More US States may implement regulations regarding Cryptocurrency

Cryptocurrencies were designed from the beginning to be stateless, independent of any one state or nation’s legal system. But in actuality, things are different. Government criticism and attention have intensified as cryptocurrencies have gained traction. Concern and hesitant acceptance of blockchain and virtual currency have replaced apathy and cynicism across the United States. News outlets regularly listed “friendly” and “hostile” states to cryptocurrency up until last year. Since then, the sands have changed. There is a growing understanding that regulation (or even attention from regulators) is beneficial because it creates laws and order in a setting where there would otherwise be anarchy and a free-for-all for shady characters and enterprises. Additionally, it conveys a desire to communicate with companies operating in the cryptocurrency ecosystem. Some states have acted independently in the absence of a federal direction on cryptocurrency. States are utilizing a hodgepodge of new and old rules to understand cryptocurrency. The usage of cryptocurrencies as legal tender in commercial transactions (including taxation), imposing authority on the operations of cryptocurrency exchanges as money transmitters, and the status of smart contracts and Ethereum tokens are the three general areas about which they are most worried.

Few nations have been successful in crafting and effectively enforcing clear regulations governing digital currencies, but even in this highly ambiguous and imperfectly regulated area, the US has had difficulty defining not only what policies to promote but also what the goals of those policies should be. In an effort to combat cybercrime and fraud, China, for example, has taken a firm position against cryptocurrencies by outlawing all virtual currency transactions. At the same time, the country has started implementing a state-backed blockchain services network. In contrast, El Salvador’s government has declared Bitcoin to be a kind of legal cash, mandating that all businesses accept it as payment, and setting up a $150 million trust to ease exchanges between Bitcoin and dollars. By extending several already-existing financial rules to the domestic bitcoin industry, the United States has largely achieved parity. For years, Know Your Customer legislation and anti-money laundering guidelines have been applied to U.S. cryptocurrency exchanges, but these regulations haven’t really prevented people from simply using exchanges in other nations for their illegitimate transactions.

Only a small number of states have advanced on all three fronts. The two states leading the pack are California and New York, which are both home to several crypto firms. But others are catching up very quickly. There are some improbable rivals. For instance, Wyoming has emerged as one of the more innovative states in terms of regulating cryptocurrencies and blockchain technology. Arizona is also. Massachusetts, in contrast, has not yet taken a position on cryptocurrencies and blockchain technology. Similar to this, Washington, a state with a booming tech economy, approved a law requiring cryptocurrency exchanges to have cash reserves equal to the number of transactions made on their platform in 2017. This action is interpreted as unfriendly. The great majority of states have not yet determined where they stand on cryptocurrency. The good news is that during the past year, regulators’ focus has increased. The movement toward regulating virtual currencies is anticipated to advance further under intense media scrutiny and focus.

Future bitcoin legislation should ideally take place in two stages. In the first stage, it would be stressed how crucial it is to stop the flow of cryptocurrencies to criminals by keeping up-to-date lists of sanctioned intermediaries and giving Americans and American businesses simple and understandable instructions on how to determine whether they are doing business with any such foreign firms. Regulators could better understand whether there is a realistic route ahead for the legal use of cryptocurrencies as a tool for financial inclusion by concentrating government resources on monitoring cryptocurrency intermediaries and evaluating the effects of such policing efforts. The second phase of policymaking will be informed by the measurement components of the previous phase. It will be a strong signal to the government to move forward with preparations for a CBDC if these measurement efforts show that law enforcement has been successful in cutting down illegal cryptocurrency flows since it is possible to properly oversee their use.