Bitcoins in the United StatesBanker Resource
March 10, 2014 — 1,200 views
Bitcoin is a kind of digital currency based on peer-to-peer, cryptographic protocol. It can be utilized to sell and buy services or products. It can also be used as an account unit. Bitcoins may be converted to regular currency like the US dollar based on prevalent exchange rates.
At present, about 12 million bitcoins exist and as per the bitcoin formula, the maximum bitcoin number is capped at 21 million. It shares a number of features with gold bullion as a medium of exchange with limited supply.
- Money service business: The US Financial Crimes Enforcement Network (FinCEN) is the sole US federal watchdog to release official guidance for bitcoin use. FinCEN has published an interpretive guidance where it is stated that any bitcoin exchanger or administrator must be registered MSB (Money Service Businesses) as per the money transmitter regulations of FinCEN. Individual users are not considered MSBs and are not compelled to record any bitcoin transaction.
- Anti-money laundering requirements: MSBs must implement know your customer, anti-money laundering and financial information reporting guidelines as per the US Patriot and Bank Secrecy Acts.
- No clear guidance: The absence of transparent regulatory guidance about bitcoins has resulted in uncertainty for companies and individuals to develop bitcoin as a financial tool. The Federal Reserve System has said that it does not have the authority to regulate digital assets like bitcoin as they currently operate.
- Legal classification to be an asset: There is no legal classification of bitcoins when it comes to regulatory purposes. There is no official guidance of bitcoin being classified as commodity, currency, security or commodity money for the aim of determining the tax treatment of the digital currency.
The US government is positively inclined towards bitcoin's regulatory future. It has stated that digital assets have beneficial and legitimate uses and must not be weighed down by regulations. A panel of experts sourced from a number of US law enforcement and regulatory agencies have noted that:
- Digital assets are not illegal and should not be considered as such due to misuse by a few unscrupulous parties.
- The present legal system is not a barrier to digital assets as long as their use complies with US laws.
- Digital assets have the potential to benefit society. They can be the base for innovative financial products.
- The current federal regulatory structures were adequate to tackle the use and also misuse of digital assets.
- The panelists recognized the need for fostering technological innovation, with smart use of the law which results in curbing illicit activity, but at the same time, rewards by minimizing burdens on participants who abide by the law.
Bitcoins have an undetermined future from a regulatory point of view. Regulations concerning the virtual currency continues to evolve with the aim of utilizing the currency for the good of commerce and industry.