While public interest in cryptocurrencies has spiked, new uses for them continue to develop almost daily. And while they’re becoming more commonplace, many people remain uncertain about their legal status. Fortunately, this article will answer the question “is crypto legal?”
The definition of cryptocurrency varies depending on who you ask. Some jurisdictions define it as a digital representation of value that functions as money, a unit of account, or a store of value, while others treat it as property. In the US, the Financial Crimes Enforcement Network (FinCEN) considers cryptocurrency exchanges to be money transmitters and requires them to comply with money transmission regulations. Meanwhile, the Securities and Exchange Commission (SEC) applies securities laws comprehensively to cryptocurrency exchanges, brokers, and marketplaces.
Most governments around the world have adopted a hands-off approach, leaving regulation of cryptocurrency to private entities. This has led to a wide range of inconsistent legal treatments. However, the United States is beginning to crack down on some of these risky practices. For instance, New York Attorney General Letitia James has proposed legislation to bring the same regulatory standards that apply to other financial services to the multibillion-dollar cryptocurrency industry.
New York’s efforts will increase transparency, eliminate conflicts of interest, and impose common-sense protections to protect investors from the risks that have plagued the sector. In particular, the program will seek to protect minority communities, who are disproportionately targeted by fraudsters and have lost significant funds due to financial collapses.
Other countries have taken far harsher measures, with Bolivia and Ecuador completely banning cryptocurrencies and exchanges while Venezuela has banned the purchase of any assets with fiat currency. In Latin America, Argentina, Chile and Brazil have passed laws that regulate cryptocurrencies. And El Salvador became the first country in the region to make Bitcoin legal tender, imposing a government digital wallet app and allowing all transactions to be conducted using its tokens.
One of the main issues affecting Bitcoin’s value is its finite supply. When the cryptocurrency was created, its developer set a limit of 21 million bitcoins that would ever be mined. This limited supply has a number of benefits, including keeping the price stable. However, it also has disadvantages, including making it difficult to use as a medium of exchange.
Another major issue is the lack of security for cryptocurrency users. When you deposit your crypto on an exchange, you give the exchange complete control of your assets, meaning that if they’re compromised you could lose your entire investment. Hackers have already brought down major exchanges such as Mt. Gox, stealing hundreds of millions of dollars worth of cryptocurrency. And while some exchanges have implemented measures to prevent this, most have not. As a result, investors need to take responsibility for their own safety by taking steps to secure their digital wallets and other devices. And in the event of a compromise, it’s essential to know your rights.