In simple terms, cryptocurrency refers to a digital asset or currency that uses strongly secured online ledgers that are powered by blockchain technology.
The development and use of cryptocurrencies gained momentum after Bitcoin, the largest and oldest form of digital currency, was released in 2009. Now, popular businesses such as Subway and Norwegian Air have begun accepting payment in Bitcoins, with others following suit. However, this does not mean that the cryptocurrency situation is all rosy.
International Concerns with Cryptocurrency
Like most new technologies, digital currencies have been received with skepticism and even total shutdowns in some regions. Countries like China and Russia have restricted development, trading, and investment in cryptocurrencies.
There are concerns that this groundbreaking technology will become a breeding ground for all sorts of crime like fraud, ransomware, money laundering, sanction evasion, facilitation of international terrorism, and sale of illegal goods. In 2013, the FBI (Federal Bureau of Investigations) shut down one of the largest dark web syndicates known as Silk Road that enabled different crimes using Bitcoin.
Blockchain is a nascent technology and policymakers are yet to comprehend it enough to enforce laws. Some regions, especially developed countries, are slowly putting up legislation that will see the regulation of cryptocurrency.
Let’s look at what the US law says about digital currencies.
Is Cryptocurrency Legal in the US?
The US government has a positive outlook on cryptocurrency and even sees it as a key technology in enabling future innovations.
Towards the end of 2020, the US Treasury through FinCEN (Financial Crimes Enforcement Network) proposed new guidelines that promise safer cryptocurrency transactions. If accepted, the guidelines will require all banks to record any transaction involving digital currencies. Details that will be needed include both the sender and recipient’s details, as well as personal information for transactions exceeding $10,000 in a single day.
Cryptocurrency enthusiasts have complained that the guidelines go against the same thing that Bitcoin and other cryptos are preferred for; anonymity. This might also create a violation of privacy issue because some currencies, like Bitcoin, make all transactions public.
Besides this, the federal government has not enforced any other laws on digital currencies, leaving it to individual state governments.
US State Laws and Cryptocurrency
US laws on cryptocurrency differ according to state. It is crucial to find out what your state government mandates before engaging in any activity involving digital currency, lest you find yourself on the wrong side of the law.
In 2015, New York became the first region to develop state agency rules that would govern cryptocurrency rules and other states soon followed. The state of Wyoming has touted virtual currency as a possible driver for public service delivery and local economic growth, by creating a special depository bank for individuals and companies to transact safely with cryptos.
The Texas government has also passed a set of legislation concerning business entities and their use of ledgers and databases based on blockchain. If you have been arrested for a crime related to virtual currencies in Texas, consider contacting a Dallas criminal lawyer because the laws might be unclear.
You can find the full list of related state legislations here.
The IRS and Cryptocurrency
The Internal Revenue Services (IRS) refers to all forms of cryptocurrencies as “virtual currency.”
In March 2014, the IRS introduced new guidelines stating that virtual currencies would be taxable as property. This means that general tax laws applied to assets regarded as property would apply to cryptocurrency transactions as well.
Additionally, the tax guidelines required individuals to disclose any transactions, mining activities, and payments made in virtual currency. Failure to disclose or any attempt to underreport the values involved in such transactions might attract fines and other penalties.