Courtroom Crypto: The Essential Guide to Cryptocurrency Legality
Have you thought about buying into cryptocurrencies? If so, you’ve probably thought about whether crypto is actually legal or not. You might also wonder where cryptocurrency actually originated from.
Cryptocurrency legality is not disputed in many countries. However, it’s long been known as a way for fraudsters and criminals to transfer money due to their lack of transparency.
Crypto is also based on a technology called the blockchain which can present some issues. Here’s everything you need to know about cryptocurrency laws.
Cryptocurrency: A Brief History
Cryptocurrencies and blockchains have been around for a long time. Bitcoin was the first currency to make its way into mainstream acceptance. Other cryptocurrencies have followed in their hundreds.
Some examples of cryptocurrencies include Etherum, Monero, and Bitcoin Gold. Facebook has even tried to set up its own cryptocurrency. It was first called Libra and is now known as Diem.
But technology is not limited to fintech. Goldman Sachs and JPMorgan Chase have developed their own cryptocurrencies.
The price of cryptocurrencies varies. Today, the market trades in a range of $1,000 to $2,500 per coin, or $10,200 to more than $100 million per day.
Online brokers now accept Bitcoin and other major cryptocurrencies. However, this is not true for all blockchain applications.
Bitcoin is notorious for its volatility, reaching an all-time high of nearly $63,00 in 2021, making many investors skeptical. However, Bitcoin can also crash dramatically, putting off a lot of investors.
Blockchain Technology
Cryptocurrencies are just one technology built using the blockchain. The blockchain is a decentralized system that can be used for a host of other projects. It is powered through intensive computer mining that takes up a lot of power.
Websites are already in development based on the blockchain. Some will automatically defund your cryptocurrency wallet depending on the amount of time you spend scrolling as payment.
Other social media websites will allow users to post in a decentralized system. This will not require regulation, and no one person will have control. This will stop social media companies from censoring or closing down accounts as they have done, even for former President Trump.
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Banning Cryptocurrency
Cryptocurrency is often therefore seen as a gateway to other crypto technologies. Accepting one would mean accepting others.
The regulatory landscape around crypto and blockchains is still rocky. However, it is no longer the Wild West it once was.
Some countries, including China, Russia, and Colombia, have banned the use of cryptocurrencies. Other governments believe that allowing cryptocurrencies would create a more efficient financial system.
Many administrations have maintained a generally friendly attitude towards digital assets. Other countries have yet to make an official decision on legality or acceptance.
US Laws About Crypto
Most regulatory discussions around blockchain have taken place at the agency level. This includes the US Department of Justice and the Federal Reserve. Both organizations have different views on regulations.
Meanwhile, the IRS has begun to audit cryptocurrency ownership. They issued corresponding tax guidelines. FinCEN does not consider cryptocurrencies as legal tender, but it considers exchanges as money transmitters.
In June 2015, New York became the first state in the US to regulate virtual currency companies. The state has also set up a working group to investigate the use of the technology further.
The federal government has left states to enforce their own rules and regulations. So far, 32 states have passed laws that accept and promote blockchain technologies. A few have already passed laws that accept and encourage their use in financial transactions.
Bitcoin took a big step forward in 2017 when it was granted the same financial safeguards as traditional assets. The FTC granted the trading platform LedgerX the right to become state-regulated exchanges. They can use clearing houses in the US.
The US Securities and Exchange Commission and the Federal Reserve Bank of New York (Fed) established the execution register for Bitcoin. This helps brokers, traders, and financial advisors with their clients’ trade.
EU Laws About Crypto
The European Union has adopted official legislation to regulate blockchain technology. On 10 January 2020, the EU signed an agreement with the US. This brings cryptocurrencies and crypto service providers under regulatory control for the first time.
These laws increase transparency just as stock trading laws did. They also introduce regulatory protections for blockchain technologies.
Central Database
Is cryptocurrency legal? Yes. However, the EU proposes a central database of crypto-users, addresses, and wallets. Crypto users must register with the tax authorities to be legal.
Finland, the Netherlands, Germany, Austria, and France have already introduced comprehensive controls. They are starting to transpose elements of the new Directive into national law.
These measures are a precursor to a more unified approach. The many EU Member States are currently preparing for the deadline for the 5AMLD.
The EU-UK Financial Conduct Authority (FCA) declared that cryptocurrencies must comply with the same rules as other financial products.
Cryptocurrency Legality: We’re Still Deciding
Blockchain is a technology that is still in development. It has not yet found a home. This challenge is not whether it should be legal but how far we regulate Bitcoin so that it can’t be used for criminal purposes.
Outside the US, there is no single policy. While Europe has transposed regulations into national law, some countries have left it to their own devices. Many countries have avoided blockchain technology altogether.
However, accepting cryptocurrency is to accept the blockchain. The blockchain worries many states as it cannot be centrally controlled. Some states are hesitant to adopt any technology associated with it.
If you’re interested in learning more about cryptocurrency legality or how to trade cryptocurrency, be sure to check out the rest of our site.
