Bitcoin Regulations News
Bitcoin regulations differ widely from state to state. Bitcoin’s legal status, so far, has not been firmly established, leading to unsustainable regulatory policies in the industry. Bitcoin regulations can be strict and prohibit the use of Bitcoin altogether, such as in Algeria and Bolivia; their use may be restricted to certain types of entities, such as financial institutions in China; or it could be fully legal and implemented in the tax system, as in Israel. Most regulations concerning Bitcoin are not directly established to control Bitcoin itself, but to manage all cryptocurrencies, Bitcoin being one of them. Many central financial authorities do not recognize Bitcoin as a currency and regulate it, rather, as an asset, stating that they would not regulate its use.
Is Bitcoin legal? Is it a deposit, a currency, a digital token, a form of property, or is it a means for money transfer? Bitcoin is just a cryptocurrency, which has its own structure, management, purpose, providers, and technology.
As with many other technologies, Bitcoin initially had no participants or regulations. As more people have been involved, the risk has increased and therefore the necessary legal framework began to be formed. Bitcoin has been around since 2009, so there are already laws that include it in certain jurisdictions.
Bitcoin is legal in certain countries, but that’s not the end of regulation. How is it being used? Are you a money service business (MSB – Money Services Business)? Are you trying to raise funds and need to consider safety regulations? What are the tax obligations?
In the United States, Bitcoin exchanges are considered a money services business (MSB). FinCEN issued guidance on how Individuals Manage, Exchange, or Use Virtual Currencies in which it is stated that: “Persons are exchangers and transmitters of money, as they accept virtual currencies and transmit them to other persons as part of an agreement.”
As with “financial institutions,” MSBs must comply with Bank Secrecy Act laws and regulations, including AML requirements and the KYC rule.
Recently, the Office of the Comptroller of the Currency (OCC) announced that they will begin allowing Fintech firms to be made through a national statute. This will allow all states to integrate a national license, without requiring the cost of a full banking license.
As Peter Van Valkenburgh points out in a Coin Center Report: “Cryptocurrencies are not transmitters of money, nor are investors or software developers.”
With respect to taxation, the Internal Revenue Service (IRS) made a determination in 2014 that, for federal tax purposes, virtual currency should be treated as a personal asset. Since then, numerous problems have arisen in the tracking of simple transactions, in the impartiality of treating this type of currency as different from the rest, and in the growing obstacle that its implementation has in the sector.
In a letter about the May 2017 Bitcoin investigation addressed to the IRS by members of Congress, it was asked, “Does the IRS consider a clause or action to remove obstacles from the use of digital currencies?”
Initial Coin Offerings
Bitcoin was the first cryptocurrency to be created, so its legal situation is more developed than that of other cryptocurrencies. Is an ICO a security offering? If so, the U.S. Securities and Exchange Commission (SEC) will regulate it and any company that uses it must ensure that they comply with its regulations.
An ICO is often described as a combination of a Kickstarter campaign with an Initial Public Offering (IPO). Companies raise funds by distributing coins (AKA tokens) that can be redeemed later for the service the company plans to offer, or, if the value has increased, they could also sell the coin to someone else for a profit.
It is this last part that has the most attention from the SEC. If the reason people invest in an ICO is because they believe they can make a profit, that could be considered as an ‘investment contract’, according to the U.S. Supreme Court. If that’s the case, an organization issuing an ICO must comply with security laws and all that entails.
Ari Levy, a tech reporter for CNBC, interviewed Naval Ravikant, a venture partner at digital currency firm MetaStable Capital, about ICOs: “If the SEC doesn’t take action, the celebration will be amazing, it will be the biggest party in town for a long time. If they repent, it will hurt a lot for people.”
“There’s no telling when regulators will knock on the door, but for sure these companies will have to subsist within the confines of securities law,” according to Levy.
In April 2017, Japan amended its Payment Service Law to enact the Virtual Currency Law. This Law allows the use of Bitcoin and Etherium as a legal means of payment, becoming the first country to do so. This allows you to buy those coins without paying an 8% consumption and clarifies the rules for cryptocurrency exchanges.
Cryptocurrency Regulations
There is no doubt that as more regulatory issues are considered, innovation will continue to grow. Although technology is not something new, that does not imply that there are no laws for this sector. Existing regulations are in place to protect investors, prevent fraud, and ensure that illicit funds are not laundered.
Any company that wants to succeed in the long term, and not just make profits and use them, must be aware of the existing legal framework and ensure compliance. The implementation of the Internet created new possibilities for communication, but it did not overturn hate speech or defamation laws. The same goes for new ways to transfer funds, make payments, and other cryptocurrency opportunities, they don’t override Anti-Money Laundering and Know Your Customer laws.
As law firm Norton Rose Fulbright states in its global legal and regulatory guide to cryptocurrencies, “As a general rule, no specific steps have been taken to regulate cryptocurrencies in the jurisdiction, so it would be necessary to create them to understand how cryptocurrencies could be applied in the new cases that the technology allows. This is particularly important when cryptocurrencies emerge in the context of industries that are already significantly regulated.”
As the industry evolves, regulators will create new rules that will reflect the specific situation of cryptocurrencies. Until then, Customer Due Diligence must be applied, creating compliance procedures that are defensible under existing rules. This includes procedures for complying with AML and KYC regulations; since governments have an obligation to fight money laundering, terrorist financing, fraud and corruption, and ignoring these rules would lead to repression by the authorities.
The potential for cryptocurrencies to innovate in areas such as payments, fundraising, and new forms of value creation is enormous. However, cryptocurrency innovators must take into account the needs of society and consumers, ensuring legal compliance to protect them and ensuring trust and security online. All innovators who defy compliance with the rule will be fined. But those who meet the established standards will be able to create useful and interesting products and services, and make a huge profit.
Published incalmente in blogbranddocs
