Cryptocurrency Regulations in the USA

The use of cryptocurrency is widespread. The market in the USA is not very well controlled, but that is likely to change. Giving the tax and financial authorities the right tools would help them track how virtual currency is used and traded.

US President Joseph Biden issued an executive order on March 9, 2022, directing the US federal government to develop regulations for cryptocurrency. It will be tough to coordinate the activities of US financial and tax authorities in their attempts to create tax legislation and financial reporting standards governing the usage and handling of digital assets.

Which restrictions are currently in effect?

The executive order issued by President Biden builds on the bipartisan infrastructure legislation passed in November 2021. This legislation lays out a national policy for digital assets across six different domains, including consumer and investor protection, financial stability, the fight against illicit finance, US leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation. Before the new legislation, the tax laws of the United States had already made it necessary for crypto exchanges to comply with onerous recordkeeping requirements to account for gains and losses resulting from transactions involving digital asset transfers.

It is anticipated that the new regulatory rules will equip tax authorities and banking regulators with more instruments that will allow them to monitor the use of cryptocurrencies. Because markets will need to price exposure and potential costs associated with the regulation, global cryptocurrency regulation will have an additional impact on the valuation of various digital assets. This is because markets will need to price exposure to the law.

Regulation of cryptocurrencies as of today

The rate at which cryptocurrencies and other digital assets are used in the world's financial markets is astounding. While enabling illegal conduct that has flourished in the current atmosphere of lax regulation, the quickly evolving bitcoin business has also provided enormous lawful investment opportunities. For instance, the only US tax guidance that treats cryptocurrencies as "property" is a 2014 IRS Notice and related questions and answers. Well-intentioned crypto users and investors have found it challenging to comply with the absence of guiding legislation under this sparse guidance. According to the Ecovis specialists, tax and financial regulators would find it difficult to make up ground lost to those with more significant experience with digital assets.

Another issue is brought up by the terrible developments in Ukraine and the economic pressures put on Russia. The US, EU, and UK governments are attempting to prevent using cryptocurrencies and other digital assets to circumvent restrictions on the movement of money and investments. The regulation of the cryptocurrency sector will help keep these sanctions under control.

Who benefits from regulation?

Many in the sector believe a robust regulatory framework might attract institutional investors and increase bitcoin market adoption. Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), recently said that regulation of the cryptocurrency space could significantly increase market growth. Behnam also claimed that digital asset providers have "substantial potential for institutional inflows."

The organization wants to have more clarification soon so these companies may continue offering innovative products that change people's lives. Behnam has consistently campaigned for regulatory clarity, something many in the industry say is lacking.

The CFTC’s oversight of bitcoin may end the securities debate. This greater clarity and visibility could open the door for more institutional players to boost their bitcoin exposure.

Some analysts believe a comprehensive regulatory framework might affect some of the largest U.S. enterprises, like Coinbase. Wells Fargo analysts rated Coinbase underweight, citing the prospect of tighter government regulation of digital assets.

Summary

The CFTC and the SEC have been competing for the primary regulator of the bitcoin business for several years. Both have shown reluctance to give much official guidance for Bitcoin enterprises, opting to establish a regulatory precedent through enforcement actions.