What Emerging US Legislation Means for Cryptocurrencies

One of the unique characteristics of cryptocurrency is its decentralized and unregulated nature. However, many governments around the world, including the US authorities, do not care about this particular trait.

Recently, the regulation of cryptocurrencies has been a hot topic in different parts of the world. We count here China’s crackdown on Bitcoin in September 2021 to El Salvador’s bitcoins law approving Bitcoin as legal tender. Simply put, cryptocurrency is becoming increasingly popular in the economies of various governments.

Despite the different levels of acceptance of cryptocurrencies, some factors are clear regarding the US regulation of cryptocurrencies. In this article, we take a closer look at how US crypto regulations affect crypto assets and CBDCs.

Bitcoin ETFs and other cryptocurrencies

Until now, cryptocurrency ETFs weren’t available in the United States. However, in mid-October 2021, the Securities and Exchange Commission (SEC) has approved Bitcoin-based Exchange-Traded Funds (ETFs).

Behind the project are Invesco and ProShares, two Bitcoin ETFs that will keep an eye on future contracts. However, it is not a direct investment in Bitcoin. It simply lowers the barriers to entry for those who are unable or unwilling to buy the king’s coin outright. In return, these future-based ETFs offer crypto investors more ways to enter the crypto market.

approval of the Bitcoin ETF is a significant triumph for the cryptocurrency ecosystem. Additionally, SEC approval provides the industry with irrefutable legitimacy and a certain level of comfort. It also creates a potential window into future SEC legislation to generate more use cases for crypto assets.

In the long term, this advance could lead to the positioning of cryptocurrencies alongside traditional financial services. As a result, both sectors could benefit substantially.

Cryptocurrency crimes and tax evasion

$ 1 trillion bipartisan infrastructure bill that is moving through Congress contains regulations on cryptocurrencies. For example, the bill aims to broaden the definition of brokerage to encompass digital asset trading platforms, such as cryptocurrency exchanges. Additionally, this would result in increased tax liability and help the IRS track cryptocurrency tax evasion.

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Additionally, US SEC Chairman Gary Gensler spoke of the need for increased regulation to prevent ransomware attacks. Such rules will help prevent attacks like the one that crashed the Colonial Pipeline in May 2021. Likewise, several high-profile attacks that the Bitcoin Swap hackers were looking for.

proposed bill is favorable for investors, as it makes it easier for them to comply with their tax requirements. If the invoice is processed, cryptocurrency exchanges must issue 1099-B tax forms with cost-based information. This practice is similar to the way traditional investments, such as stocks, often do.

Also, this means that the exchange must provide the IRS with a record of taxable events. In this way, you should reduce the burden of reporting on cryptocurrencies. It is worth noting that investors should always keep track of their capital gains and losses on cryptocurrency trading. Also, they must report this on their federal tax returns.

Stablecoin regulation

In an effort to reduce cryptocurrency crime, Genser and Federal Reserve Chairman Jerome Powell have also spoken about greater regulation of stablecoins. y said that overlooking the participation of the US dollar in direct crypto-crypto exchanges allows for tax evasion and money laundering. Furthermore, Powell noted that if stablecoins are part of the payment system, there should be an appropriate regulatory framework in place.

Stablecoins are generally a popular cryptocurrency pegged to an existing crypto asset, such as Tether (USDT). price of a Tether is always $ 1, as it is pegged to the cost of the US dollar.

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Almost three-quarters of the transactions on all cryptocurrency exchanges occurred between a stablecoin and other digital assets in July 2021. This is because trading cryptocurrencies to cryptocurrencies is cheaper than buying cryptocurrencies using the US dollar.

It’s unclear what regulatory action on stablecoins would look like. However, any regulation will affect stablecoin investors in one way or another. We are currently awaiting a stablecoin guide from the US government, so be sure to choose a crypto exchange that is in line with the evolution of state and federal regulators.

Appearance of cryptocurrencies in the 2022 Banking Supervision Operational Plan

In mid-October 2021, the Office of the Comptroller of the Currency (OCC) revealed its 2022 Banking Supervision Operational Plan. Under the plan, activities related to cryptocurrencies will become the supervisor’s top priorities.

When it comes to the financial sector, the OCC is far-reaching in scope. For example, you are responsible for maintaining the integrity of the federal banking system. This includes the supervision and regulation of more than 1,200 federal savings associations and national banks.

Its inclusion of cryptocurrencies in the 2022 business plan supports the inclusion of cryptocurrencies in the American financial system. In turn, this further encourages cautious regulators to support growth in the cryptocurrency ecosystem.

Guide to additional sanctions from the Department of the Treasury

Treasury Department’s Office of Foreign Assets Control (OFAC) also included the application of sanctions within the cryptocurrency space. To that end, this shows the government’s resolve to implement a more efficient process for managing cryptocurrencies.

brochure did not contain new information. Regardless, it shows the government’s intention to simplify and regulate crypto assets online with other traditional financial services operators.

Treasury guidance required governments to employ systems that acquired geolocation of VPN usage and IP addresses. In turn, this helps address any potential and illegal use of digital assets.

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conclusion

With Bitcoin ETFs already in place, there is support for cryptocurrencies and their ecosystem from the US government.In addition, the SEC and OCC have shown positive trends to support the future of the crypto space. y must do this by framing cryptocurrencies and their impact through traditional investment channels, such as ETFs. Additionally, they will run cryptocurrency trading platforms like their traditional counterparts.

We look forward to seeing how the CBDC proposals relate to virtual currencies with these new regulations in the long term. All in all, it appears that the government has a goal of financial inclusion for everyone. refore, its aim is to establish a more compatible and consistent integration of traditional banking systems and cryptocurrencies for economic growth.

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