The United States is one of the largest cryptocurrency markets in the world. In 2021 alone, investors earned $47 billion. These numbers were representative of the highest earnings in the crypto space. The USA is the second country with the most crypto investors after India.
The USA is one of North American cryptocurrency exchanges’ most essential investment centers. The USA is the largest economy in the world, and it is undeniable that it needs cryptocurrency regulations. A similar situation applies to Canada, but the potential is not as great as in the United States.
Cryptocurrency regulations in the USA
Cryptocurrency regulation in the US is generally handled by Executive Order. Almost everything is coordinated. The Securities and Exchange Commission (SEC), Commodities Futures and Trading Commission and federal banking agencies examine all issues.
- Protecting consumers and investors against the problems of cryptocurrencies
- Strive for financial stability in cryptocurrency transactions
- Preventing illegal financial activities such as money laundering and fraud
- Leading the US in economic competition within the global financial system
- To control the spread of financial activities carried out through cryptocurrencies
- To follow and support the crypto money-supported innovation studies
The approach to cryptocurrencies in the USA is no different from that of traditional financial institutions. It is a priority for financial institutions to protect consumers, reduce cybercrime and prevent illegal activity. In this respect, the obligations for financial institutions are the same whether they are cryptocurrencies or not.
Is Bitcoin a security in the US?
There are different draft laws at various stages of Congress, especially Bitcoin. There are more than 50 bills submitted regarding cryptocurrency and blockchain regulations. Especially after the collapse of multiple cryptocurrencies, interest in the bills increased.
There are many provisions for initiatives, analyses, and other steps taken. Various explanations have been given. However, none saw Bitcoin or other cryptocurrencies as a safe investment tool. Cryptocurrencies that will replace other currencies are not considered safe.
How is Bitcoin regulated in the USA?
Bitcoin exchanges operating in the US are considered money service businesses (MSB). For this, the Financial Crimes Enforcement Network has published a guide for people who manage and use virtual currencies. The US view on cryptocurrencies is evident in the directory.
If a person receives and sends cryptocurrencies, that person is seen as an exchanger or a money transmitter. Everyone acting as a financial institution is required to comply with the laws and regulations of the Bank Secrecy Act. These include AML and KYC requirements.
Are other digital assets securities in the US?
There are various digital assets besides Bitcoin, but it is not easy to classify them. Each token has a different usage. In addition, each token operates according to a different financial structure. It is pretty challenging to determine whether digital assets are a security or not.
According to common understanding, an investment contract can arise if people think they will make a profit when investing in a digital asset such as a token. There are conditions for this, such as a deposit, a joint operation, profit expectation, and derivation.
Digital assets such as DeFi and NFT are strictly vetted under security laws. The SEC carries out investigations, and significant sanctions are imposed if necessary. The SEC can be considered to have a high jurisdiction over digital assets.
Can banks deal with digital assets in the US?
The Comptroller of the Currency (OCC) has given various powers to national ministers in the US over digital assets. These powers include vital activities such as taking custody of cryptocurrencies, holding US dollars against stablecoin, and using stablecoin for payment activities.
Although the fields of activity have been clarified, various restrictions apply through the Interpretive Letter. The Federal Deposit Insurance Corporation stated that additional authorizations could create confusion in the market, and only certain banks could benefit from it.
Compliance with travel rules and sanctions in the USA
The Financial Action Task Force (FATF) has published a guide on how to regulate cryptocurrency exchanges. With the travel rule, it is understood that the transaction is not related to illegal activities. All the laws that apply to traditional currencies also apply to cryptocurrencies.
The sanctions list applies to all US financial institutions and crypto companies. The Treasury Department has warned all crypto companies to adhere to the sanctions list in the fight against terrorism. In addition, there are different steps to be taken on a state basis.
Cryptocurrency regulations in Canada
All companies engaged in cryptocurrency in Canada are considered money service companies (MSB). All companies must meet due diligence, record keeping, monitoring, and reporting requirements. However, cryptocurrencies of 10,000 CAD and above must be declared.
Virtual asset service providers (VASP) must register with the Financial Transactions and Reports Analysis Center of Canada (FinTRAC). Each one must follow KYC procedures, and this includes customer identification. These obligations apply to all companies without exception.
Canadian Securities Administrators have issued guidelines to avoid false and misleading disclosures for generating reports on behalf of those dealing with crypto assets. Guidelines inform investors about making informed investment decisions.
Under Canadian cryptocurrency regulations, there is a difference between companies that offer crypto assets to their customers and trading platforms that hold custody of crypto assets. If trading platforms have digital assets, that asset is traded as a security.
In short, cryptocurrencies are not considered legal tender under the Bank of Canada Act. For taxation purposes, crypto assets are treated as commodities, not money. Also, in terms of securities laws, digital assets such as tokens are considered securities.
What is the future of cryptocurrency regulations?
It’s not hard to predict precisely where cryptocurrency regulations will go in North America. Over time, the US will introduce a precise crypto regulation. People and investors interested in cryptocurrencies will feel more secure.
For both the USA and Canada, the important thing is that the procedures to be followed for compliance are sound. People will experience a fast and seamless experience with cryptocurrency support. But most importantly, the cryptocurrency market will expand in North America.