved in bitcoin and cryptocurrency-related trading to apply for a money transmitter license.
new york, delaware, florida and kansas have also adopted regulations, but most states have not legislated on cryptocurrencies.
Wyoming stands out. “the state of the block chain” has passed more than a dozen laws facilitating trade for cryptocurrency companies and greater acceptance of cryptocurrencies, including granting digital currencies the same legal status as money and cryptocurrency. authorization for banks to hold digital assets in custody.
Although not due anytime soon, California’s “Digital Asset Regulation Bill” is designed to provide the state with similar regulatory clarity and (hopefully) position it as a potential hotspot for crypto businesses. it overwhelmingly passed the state senate committee in August and is now subject to a report.
is it legal to buy and sell bitcoins in the united states?
In many states, it is perfectly legal to buy bitcoin. In 2013, the US Treasury Department’s Financial Crimes Enforcement Network (FINCEN) guidelines established that it is legal to invest in bitcoin and use it as a form of payment, as long as the seller of the goods or services is willing to accept it. .
in fact, many us states. uu. they do not have explicit laws prohibiting the buying or selling of bitcoin. A good example is California, where the status of bitcoin is still undefined and therefore unregulated. the flexibility this offers has attracted crypto exchanges and other businesses to the state.
texas was the first state to publish a memorandum stating that a money transmitter license was not needed to sell bitcoins or other digital currencies. (The state also came close to passing a bill that would have prohibited the use of cryptocurrencies between unidentified parties.)
In Colorado, legislation passed in 2019 exempts cryptocurrency brokers from state licensing requirements in certain circumstances.
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But some states, including new york, new hampshire, new mexico, florida, and connecticut, are more hostile to bitcoin and require money transmitter licenses for cryptocurrency operators.
however, as of September 2020, 48 states have agreed to follow a single set of licensing rules. this means that businesses that already operate as money transmitters in one state automatically become eligible for a license in another participating state.
is it legal to operate a bitcoin ATM in the united states?
again, states have different laws for bitcoin ATMs. new york, for example, requires licenses for virtual currency financial intermediaries through its bitlicense. others have ruled that the act of transmitting money does not affect cryptocurrencies, and some have a more nuanced strategy. In Texas, for example, a license is only required if an ATM is connected to a cryptocurrency exchange, where bitcoin is purchased.
state guidance is changing. Last year, for example, Nevada unveiled new requirements for crypto ATM owners, requiring them to obtain a broadcast license.
is it legal to promote bitcoin in the united states?
Promotion of cryptocurrency markets may be illegal if the activity is interpreted as a pump and dump scheme, which the cftc defines as “coordinated efforts to create false demand (the pump) and then quickly sell (the dump). ) to make a profit.” taking advantage of merchants who are unaware of the scheme.”
Jake Chervinsky, attorney and general counsel for the decentralized finance startup complex, recently warned that such activity is just as risky with cryptocurrencies as it is with stocks and shares.
The same applies to insider trading, and the SEC or CFTC could go after crypto traders for tipping someone off or acting on a tip, according to Jason Gottlieb, an attorney and partner at the Morrison Law Firm. cohen based in new york.
is bitcoin mining legal in the united states?
In a word, yes. It is perfectly legal to mine bitcoins in the United States. If you’re interested in getting started, here’s our how-to guide to bitcoin mining.
is it legal to gamble with bitcoin in the usa? uh?
again, in most states, the current legal framework provides few clear guidelines on the use of bitcoin for gambling at online casinos, some of which now accept bitcoin.
so, in those casinos that accept it, betting with bitcoin is perfectly legal, and the same goes for lotteries, where tickets can be purchased with bitcoin.
is it legal to trade bitcoins in the usa? uh?
There are various definitions of what constitutes “trade”, so the answer here is complex.
And since there is no unified law governing cryptocurrencies, it is often up to individual states whether a money transmitter license is required.
pennsylvania, for example, published a guide in January 2019 on virtual currency trading platforms. the state clarified that they are generally not money transmitters under state law.
Federal law provides some clarification. defines a business as a money services business if it does more than $1,000 in business with one person in one or more transactions involving any type of money transfer services, such as foreign exchange or foreign exchange transactions. in these cases, a license is required.
united states compared to the rest of the world
The United States is considered one of the leading countries in terms of cryptocurrency regulation, which is why it sets the standard in much of the world.
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However, neighboring Canada was one of the first countries to draft legislation covering bitcoin, in 2014. Cryptocurrency is not legal tender in Canada, and digital currency dealers are regulated and licensed as trading companies. money services.
To date, Japan is the only country that has declared bitcoin to be legal tender. But authorities have recently cracked down on cryptocurrency exchanges, demanding they adopt better security measures.
Most countries are still debating the status of bitcoin. The UK, for example, appears to be in no hurry to regulate, and Russia has yet to publish its draft cryptocurrency bill.
some countries, such as india, bolivia, and ecuador, have made bitcoin completely illegal.
in 2018, china restricted bitcoin for private use only, banning all financial institutions from handling digital currency transactions.
the future legal status of bitcoin in the united states
October 2020 saw the release of the US Attorney General’s “Crypto Enforcement Framework”. The US, which noted that cryptocurrencies such as bitcoin are “critically important” to the US. uu. and its allies, as long as they “do not jeopardize” public safety. he also stated that private industry, regulators, and elected officials “shall take steps to ensure that cryptocurrency is not used as a platform for illegality.” exactly what those steps are, are not clear; however, the fact that the report highlights the “transformative potential” of the cryptocurrency suggests that an outright ban on bitcoin is out of the question.
that assessment appears to have been endorsed by interim comptroller of the currency brian brooks. Speaking on a CNBC broadcast in December 2020, Brooks, whose responsibilities include federal banking regulation, said U.S. regulators have no plans to ban bitcoin. brooks also promised “lots of good news for crypto” at the end of donald trump’s term.
It’s open to question whether that bitcoin-friendly approach will carry over to the presidency of joe biden. certainly bitcoin has a defender in the biden administration; its financial policy transition team is headed by former cftc president gary gensler, who previously taught a course at mit on the use of bitcoin and blockchain in finance, describing bitcoin as “a modern form of digital gold” in a 2018 congressional hearing.
That same year, in an interview with the new york times, gensler emphasized that bitcoin should remain exempt from securities regulations, while arguing that there was a “strong case” that ripple and ethereum did not meet values. In a December 2019 CoinDesk op-ed, Gensler described bitcoin as a “catalyst for change,” while also noting that crypto markets have been “rife with scams, fraud, hacking, and manipulation”.
In July 2020, the CFTC declared its goal to “develop a holistic framework to promote responsible innovation in digital assets” within its strategic plan for 2020-2024.
The plan recognizes that the derivatives markets have undergone a major digital transformation over the years, presenting many new opportunities and risks for traders.
The CFTC has also recently flexed its regulatory muscles. filed an enforcement action against the owners of the Bitmex exchange in October 2020, for operating an unregistered trading platform, among other charges.
Some industry insiders have interpreted this as a positive move and a necessary cleanup step before further regulatory innovation, such as the approval of bitcoin etf, can occur.
“I suppose that nothing will move in the legal aspect until these investigations are carried out, it is assumed that the existing legal framework is sufficient to regulate the space adequately for now”, andrés guadamuz, tenured professor of intellectual property law, in the university of sussex, uk said decipher.
But regardless of the legal uncertainty surrounding bitcoin, many enthusiasts will tell you that no matter who says you can’t use bitcoin, its decentralized nature ensures that no one can really stop it.
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