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World CryptoMap: USA — regulatory disparity or independence?

July 11, 2018

For any crypto-related project, getting into the U.S. market — one of the largest and most profitable markets in the world — is both a dream and a nightmare. On the one hand, John McAfee is planning to run for President in 2020 and promote blockchain technologies; on the other, regulators are baffled by what to make of cryptocurrencies. In today’s World CryptoMap instalment, we are taking a closer look at cryptocurrencies in the USA. Let’s go!


Regulation of Crypto, Tokens and ICOs

In the United States, crypto-related operations are subject both to federal laws and state regulations. On the federal level, all crypto-related activity except for taxation is controlled by the Financial Crimes Enforcement Network(FinCEN). Such activity should also be licensed as long as state regulations call for that. While most states (such as New York and Washington) tend to heavily regulate Bitcoin and other digital currencies, some others are way friendlier towards them. For instance, blockchain transactions are not taxed in Nevada.

To get a clearer view of this two-tier regulatory system with regard to cryptocurrencies in the USA, let’s take a look at the timeline:

  • March 2014: The Internal Revenue Service publishes a guide defining crypto as property, meaning that all crypto-related operations (including mining) should be taxed;
  • September 2015: The Commodity Futures Trading Commission equates Bitcoin to an exchange commodity;
  • 2017: At least eight U.S. states start working on bills for blockchain regulation and/or implementation, with important developments being witnessed in Arizona (recognition of smart contracts), Vermont (blockchain as evidence) and Chicago (real estate records), among others;
  • July 2017: The SEC lists the conditions for tokens to be considered securities rather than commodities and also publishes a number of documents regarding ICO risk minimization;
  • December 2017: Donald Trump signs the law making all cryptocurrency transactions subject to taxation. Before that, such transactions were classified as like-kind exchanges by section 1031 of the IRC, allowing traders and investors to perform operations with cryptocurrency tax-free;
  • June 2018: The SEC declares that BTC and ETH should be classified as commodities. Still, there is no consensus on cryptocurrency classification, either within the U.S. or worldwide.


Business

Given this legal disparity, many U.S. crypto-based projects are starting to align themselves with regulatory bodies. Two of the largest crypto businesses in the US — Coinbase and Circle — have recently announced plans to launch licensed cryptocurrency securities trading.

  • The Goldman Sachs-backed Circle announced plans to obtain a federal banking license in order to increase the range of services it provides. Circle also intends to be registered with the SEC as a brokerage and trading venue.
  • Coinbase has acquired three companies (Keystone Capital Corp., Venovate Marketplace Inc., and Digital Wealth LLC.) in order to launch a new and improved Coinbase Pro crypto exchange that will allow margin trading, crypto securities trading, OTC trading and other services. Obviously, this initiative will first have to be approved by the SEC.

Goldman Sachs itself doesn’t want to be left behind and plans to open a crypto trading desk, thus jumping on the bandwagon along with other major Wall Street players and technology giants. Here are just a few examples:

  • The Intercontinental Exchange (ICE), which is the parent company of the New York Stock Exchange (NYSE), is developing a Bitcoin exchange for large investors;
  • JP Morgan has recently established a crypto-asset strategy department for in-house development of crypto-related projects. Oliver Harris was appointed as the head of the new department;
  • IBM has partnered with software developer Mediaocean to develop a blockchain-powered tracker for digital media transactions. “In recent years, … the industry has been plagued with unsustainable economics and transparency issues that hinder progress — particularly around intermediary fees and non-working media. By partnering with IBM, we’re able to launch the first advertising blockchain solution that will improve spend transparency — at scale,” explains Bill Wise, CEO of Mediaocean;
  • Facebook is reportedly considering the launch of its own cryptocurrency;
  • Nasdaq is open to the idea of becoming a crypto-based exchange if the cryptocurrency space becomes more mature and better regulated;
  • John McAfee has expressed his intent to run for President for the second time in 2020. In his announcement on Twitter, McAfee makes it clear that blockchain technologies will be a major focus of his campaign.


People & Stats

  • According to a survey by Finder.com, only about 8% of U.S. population have ever purchased some form of cryptocurrency, with slightly more than 5% owning Bitcoin. This might not look like a huge number, yet it is an obvious increase compared to the December 2016 survey by Pew Research Center, which revealed that only 1% of American citizens had ever owned and/or used Bitcoin;
  • However, the latest research commissioned by CreditCoin offers a different perspective. According to it, 42% of respondents were unsure of the ways to purchase crypto and thus hadn’t invested in it. An overwhelming amount of respondents (75%) said they wanted to be able to spend crypto in everyday life;
  • Yet another survey — this time, conducted by real estate brokerage Redfin — has looked into the ways millenials are saving for their house down payments. The majority of respondents (69%) primarily chose to save directly from their paychecks; however, that wasn’t the only tactic listed. 36% found a second job, 13% pulled money out of retirement funds early, and 10% actually chose to sell their crypto assets;
  • In February 2018, StatusMoney published a report on the Top 10 cryptocurrency cities in the U.S. by volume. New York and Chicago occupied the top two spots (6.9% and 4.9% of the total investment volume, respectively), while the third place somewhat unexpectedly went to the country’s 12th-largest city, Jacksonville (4.2%);
  • In March 2018, popular TV presenter John Oliver touched upon the topic of crypto in an instalment of the Last Week Tonight show. Over the course of 25 minutes, Oliver gave the viewers an easy explanation of Bitcoin, ICOs, blockchain technologies and cryptocurrencies in general;
  • At the same time, support for ICOs across the U.S. is dwindling. Celebrities are getting more careful about their endorsements of crypto-related projects (even the aforementioned John McAfee is stopping his active support of ICOs on social media), while U.S. rapper The Game is actually being sued for promoting Paragon Coins, an ICO scam;
  • Elizabeth White, who made a business out of helping cryptocurrency holders to swap their digital assets for luxury cars, yachts and designer fashion items, is now launching her own cryptocurrency.


Summary

The USA obviously has an incredible potential for cryptocurrency development. With that said, it is also the land of disparity for crypto holders: just like different states have different laws, U.S. businesses and traders are still unable to find common ground when it comes to blockchain technologies. The U.S. market is full of innovators, opinion leaders and influencers; yet it seems that the general population is only starting to gain a more or less substantial interest in cryptocurrencies.


Do you live in the USA? We would be glad to hear your side of the story. How do you see crypto in your country’s future? Let us now in our Telegram channel!

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