You may be wondering if crypto mining is legal in the US. The answer is yes, it is perfectly legal to mine Bitcoin in the US. However, how you can buy it, what services and exchanges you can use, and what you can use it for may depend on the state you are in. Krisztian Sandor is a reporter in the US Markets Team who focuses on Stablecoins and Institutional Investing.
Over the past few years, legislators at both the state and federal levels have developed a mosaic of cryptocurrency regulations. A number of agencies, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), are also struggling to oversee parts of the growing cryptocurrency market. The SEC's effort has focused on using blockchain assets as securities and protecting investors, such as whether certain bitcoin investment vehicles should be sold to the public or not, and whether a specific offer is fraudulent or not. To illustrate, it's up to the agency to approve or reject any request for an exchange-traded fund (ETF) related to bitcoin.
The CFTC defined bitcoin as a “commodity” and its efforts are mainly focused on monitoring the cryptocurrency futures market, a certain type of derivatives market that allows investors to speculate on price without actually buying the underlying commodity. The agency also took responsibility for investor protection and has filed lawsuits related to several bitcoin-related schemes. Beyond the classification of a cryptocurrency, the use of the asset also plays a role in determining which agency is responsible for regulation. The FTC is primarily responsible for protecting US citizens from fraud or misrepresentations about cryptocurrencies.
FinCEN is the regulatory body that ensures that all crypto exchanges and service providers comply with all necessary anti-money laundering (AML) and counter-terrorism financing measures. Real federal regulations are much scarcer than the long list of federal acronyms responsible for regulating cryptocurrencies. The SEC is the main securities regulator in the United States and is responsible for regulating the issuance and sale of any cryptocurrency that is determined to be a security. The SEC loosely defines a security as an “investment contract” which must also be defined by the SEC.
If a cryptocurrency meets the four requirements of the Howey test, it is likely to be considered a value under US law regardless of what name it is called or how it was created. The SEC will examine the substance of each transaction rather than its form. The SEC has also claimed that it regulates decentralized finance (DeFi), a cryptocurrency subsector that offers financial services through self-executing smart contracts, and could be the agency that ends up controlling stablecoins, privately issued cryptocurrencies with a price linked to US currency. The agency is also pushing for greater oversight of cryptocurrency exchanges, claiming that platforms offer tokens that could be securities.
Being an accredited investor is clearly not for everyone and significantly reduces the number of people who have access to a cryptocurrency. While options such as Simple Agreement of Future Tokens (SAFT) have been considered as an alternative way for cryptocurrency companies to raise funds without violating securities laws, the SEC has yet to make a decision on their validity. The IRS is the agency that enforces rules for paying taxes. Cryptocurrencies, including non-fungible tokens (NFTs), continue to be treated as “property” for tax purposes in the United States and are subject to capital gains taxes.
As is likely to emerge from the regulatory frameworks discussed above, federal regulation of cryptocurrencies in the United States does not enforce specific regulations on cryptocurrencies. While this has been the unfortunate standard throughout the history of cryptocurrencies in the US, The Uniform Law Commission, a nonprofit association that aims to bring clarity and cohesion to state legislation, has drafted The Uniform Virtual Currency Business Regulation Act which several states are considering introducing in upcoming legislative sessions. The legislation aims to explain what virtual currency activities are money transmission businesses and what type of license they would require. In the end, only one state has enacted this motion: Rhode Island.After automaker Tesla sold 75% of its bitcoins, Twitter piled on them for losing money on their sale even though they didn't.
A new narrative on Bitcoin's energy impact has emerged; Alliance DAO Lead Partner gives bearish market wish list.Here's the bottom line: Bitcoin is not illegal in the US. However, how you can buy it, what services and exchanges you can use, and what you can do with it may depend on your state's regulations. Similarly, ASIC mining is another method of mining cryptocurrency; unlike GPU miners, ASIC miners are specifically designed to mine cryptocurrencies so they produce more cryptocurrency units than GPUs but they are expensive which means that as difficulty increases they quickly become obsolete.The cryptocurrency industry is constantly changing; regulators are working hard to figure out what they want to do and how they will regulate Bitcoin and other cryptocurrency-related assets as cryptocurrencies continue making headlines at federal, state and local levels trying to decide how to regulate these digital assets; resulting in an agitated mix influenced by type of crypto used, how it's used and where an organization or individual is based.As more regulations come into play it's important to stay informed about your state's laws regarding cryptocurrencies so you can make sure you're compliant.