Cryptocurrencies are a focus of attention at state and federal level in the United States (US). At the federal level, there has been significant inter-agency discussion between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), the Department of the Treasury (Treasury), the Internal Revenue Service (IR), the Office of the Comptroller of the Currency (OCC) and the Financial Crimes Enforcement Network (FinCEN).
These agencies have also worked together to regulate by enforcement against a flurry of federal-level bills that have yet to result in hard-and-fast laws. At the state level, there have usually been two approaches to regulation.
Some states have favored cryptocurrencies in their regulatory approach. By doing so, they hope to promote investment and grow the local economy. Other states are making it harder for companies to use blockchain technology by amending money transmitter regulations to include cryptocurrencies.
How the US position compares with cryptocurrency regulation internationally
It’s clear that cryptocurrency regulation remains disjointed and uncertain in the US, although bills at the federal level aim to make it less so. It’s interesting to compare the US position with other countries, where the attitude towards cryptocurrencies varies greatly.
- China banned Bitcoin mining in 2021, and cryptocurrencies were banned outright in 2021.
- In Canada, cryptocurrencies are not legal tender. However, there is a permitted Bitcoin exchange-traded fund (ETF), and crypto trading platforms must register with provincial regulators. Taxation on cryptocurrencies is dealt with in a similar way to other commodities.
- In the United Kingdom (UK), in 2022, the House of Commons recognized all crypto assets as regulated financial instruments. This was followed by the implementation of the Financial Services and Markets Bill, which extended existing laws concerning crypto assets, services, and providers.
- In 2020, the European Union (EU) proposed the Markets in Crypto-Assets Regulation. This framework enhances consumer protection, introduces licensing requirements, and establishes the crypto industry’s required conduct. Individual states deal with exchange governance and taxation.
The US is slowly dealing with its regulation, but there are challenges to overcome.
The challenges of regulating cryptocurrencies in the US
The US has no federal cryptocurrency regulation in place, and its approach has been fragmented. The regulatory landscape is currently complex, and this situation is not helped by three main challenges,
- Classifying and defining crypto assets that are still novel and do not fit into existing definitions.
- Balancing the innovation potential of the crypto industry with the need for regulation to protect consumers and the market’s integrity.
- Addressing the issues of a global crypto industry that crosses borders and presents risks like money laundering and tax evasion.
Industries that use cryptocurrencies and are closely watching regulatory developments
Several industries have already recognized the potential of cryptocurrencies and embraced them. Companies operating in these industries are observing the regulatory landscape in the US with interest. We have listed the main industries to which this applies below.
Corporate and Enterprise
Many companies in the corporate and enterprise realms are embracing blockchain technology. Some are also developing their own cryptocurrencies. These companies are attracted by the additional security blockchain technology provides, and they hope regulation makes using it easier rather than more difficult.
Gaming and Gambling
Cryptocurrencies like XMax, WINk Cocos-BCX, and Moss Coin were designed for the gaming industry. Gamers like the fact that they can earn cryptocurrencies by completing in-game challenges, and crypto is also high-profile in fantasy sports and iGaming.
Examining the iGaming sector more closely, it’s evident that crash gambling has most benefited from the inclusion of cryptocurrencies in the industry. The popularity of this form of iGaming continues to increase as it’s more engaging and exciting than traditional casino games, and there is potential for higher payouts. The integration of cryptocurrencies as a payment method in crash gambling and in the iGaming industry overall has been highly beneficial.
Healthcare
Several major countries use cryptocurrencies as a payment method in their healthcare sector. This applies to countries such as South Korea and Poland. It could potentially happen in the US healthcare system, depending on how regulation progresses.
Hospitality
Cryptocurrencies are becoming more commonplace as a method of payment in the food and dining sectors. Brands that have already embraced crypto include Hard Rock Café, Domino’s, and Chuck E Cheese. If the regulatory landscape becomes more advantageous, an increasing number of US hospitality brands are likely to jump on board with cryptocurrencies.
Overall, the current cryptocurrency regulatory position in the US is fragmented. This may change if the current Bills progress to fruition. Until then, most regulation will continue to happen at the state level, and interested sectors will monitor the situation with interest.
