US Government and Cryptocurrency — A Turbulent Relationship

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US Government and Cryptocurrency — A Turbulent Relationship
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Bitcoin and cryptocurrencies have generally had a turbulent ride in the US, at least when the government is involved. They only kept gaining popularity among people, but the same cannot be said about the US government, which has had a lot of reactions to it — both negative and positive. 

Over the years, the US has made many decisions regarding the crypto world, and each decision has had a significant effect on the crypto market, often affecting the price accordingly. 

With that in mind, let’s take a look at the history and the future of the cryptocurrency world in the US. 

US Government’s Initial Negative Stance on Cryptocurrency

Bitcoin emerged in 2008, but the US government started reacting to it many years later. By then, other cryptocurrencies had been created, and the crypto market had already started growing rapidly. 

At first, the US made some simple guidelines for decentralized virtual currencies, like the guidelines released by the Financial Crimes Enforcement Network (FinCEN) in 2013 regarding miners.

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That same year, the US government made the first seizure of bitcoins when the DEA confiscated 11.02 bitcoins.

At the time, the US government didn’t have a positive relationship with cryptocurrencies, primarily for the wide usage of Bitcoin in illegal transactions on the dark web. 

This became evident when the FBI seized as many as 26,000 bitcoins from Silk Road, a notorious darknet marketplace for many black market dealings. Despite the notoriety, the price of BTC kept rising. 

As time passed and the crypto market kept rising, the US government’s stance kept changing as well. It became more positive, but without making any clear regulations regarding crypto. They only decide on small resolutions regarding specific aspects of cryptocurrency or certain products based on cryptocurrency or blockchain technology.

Various Legalization Decisions From 2013 Onwards

Even though the US government was quite antagonistic towards crypto, 2013 was a turning point. That’s because that year was also when the US Treasury classified BTC as a convertible decentralized virtual currency. 

The Commodity Futures Trading Commission (CFTC) classified it as a commodity two years later, while the IRS decided to tax bitcoins and other cryptos as property. 

Cryptocurrency exchanges also started rising in the meantime, and in 2018, the FinCEN director explained the requirements an organization like an exchange has to complete to do business in the US.

Exchanges have also been legal under the Bank Secrecy Act, and as long as they register with FinCEN, they can start offering their services to US citizens. 

However, the Securities and Exchange Commission (SEC) also stated that cryptocurrencies are securities, meaning these laws apply to crypto exchanges and wallets. 

In 2021, as many as 17 states passed various laws and regulations regarding cryptocurrencies, the most positive. However, besides that and specific rules from various federal agencies, the US still doesn’t have a specific unifying law that will govern cryptocurrencies. 

The US has already seen the need for further crypto regulations. This is necessary as regulations will help fight criminal activities in the US and abroad. 

FinCEN has already proposed new crypto regulations that will place specific requirements regarding data collection on exchanges and wallets. And the Justice Department wants to coordinate with the CFTC and SEC to create new crypto regulations in the near future. 

The main focus is on making sure that proper consumer protection exists and regulatory oversight. 

Another glimmer of hope for more positive regulations is the regulatory approval of the first multi-asset DEX and issuance platform — SOMA.finance. The company offers tokenized securities on the blockchain, and it’s now the first of its kind that’s fully compliant with US laws and regulations. It has both an SEC and FINRA (Financial Industry Regulatory Authority) license.

This is a big thing for the crypto market as SOMA.finance plans on launching as few as 20 and as many as 30 tokenized equities, crypto assets, STOs, and ETFs soon. More products will be added in the future.

The company’s approval is yet another positive trend in the crypto and blockchain technology realm. It’s especially important as trading securities and DeFis will likely become the next big thing in the crypto world and beyond. And even though the crypto market is witnessing a downturn in 2022, the regulations are moving in the right direction.