Ten Facts about U.S. Crypto regulation

Whenever a new financial asset is created — such as derivatives — regulators impose guard rails to prevent the financial system from blowing up. This article looks at ten things you ought to know about.


Henri Kouam

3 years ago | 6 min read


The price of Bitcoin and other cryptocurrencies have gone through wild swings. Interest from public investors, experts and regulation have surged, but the future regulatory framework for digital assets is complex and uncertain.

Prior to COVID-19, monetary policy was the new game in town. But cryptocurrencies appear be the leading cause of worry amongst regulators across the world. The U.S. is more accommodating about cryptocurrencies, but China has imposed an outright ban, while Europe continues to straddle the regulatory line.

Whenever a new financial asset is created — such as derivatives — regulators impose guard rails to prevent the financial system from blowing up. This article looks at ten things you ought to know about.

1). Cryptocurrencies are a legitimate Asset

U.S. regulators define the term crypto or “crypto-commodity” means economic goods or services, including derivatives, that —

(A) have full or substantial fungibility;

(B)the markets treat with no regard as to who produced the goods or services; and

©rest on a blockchain or decentralized cryptographic ledger.

2). Very little has actually been done to regulate cryptocurrencies

Outside the H.R.6154 — Crypto-Currency Act of 2020, little rule making has occurred and state legislation appears to be diverging from Federal legislation. There is a risk of overregulating the sector and while its only gaining broad-based appeal amongst investors, most U.S. policy makers see innovation as something to celebrate.

Although President Joe Biden’s nominee to chair the U.S. Securities and Exchange Commission (SEC), Gary Gensler, is generally seen as crypto-friendly and knowledgeable, the broad task of regulating digital assets is up to him and several agencies such as the Securities and Exchange Commission (SEC), the Commodities and Futures Trading Commission ( CFTC), the Treasury via the IRS, the Office of the Comptroller (OCC) and the Financial Crimes Enforcement Network (FinCen).

3). State and Federal regulations Differ

While congress passed the Crypto Act of 2020, several states have proposed alternative laws affecting cryptocurrency or blockchain technology. Two approaches have generally been applied. Some states have passed favorable regulation to exempt cryptos from state securities laws or money transmission statutes.

For example, Wyoming are seeking a broader impact on the local economy and has legislated for a special purpose depository institution to facilitate crypto-related activity. The new bank will act in custodial or fiduciary capacity, which allows businesses hold digital assets safely and legally.

Colorado passed a bi-partisan bill that exempts cryptos from state regulation. Oklahoma passed a bill that allows cryptos to be offered, exchange and sold as well as accepted by all government institutions. This should lead you to ask if your taxes will be paid in cryptos. Well, in Ohio, you can now pay your taxes in cryptocurrencies.

Conversely, not all states see cryptocurrencies as something to celebrate; Iowa has passed a bill that prevents government agencies from receiving cryptos as forms of payment. Authorities in states such as Maryland and Hawaii have issued warnings about investing in cryptocurrencies. New York, meanwhile, has eased its restrictions for obtaining a “Bitlicence” in hopes of luring back cryptocurrency companies who left it imposed stringent and antagonistic regulation.

4). The CFTC is watching for any market manipulation

Several cryptocurrencies have what is referred to as whales. A person or entity that owns a large amount of a cryptocurrency and whose activities can be potentially market moving.

Additionally, futures, options, swaps and derivatives that make reference to cryptocurrency are subject to regulation by the Commodity, Futures and Trading Commissions. The CFTC is likely to watch closely as both the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange offer futures linked to Bitcoin.

Meanwhile, the SEC is clear that any coin with a utility can be considered an asset. So cryptocurrencies are a new asset class. In 2018, William Hinmann the SEC’s Director of Corporate Finance issued a statement which hinted that a token’s utility does not preclude it from being called an asset; So happy investing!

5). Anti-money laundering laws and requirements

Every money transmitter — nerd talk for crypto exchange — must conduct a comprehensive risk assessment of its exposure to money laundering and implement an anti-money laundering (AML) program based on such risk assessment.

This means that regulators are allowing crypto exchanges to do their bidding to prevent any undue interference with market-making mechanisms (See FIN-2013-G001), Application of Persons Administering, Exchanging or Using Virtual Currencies ( March 18, 2013).

For exchanges, such programs must incorporate written policies, procedures and internal controls, reasonably designed to prevent cryptos from facilitating money laundering and terrorist activities. They must equally have a compliance officer and provide training for appropriate personnel.

All companies are required to freeze or block the assets of entities that are currently under U.S. sanctions i.e. Specially Designated Nationals and Blocked Entities (SND List) and the U.S. Department of Treasury Office of Foreign Assets Control (OFAC).

6). Decentralized Finance (Defi) is a Challenge for AML regulation

Another tensions for regulations is Defi, which is a decentralized version of various traditional financials instruments with a focus on lending, exchanging and borrowing assets. It equally includes the creation of synthetic assets. For example, Uniswap is a decentralized exchange in the form of two smart contracts hosted on the Ethereum blockchain.

There is no customer identification vetting process, which makes it the perfect vehicle to circumvent anti- money maundering laws. There is currently $5 billion locked into DeFi contracts.

7). Taxation

The IRS declared in March 2014 that cryptocurrencies such as Bitcoin will be taxed as property and not currency. Individuals will have to keep detailed records on any gains or sale from cryptocurrencies.

You will equally pay taxes on any gains made from selling or any mined cryptocurrency you get. If you’re filing a Federal Income Tax Return, the gains or losses from a virtual currency held as a capital asset should be reported on

i) Schedule D of IRS form 1040

ii)IRS Form 8949 (Sales and other dispositions of capital assets)

iii) Each transaction should be reported on form 8949

Finally, any gains made on your cryptos held for one year or less is subject to income tax. This could discourage people from using cryptos to buy goods and services, hence limiting their value as a useful asset.

8). Crypto innovation is welcome in Arizona

Arizona is the first state to adopt a “regulatory sandbox” to support nascent or emerging industries such as fintech, blockchain and cryptocurrencies within its border. State laws grant relief for innovators who bring their product to market within the state and companies are able to test their project for up to two years and serve as many as 10,000 customers before needing to formalize their operations. Other states have since followed suit, with the likes of Hawaii, Kentucky, Nevada, Utah, Vermont and Wyoming creating similar policies.

9). if you can trade you can’t always mine cryptos!

The general rule of thumb is that you may mine cryptos here it is legally allowed to buy or sell them. If owning is illegal -say in China — you almost certainly cant mine. There are no cities in the U.S. where cryptos are illegal. However, in Plattsburgh, New York, it is illegal to mine cryptocurrencies, probably sue to the huge environmental implications. Meanwhile, the U.S. Marine Corps banned crypto mining apps from all government-issued mobile devices.

10). Estate Planning and Succession

Thera re very few millennials who haven’t thought of life after the struggle. There are not effective legal structures that enable you to pass on cryptocurrencies and tax planning's only being fully developed. However, if you’re a parent with a portfolio worth hundreds of thousands or millions, then you may have to rly on your credential for them to benefit from your assets.

Single device wallets with private keys may be your single best bet at this time. The instructions in any wills must be written clearly with relevant information divulged to ensure the beneficiary enjoys whatever coins you’re leaving behind. A bit morbid, but I thought I'd think about life after cryptos.


The U.S; has passes a range of laws and regulations regarding cryptos and some people are still skeptical of digital assets. this article gives an overview of ten things to remember about U.S. crypto regulation to ensure you are informed about the implications of any investments you make.


Created by

Henri Kouam







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