Bitcoin and US cryptocurrency regulation: The story until now
Perhaps no country has seen the potential of Bitcoin more than the United States. Never one to stifle innovation, the country is full of Bitcoin ATMs and has more hedge funds, indices and merchants that accept Bitcoin than any other country on the planet. Even in regulation, the US is currently investigating ways to ensure that the potential of Bitcoin can be leveraged.
Bitcoin didn’t even exist ten years ago, so it’s quite remarkable how quickly the US regulatory system has got into gear to respond to the changes being brought by it and other cryptocurrencies. The first public utterance from officialdom about Bitcoin came in 2012, when the FBI raised some concerns about the legitimacy of many of the transactions being made on Bitcoin (it still regularly raises those concerns).
Two years later, in 2013, the Federal Reserve released two research papers: “Bitcoin: A Primer” and “Bitcoin as money,” being the first central bank in the world to address the new phenomenon. Notably, the primer said that Bitcoin was: “A small phenomenon but growing,” adding that Bitcoin was a “”remarkable conceptual and technical achievement, which may well be used by existing financial institutions.” 190
In May 2014, the Federal Reserve system defined Bitcoin as a threat to the banking system, economic activities and financial stability. However, two months later, the stance was softened as the Consumer Financial Protection Bureau noted that: “virtual currencies may have potential benefits,” even if it went on to say that people should be made aware of their risks.
In May 2015, the New York Stock Exchange launched a Bitcoin price index that would track and publish the daily value of Bitcoin in US dollars. Days later, the Department of Financial Services granted a banking charter to the ItBit Exchange, making it the first officially-recognized Bitcoin exchange in the world.
In 2015, state regulation for cryptoocurrencies was also introduced in California, New York, Washington DC and New Hampshire. At the federal level, the debate rages about how to properly define Bitcoin as property for tax purposes. Therefore, transactions in Bitcoin in the US are taxable and income paid in Bitcoin is subject to income and payroll taxes. And although that seems like a bad thing at first, nothing like tax points to a more secure future for Bitcoin in the regulatory landscape.