Even after being in existence for over thirteen years, lawmakers and regulators have not been able to come up with a consensus on cryptocurrencies. We are still unclear about whether cryptocurrencies like Bitcoin are a currency, a store of value, security, product, or commodity.
This has the potential to create multiple problems, most notably with regard to regulations like taxations. It is important that the USA adopt a consensual position among its differing authorities as other countries are looking up to the USA for guidance on these matters.
In this article, we are going to discuss all that you need to know about the various regulations on Bitcoin in the United States. However, before we begin, we will look at why it is difficult to classify cryptocurrencies under one common framework.
The Difficulty in Regulating Bitcoin for US Authorities
Many countries like Germany, Australia, and France have legalized the use of Bitcoin. They have also adopted formal legislation to make them an integrated part of the economy. However, the USA has been unable to do that.
The main regulatory bodies or authorities in the USA are still vying as to what they are going to classify cryptocurrencies. This becomes difficult, as not all cryptocurrencies are the same. They differ in the way they are mined, what kind of network they run on, and ten other different things.
If you classify Bitcoins under a currency framework, the regulations are quite limited and lax in nature. However, if you start treating them as a store of value (commodities) then the regulations become much stricter in nature. As we know, Bitcoin is both- a currency as well as a store of value!
How does the different Regulatory Authorities Classify Bitcoin in the USA
We need to point out that as the USA is a federation, laws governing Bitcoins are not the only federal in nature, but also vary according to the different states. While some states treat them as currencies, others consider them like ‘property’.
- Many big authorities in the USA like the FCEN or the Financial Crimes Enforcement Network does not even consider Bitcoin as any legal tender. However, in recent years, it has started looking at Bitcoin as a form of property rather than a currency.
- The Internal Revenue Service or the IRS, which deals with taxations, labels Bitcoin as property and applies long-term capital gains to its taxation laws. The IRS is in many ways, an authority, which has some definite identity as to what Bitcoins are.
- The SEC has come down hard on Bitcoins and considers Bitcoins as securities as against property or a form of currency. This means that it becomes subject to a corresponding set of laws of the SEC, which are different from the IRS or the FCEN.
- The US Treasury has called for evolving stricter laws for regulating crypto and Bitcoin transactions of a cross border nature. It feels that the rise in Bitcoin can act as a threat to the superiority of the dollar. However, the same is under consideration.
How has the COVID-19 Pandemic changed the US Stance on Bitcoin?
For a very long time, the dilly-dallying attitude of the US authorities made any formal integration of Bitcoins into the US financial system impossible. However, all this changed as the Coronavirus pandemic hit the USA. Jack Dorsey.
The founder of Twitter secured low-interest rates for his crypto-based app, Square to help in processing aid and payments to people most affected by the pandemic. He was able to get the consent of many significant individuals in the government.
This has opened conversations on the Digital Dollar and how it should be evolved to help the USA maintain its position as a global leader. Threats from China venturing into the field and the coming about of the Digital Yuan are two main reasons why the digital dollar is picking up pace.
The Final Word
The rise of Crypto Exchanges and Trading Platforms like Bitcoin Guide is also pushing the discourse mainstream. With a major chunk of the American people looking at Bitcoins as a serious source of investments, the government is forced to change its stance and regulations on the cryptocurrency.