Ever since Bitcoin was introduced, there’s been one lingering question about crypto: What is it?
Years later, there are thousands of different cryptocurrencies collectively worth well over $1 trillion, but the shroud of mystery is just as prevalent today as it was when Bitcoin was the only one. Crypto is difficult to define, especially when it comes to regulation, which means it’s important for crypto-friendly businesses to know current US regulations that impact them.
We’ll take a look at seven essential facts about US crypto regulations that businesses should know about and discuss what that means regarding taxes and other relevant business decisions that involve accepting crypto payments.
Understanding Crypto Regulations
Cryptocurrencies represent:
- A new technology
- A new way to distribute software
- A new concept in economics
- A new form of finance
In many ways, crypto is a vehicle of change for regulating all of these things.
Can the Government Regulate Crypto?
Yes, the government regulates crypto, but there are numerous interdepartmental disputes about where lines should be drawn. It’s easy to understand that regulators and lawmakers are among the most interested in defining what crypto actually is: You can’t control—or tax—what you can’t define.
This means that all US crypto regulations share one purpose: Define crypto so that rules can be implemented under the proper agencies and consumer protections can be observed and enforced.
7 Crypto Regulation Facts for Business Owners
The following crypto facts may change over time, so it’s highly recommended that business owners seek ongoing guidance from professional advisors in the crypto space.
1. It Is Legal to Accept Payments In Crypto
As hard as it is for individuals and lawmakers to fully grasp cryptocurrencies, the one certainty businesses can appreciate is that you are allowed to accept crypto payments and spend that crypto on business supplies, goods, and services.
To be on the safe side, be sure to have a legal advisor and tax advisor to stay in contact with, as there are always nuances to changes in regulation over time.
2. Cross-Border Payments Are Regulated
International intergovernmental agencies like the Financial Action Task Force (FATF) create guidelines for countries to adopt and provide recommendations for the oversight of international payments.
One example is a controversial “travel rule” that determines how individuals who purchase crypto are allowed to trade or spend that crypto in other countries where different crypto regulations may apply. It’s a layer of protection recommended for tracking where a crypto purchase originates to prevent international money laundering operations.
This is controversial because it places the responsibility on crypto exchanges to ensure that every customer is registered and from a country that permits specific cryptocurrencies.
While the travel rule does not directly apply to US businesses that accept crypto, it’s an example of how complex regulations have become and why companies should remain aware of updates and changes to US rules.
Overall, crypto is a breakthrough for international payments, and the countries that need affordable, fast solutions the most are those with the largest populations of unbanked citizens, so many countries support favoring the benefits of crypto payments over more aggressive international regulations.
3. The Government Is Exploring Central Bank Digital Currencies (CBDCs)
Numerous countries are studying the potential applications of and infrastructure for a CBDC. There is reason to believe that a CBDC and crypto can co-exist similarly to the present situation with fiat (USD) and crypto. But, a CBDC is a much more significant fundamental change in how currency works than most realize.
Because a CBDC would change the very nature of how central banks issue legal tender to state and local banks, the concern is how rules governing digital transactions, privacy, and security would change to accommodate the way a CBDC functions.
Among the many concerns is that governments would have immediate and direct access to purchase decisions. Some predict that a CBDC would increase the immediacy of interest in the use of crypto, while others fear regulation would endanger the privacy and anonymity that so many value.
4. There Are Numerous Federal Agencies Involved in Crypto Regulations
Federal crypto regulations are expected to change and mature over time, and how that progresses is considered a partisan “hot topic” between parties. The following federal agencies play a vital role in how policy is shaped in the future:
- The Internal Revenue Service (IRS): Since the IRS collects taxes, business owners need to be aware of how they view crypto as it relates to taxable events. Crypto payments are treated the same as any digital payment; keep a record for your income taxes. When you use crypto to pay for goods or services, it is taxed as a capital gain as if it were property.
- The Securities and Exchange Commission (SEC): The SEC oversees items that are considered securities, which require registration and approval by the SEC. In recent years, the SEC has pushed hard to govern the classification of crypto as securities to control crypto market oversight, but most top cryptocurrencies have been shown to be commodities that are treated as property for tax purposes. It is important to remain aware of which cryptocurrencies may be treated as securities in the future.
- Financial Crimes Enforcement Network (FinCEN): FinCEN detects and prosecutes financial crimes and money laundering. FinCEN is the delegated administrator for the Bank Secrecy Act (BSA), which involves crypto platforms following anti-money laundering (AML) and Know Your Customer (KYC) regulations. Since your business will likely use a crypto account to handle transactions, you’ll follow rules about providing accurate information for your account that FinCEN oversees. As long as you provide factual details about your identity, you’ll remain in compliance.
- Commodity Futures Trading Commission (CFTC): The CFTC enforces assets traded in futures and derivative markets, which is partly why there has been ongoing tension in classifying cryptocurrencies as a commodity or a security. As long as you stick with top-ranking crypto like Bitcoin, Litecoin, and Monero and stay aware of changes regarding how specific cryptocurrencies are classified, all you need to do is keep accurate records of transactions and pay your taxes as you normally would.
5. States May End Up with Different Crypto Regulations
One of the most challenging things to navigate is how the rules regarding crypto vary from state to state. While some states are going out of their way to develop crypto-friendly laws that protect businesses seeking to scale in the crypto space and looking after individual rights to self-custody crypto in private wallets, other states have been more aggressive in placing tighter restrictions on crypto.
There’s a lot of variation:
- States like New York and Florida have stricter money transmitter regulations regarding licenses for specific types of intermediary platforms.
- Arkansas currently treats crypto as non-taxable.
- Wyoming and other states have worked to be crypto-friendly and encourage Bitcoin mining and crypto-based banking.
The good news is, in every case thus far, even strict state regulations are mostly focused on the rules governing money transmitter laws, how banks and exchange platforms have to receive approval, and what hoops they have to jump through to remain compliant.
This is one of many reasons to stay up-to-date on current rules surrounding crypto. You especially want to pay attention to specific changes that may occur in your state, but the law has remained consistent at a federal and state level regarding your right to accept crypto payments and use that crypto to purchase business goods and services; that’s a win-win for everyone!
6. Stablecoins Face Increasing Scrutiny
Stablecoins are cryptocurrencies designed to remain pegged to the value of a fiat currency (US dollar or other national legal tender). There have been numerous debates between legislators and different US agencies about whether stablecoins should be treated as a uniquely different category from other cryptocurrencies since they can stand in place for fiat and essentially be used just like a national currency.
Currently, they are treated the same as other crypto, which means there are no blanket rules against accepting them as a form of payment. But, like any other crypto, you have to remain aware of which ones are permitted for use.
7. Bitcoin Could Become a Legal Tender with a National Bitcoin Reserve
One consideration that could radicalize crypto legislation is the decision to treat Bitcoin or other specific cryptocurrencies as alternate US legal tender. El Salvador was the first country to make this controversial move, which has shown enough promise to prompt other countries to consider the benefits of establishing Bitcoin as legal tender and storing Bitcoin reserves like gold.
Enjoy the Freedom of Paying for Your Shipping with Crypto
Now’s the best time to take advantage of the freedom to use those crypto payments to pay for business expenses, such as shipping. Enjoy the peace of mind that comes from the added privacy and security of paying directly from your crypto wallet.
With Bitcoin Postage, you pay the same low prices for shipping as you would with the carrier without racking up credit card charges.