US and Cryptocurrency Regulations: Navigating Challenges in 2024
The US Struggles to Define Cryptocurrency Regulation
Despite being a global financial powerhouse, the United States has never fully embraced cryptocurrencies like Bitcoin or Ethereum as mainstream assets. As we enter 2025, the crypto industry in the US continues to face a complex and fragmented regulatory environment. A lack of clear laws has left businesses and investors navigating a confusing landscape of overlapping regulations, while many global competitors such as the UAE have moved ahead with more defined policies on digital assets.
Key Regulatory Bodies and the Legal Framework
First of all, the cryptocurrency regulations in the US, fall under several federal agencies, each with its jurisdiction. The Securities and Exchange Commission (SEC) has played a significant role in crypto oversight, particularly in determining whether certain cryptocurrencies should be classified as securities. Historically the SEC has taken action against numerous Initial Coin Offerings (ICOs) that it deems violate securities laws, signalling a tough stance on unregistered crypto offerings, including the infamous case of the FTX exchange.
On the other hand, the Commodity Futures Trading Commission (CFTC) classifies Bitcoin and other digital assets as commodities, granting it jurisdiction over crypto derivatives, including “futures contracts”.
This dual regulatory approach can cause confusion, especially for assets that do not fit in neither category, such as stablecoins such as USDT or decentralized finance (DeFi) platforms.
Additionally, FinCEN (Financial Crimes Enforcement Network) ensures that crypto exchanges comply with anti-money laundering (AML) regulations and Know Your Customer (KYC) rules. These regulations require exchanges to verify their customers and report suspicious transactions, aiming to tackle illicit activity in the crypto space.
Taxation and Reporting
The Internal Revenue Service (IRS) treats cryptocurrencies as property, meaning that any gains from trading or using crypto are subject to capital gains tax. Investors must track their transactions meticulously, including when using cryptocurrencies for purchases or converting them to fiat (hard) currency. Frequent traders or those engaging in decentralized finance (DeFi) platforms, may find the reporting requirements particularly difficult.
The Future of US Crypto Regulation
While the US has taken steps toward clarifying the crypto landscape, much remains unresolved. In 2022, President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets, aiming to create a framework for future regulation. The order emphasized consumer protection, market stability, and the development of Central Bank Digital Currencies (CBDCs).
Despite these efforts, many in the industry argue that the US still lags behind certain countries such as UAE and Singapore in offering clear, comprehensive legislation. While there is growing interest in regulating crypto, no unified regulatory bill has yet passed through Congress, and the regulatory patchwork continues to create uncertainty.
A Balancing Act
As the cryptocurrency market matures, the US faces a critical crossroads. Will Trump’s administration facilitate the growth and innovation in the crypto space, or will they impose restrictions that stifle it? As more countries establish clearer regulatory frameworks, the new US government will need to act decisively to ensure it does not fall behind in this rapidly evolving sector.
