Legal Guide To Cryptocurrency Regulation | PN Lawyers
On A Federal Level:
The U.S. currently has no coherent answer on its cryptocurrency regulation, however there will be one coming soon.
The following federal organizations have expressed their own thoughts and regulations on virtual currency.
1. The Securities and Exchange Commision (SEC) has hinted at the need for greater cryptocurrency regulation and warned investors on cryptocurrency investing risks. The SEC has not approved any exchange – traded products holding cryptocurrencies for listing or trading.
2. The Commodity Futures Trading Commission (CFTC), on the other hand, has become the first U.S. regulator to allow for cryptocurrency derivatives to trade publicly. The CFTC has designated Bitcoin as a commodity and announced that any fraud and manipulation involving Bitcoin is under its authority.
3. The Internal Revenue Service (IRS) says that Bitcoin must be treated as property for tax purposes. That means a capital gain or loss should be recorded as if it were an exchange involving property or inventory held for resale. However, if used as a payment, it should be treated like currency.
4. The Financial Stability Oversight Council (FSOC) has just recently formed a working group focused on cryptocurrencies.
The federal and state level regulations depend on whether the U.S. treats cryptocurrencies as currency or as securities. If they treat it as currency, it seems likely that actions by the federal government would override states’ licensing. If treated as securities, they would have to clear “blue sky laws” on a state-by-state basis.
On A State Level:
Most states have adopted different rules and regulations on virtual currencies; some friend to virtual currency businesses, some neutral, and some hostile. New York is among the more hostile states in that it requires licensing for virtual currency businesses.
Any business engaging in virtual currency business activity involving New York State, or persons residing or conducting business in New York, must first obtain a BitLicense. This is not only expensive, but also imposes variety of regulatory requirements.
However, if an applicant does not satisfy all of the regulatory requirements upon licensing, they may be issued a conditional two – year license.
The initial application fee is $5,000. The review and decision shall be rendered within 90 days from the filing of an application which is deemed to be complete.
It’s important to note that even in states that do not have something equivalent to New York’s BitLicense, Bitcoin businesses may still have to obtain a money transmitter license. This is all subject to the courts’ review.
Your Options Outlined:
- Apply for a BitLicense
- Limit to activities that do not require a BitLicense
- Operate out of a state with a more friendly regulatory framework.
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