As cryptocurrency remains in the early stages of its evolution, the United States government has been exploring ways to further understand how this technology works and how to regulate it, specifically in regard to taxation and anti-money laundering efforts. As previously mentioned in our “What is Cryptocurrency?” blog, we learned that the Bitcoin world is decentralized. This means that there are no banks or governments to store transactional data. Instead, it uses a digital ledger on a shared database called blockchain. This decentralized property makes it difficult to enforce restrictions on Bitcoin. However, since the rise in popularity of Bitcoin, many states have started taking steps towards the regulation of cryptocurrencies. Below, we have a look at the approach of a number of different jurisdictions within the United States of America.
At the State level, some states have introduced bills which could affect the future of cryptocurrencies. For example, Arizona introduced HB 2602 and HB 2601. The former will prohibit towns from restricting cryptocurrency mining in residences. Cryptocurrency mining is a peer-to-peer process of adding data into Bitcoin’s public ledger in order to secure a transaction. Then, various transactions are gathered into blocks and added to the Bitcoin blockchain. The latter will address and recognize a “virtual coin” as a medium of exchange in digital trading. Lastly, Arizona is in the process of considering SB 1145 which would address the income taxability of cryptocurrency transactions.
Additionally, in June 2017, Florida enacted HB 1379 which is an anti-money laundering bill and targets people who leverage Bitcoin to hide funds generated from illicit activities. This same year, Nevada introduced SB 398. This was a big step into cryptocurrency evolution as it added blockchain as an official form of electronic record under the Uniform Electronic Transactions Act. The bill also prohibited local governments from putting a tax on blockchain technology.
While only official regulations have been made at the State level, it seems as though these regulations are a quantum leap in a positive direction. Furthermore, these steps may incentivize changes to be made not only in other states but at the Federal level as well. Ultimately, these modifications in legislation are important as it will encourage business in the cryptocurrency world.
Here at Bolimini we will keep you apprised of legislative and regulatory developments in the areas of blockchain and cryptocurrencies. These are exciting times that could change the way businesses interact with one another. For questions related to this topic, or any other legal question – please feel free to reach out to our office.