In the letter
- Under federal law, Bitcoin is defined as a commodity.
- But a patchwork of state laws means that the legal status of the activities associated with it varies across the United States.
- Bitcoin’s legal status is currently evolving in the United States and elsewhere.
Familiarity with Bitcoin 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, legislation on Bitcoin is patchy and fluid, even a decade after the invention of BTC.
The United States of America is no exception, not least because it is made up of a patchwork 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 always attracted the bulk of industry innovation.
Here, we take a look at the legality of Bitcoin in the United States, and the various activities associated with it, and take stock of recent developments.
The legal status of Bitcoin in the United States under federal law
The two agencies most concerned with 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 (CTFC), which regulates US derivative markets, including futures, swaps, and certain options.
Importantly, the SEC said that Bitcoin is not a security. Meanwhile, the CTFC said in 2015 that it is a merchandise, like gold, and therefore subject to its regulations.
The legal status of Bitcoin in the United States under state law
In large part because of the fragmented legal system in the United States, the situation regarding Bitcoin is uneven; there are a myriad of laws, and they vary from state to state.
Hawaii, for example, prohibits all cryptographic operations in 2014 but surrendered in 2018, and now requires anyone involved in Bitcoin and cryptocurrency transactions to apply for a money issuer license.
New York, Delaware, Florida, and Kansas also have regulations, but the majority of states do not have cryptocurrency legislation.
Wyoming stands out. ” The state of the blockchainPassed more than a dozen laws making it easier for cryptocurrency companies to trade and wider acceptance of crypto – including giving digital currencies the same legal status as money and allowing banks to keep digital assets.
Although it is not due anytime soon, California ” Digital Asset Regulation BillIs designed to provide the state with similar regulatory clarity and (he hopes) position it as a potential hotspot for crypto firms. It was passed by an overwhelming majority by the State Senate Committee in August and is now the subject of a report.
Is buying and selling Bitcoin legal in the United States?
In many states, it is perfectly legal to buy Bitcoin. In 2013, the US Department of the Treasury Financial crime repression network (FINCEN) states that it is legal to invest in Bitcoin and use it as a method of payment, as long as the seller of the goods or services is willing to accept it.
In fact, many states in the United States do not have explicit laws prohibiting the buying or selling of Bitcoin. A good example is California, where Bitcoin’s status is not yet defined and therefore is not regulated. The flexibility this offers has attracted crypto exchanges and other enterprises to the state.
Texas was the first state to publish a memorandum stating that no money issuer license was required to sell Bitcoin or other digital currencies. (The state also nearly passed a bill that would have banned the use of cryptocurrencies between unidentified parties.)
Au Colorado, legislation passed in 2019 exempt cryptocurrency brokers state licensing requirements in certain circumstances.
But some states, including New York, New Hampshire, New Mexico, Florida, and Connecticut, are more hostile towards Bitcoin, requiring money issuer licenses for cryptocurrency operators.
In September 2020, however, 48 states agreed to follow a single licensing rules. This means that companies that already operate as money issuers in one state automatically become eligible for a license in another participating state.
Is operating a Bitcoin ATM legal in the United States?
Again, states have different laws for Bitcoin ATMs. New York, for example, requires licenses for financial intermediaries in virtual currency through its BitLicense. Others have ruled that 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.
The orientations of the State are evolving. Last year, for example, Nevada unveiled new requirements for crypto ATM owners, requiring them to obtain a transmission license.
Is promoting Bitcoin legal in the United States?
Promoting cryptocurrency markets may be illegal if the activity is interpreted as a pumping and emptying diagram, which the CTFC defines as “a coordinated effort to create false demand (the pump), then sell quickly (the dump) for profit by taking advantage of traders who are unaware of the system.”
Jake Chervinsky, lawyer and general counsel for decentralized financial start-up Compound, recently warned that such activity is just as risky with cryptocurrencies as it is with stocks and stocks.
The same goes for insider trading and the SEC or CFTC could sue crypto traders to inform someone or act on a tip, according to Jason Gottlieb, a lawyer and partner at New York-based law firm Morrison Cohen.
Is Bitcoin mining legal in the United States?
In short, yes. It is perfectly legal to mine Bitcoin in the United States.
Is gambling with Bitcoin legal in the United States?
Again, in most states, the current legal framework provides little clear guidance on how to use Bitcoin for gambling at online casinos, a number of which now accept Bitcoin.
So, in casinos that accept it, betting with Bitcoin is perfectly legal, and the same goes for lotteries, where tickets can be bought with Bitcoin.
Is trading with Bitcoin legal in the United States?
There are different definitions of what constitutes “trading”, 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 issuer license is required.
Pennsylvania, for example, released guidance in January 2019 on virtual currency trading platforms. The State clarified that, generally, they are not money issuers under state law.
Federal law provides some clarifications. He defines a company as a Money services business if he conducts business for more than $ 1,000 with a person in connection with one or more transactions involving any type of money transfer service, such as foreign exchange or foreign exchange transactions. In these cases, a license is required.
The United States versus the rest of the world
The United States is considered one of the top countries when it comes to cryptocurrency regulation, so it sets the tone for much of the world.
However, it was neighboring Canada that was one of the first countries to develop legislation covering Bitcoin, in 2014. Cryptocurrency is not legal tender in Canada, and digital currency merchants are regulated and licensed. as money services businesses.
To date, Japan is the only country to have declared Bitcoin will be legal tender. But local authorities recently cracked down on cryptocurrency exchanges, demanding they adopt better security measures.
The majority of countries are still debating the status of Bitcoin. The UK, for example, doesn’t seem in a rush to regulate, and Russia has yet to release its cryptocurrency bill.
Some countries, like India, Bolivia, and Ecuador, have made Bitcoin completely illegal.
In 2018, China restricted Bitcoin to private use only, prohibiting 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 United States Attorney General’s Cryptocurrency Enforcement Framework, which noted that cryptocurrencies such as Bitcoin are “of vital importance” to the United States and its allies, as long as ‘they do not “endanger” public safety. He also said that the private sector, regulators and elected officials “will need to take action to ensure that cryptocurrency is not used as a platform for illegality.” We do not know exactly what these steps are; nonetheless, the fact that the report highlights the cryptocurrency’s “transformative potential” suggests that an outright ban on Bitcoin is out of reach.
In July 2020, the CTFC declared its goal to “develop a holistic framework to promote responsible innovation in digital assets” within its 2020-2024 strategic plan.
The plan recognizes that derivatives markets have undergone a significant digital transformation over the years, presenting many new opportunities – and risks – for traders.
The CTFC has also recently refined its regulatory muscles. He filed a action coercitive 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 step and a necessary clean-up step before further regulatory innovations can occur, such as a Bitcoin ETF approbation.
“I guess nothing will move on the legal side until these investigations are completed, the assumption is that the existing legal framework is sufficient to regulate the space adequately for the moment”, Andres Guadamuz, senior lecturer in Intellectual Property Law, University of Sussex, UK, said Decrypt.
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 nobody can actually Stop you.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.