Given the inherent issues of this new financial ecosystem, it is crucial to understand how governments and courts deal with cryptocurrency’s impact on society. In addition, you can visit https://bitcoin-banker.io/, to execute profitable trades even if you don’t have any prior experience in bitcoin trading.
This comprehensive guide will help you understand the legal issues surrounding cryptocurrencies, what is happening worldwide in regulation, and more. First, but, it’s time to take a primer on where we stand today in this critical area.
A forward-thinking and enthusiastic individual or group of individuals came up with the idea of a currency that any government or central bank does not back. Think of it as the type of money you would use in a video game while at the same time not being able to be used as legal tender. Instead, its value would be based solely on its adoption by merchants and consumers and its market demand. It has manifested into what is known today as cryptocurrency.
Cryptocurrencies are a subset of digital currencies – think Venmo and PayPal that you can use for transactions. An example is Bitcoin, the first cryptocurrency to hit the market. Before Bitcoin, there was e-gold, but the owner essentially shut it down in 2009 for money laundering.
The idea of creating a currency that a government or central bank would not control has been percolating for decades. A cryptocurrency is a digital, sometimes virtual or intangible currency, designed to be used as a medium of exchange.
How Should Cryptocurrencies Be Regulated?
Today there are thousands of cryptocurrencies. Deciding what is legal and illegal can be very challenging for financial institutions, regulators, government officials, and law enforcement. And this is where blockchain technology comes in. This has significant implications for governments, financial institutions, and law enforcement agencies because they will have to put laws specifically for each cryptocurrency they are currently trying to regulate. The United States is further complicated because no federal regulatory agency tells financial institutions what they can and can’t do.
To clarify the issue of cryptocurrency regulation, there have been international attempts – so far unsuccessful – to create a global cryptocurrency regulations body. For example, on January 10, 2017, the United States Department of Treasury and the Commodity Futures Trading Commission (CFTC) released a joint statement on cryptocurrencies. “The U.S. government has taken important steps to combat fraud and misconduct in virtual currency markets,” both agencies said.
Dealing with the Bitcoin Regulatory Platypus:
It is crucial to note that no current federal law governing cryptocurrency exists in the United States. It means that it is up to each state and local government as to how they want to deal with Bitcoin or other cryptocurrencies, for that matter. It makes the issue of U.S. regulation for cryptocurrencies extremely difficult, especially given that Bitcoins are traded across many state lines. In addition, cryptocurrency trading platforms outside of the U.S. can be regulated differently from those within the U.S., which makes regulation and compliance difficult for cryptocurrency companies within the States.
State Money Transmitter Licenses
The first step in setting up a money transmitter business in any country must be to apply for a money transmitter license from a state agency (or other applicable jurisdiction). For example, a company can work with a state’s Secretary of State to obtain an “S” license in exchange for fees.
In the U.S., money transmitters are classified as “money service businesses.” Applicants must also comply with anti-money laundering (AML) laws, which vary from state to state, and legit cryptocurrency exchanges are correspondingly listed under this category. In addition, some states require banks to report suspicious transactions, while others do not.
Cryptocurrency and the IRS:
The tax regime for cryptocurrency can be very complicated. Regulators must balance protecting consumer rights while not stifling the development of this new financial ecosystem. It is vital in today’s world, where crypto companies are forced to go abroad in search of places that will accept them.
While some companies have tried to get around trade restrictions and other regulations by moving abroad and basing their operations outside of the U.S., others stay put and continue lobbying for regulatory changes from within the country.
Coinbase, San Francisco-based cryptocurrency exchange, has filed a petition with the Securities and Exchange Commission (SEC) to let it become a registered brokerage and trading venue. It would enable the company to offer its services in every state in the U.S. while allowing its investors to benefit from specific protection under federal law.
The current Tax regulations for cryptocurrency are insufficient. They have led to conflicting rulings from federal courts on how to treat cryptocurrencies for tax purposes and create obstacles for individuals conducting cryptocurrency transactions. The House of Representatives is tried to take care of this issue by introducing new legislation known as the “Virtual Currency Tax Reform Act.