While cryptocurrency is a relatively new technology that has only gained attention and popularity over the last few years, governments of the world have had to keep up when it comes to applying laws and regulations to the systems to help prevent things like fraud, laundering, and general misuse with what the technology can do.
In today’s post, we’re going to focus on the U.S. laws surrounding cryptocurrency, detailing what they are, what they do, and why they’re enforced, all, so you know exactly what you’re dealing with.
- The Governing Bodies of Cryptocurrency
Cryptocurrencies are monitored and regulated by several organizations in the U.S. These include the Securities and Exchange Commission (SEC), the Commodities and Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), and then others, including the Internal Revenue Service (IRS), and the Department of the Treasury.
As you can imagine, there’s a lot going on when it comes to all these factions making rules and working together, but the main laws come down to ensuring money is handled legally, and that the technology isn’t misused.
2. Cryptocurrency Security Laws
Federally, the U.S. has passed several security laws over the years, mainly from the SEC. The law states that cryptocurrency is a digital asset, or token, and sees cryptocurrency as the substance of a transaction, rather than the form, which is especially helpful since there are many cryptocurrencies out there. This is made true by the case of Reves v.Ernst & Young 494 U.S. 56, 61 (1990) where investments are regulated, despite whatever form they are made in.
3. Sales Regulations
The sale of cryptocurrency is only regulated if the sale is classed as a sale of a security, which is regulated by both State and Federal laws. Additionally, this is relevant if the sale is considered money transmission. This is monitored by the CFTC to stop practices like market manipulation taking place, especially in places where cryptocurrency is considered a commodity.
Of course, the prices of cryptocurrency can fluctuate dramatically, which is why the CTFC must be active in looking for manipulative practices. This is far more likely to occur with high-value cryptocurrencies due to the impact it can have on markets. Stay up to date with the latest trends and info on this subject at lawalways.
4. Anti-Money Laundering Protection
Of course, where the money is involved, the government is going to set out to try and prevent as much money laundering practices as possible. Where cryptocurrency is involved, this is carried out under the Bank Secrecy Act (BSA), in which FinCen monitors.
This is to stop things like money and funding going to terrorist organizations, being moved to fund illegitimate organizations and companies, or other ways facilitate money laundering. These are known as money laundering programs or AML. Under these regulations, companies dealing with cryptocurrency must be proactive in providing appropriate training or how to spot fraudulent activities and how to look for suspicious transactions.
The laws that surround the cryptocurrency industry can vary dramatically, and if you’re someone who deals with it sometimes or frequently, it’s essential to ensure you stay up to date with the latest regulations to guarantee you’re not doing anything that’s going to land you in a lot of trouble with the government.