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Is trading cryptocurrency illegal in the US?

Bitcoin is a decentralized asset that exists without regulation in the U.S. This deregulated marketplace, and the decentralized nature of bitcoin means there is no centralized issuing authority and no way to track any bitcoin back to the person or company that created it.

Many cryptocurrencies allow mining and payments to occur without personal information being collected as it would be in banking transactions. Plus, there is no overseeing entity to ensure that information retained on the blockchain is true and correct. Instead this is accomplished by the anonymous network.

And even with all of these features that promote decentralization and privacy, the U.S. has taken a pretty free and liberal stance towards cryptocurrencies, although there have been efforts to reduce the use of cryptocurrencies in illegal activities. That said, trading cryptocurrencies in the U.S. is completely legal, and there are no regulations of laws preventing you from trading any of the cryptocurrencies.

In fact, trading is so accepted that bitcoin is even accepted in the U.S. derivatives market, with both the Chicago Mercantile Exchange and the Chicago Board Options Exchange offering bitcoin futures.

The Securities and Exchange Commission is actively developing regulations for cryptocurrency trading. So far, they have blocked the formation of any publicly traded cryptocurrency funds, but that stance isn’t likely to persist for long, and by the end of 2019 we would expect to see an ETF based on cryptocurrencies.

The U.S. Department of Treasury considers bitcoin as a money services business, not a currency. That allows for trading of cryptocurrencies, but also requires exchanges to adhere to legalities that include record keeping, registration and reporting.

The IRS considers cryptocurrencies to be a property, and in trading, taxes are handled using the same laws that govern short and long-term capital gains.

On November 16, 2018 the U.S. Securities and Exchange Commission was back in the media limelight with another bold statement regarding blockchain securities. The regulatory body released an article specifying that the rules and regulations regarding securities must be followed by everyone. This applies whether they are considered cryptocurrency related or not, although the statement was specifically directed at recent actions against blockchain companies.

The announcement stated that, “the Division of Corporation Finance, Investment Management, and Trading and Markets under the commission encourages the technological advancement and its benefits to the investment markets.” It also emphasized that blockchain operators should keep federal securities laws in mind to avoid any potential issues.

In Conclusion

Cryptocurrency trading is not only legal in the U.S., it is also poised to see impressive growth in the coming years, with regulators and major investing platforms already taking cryptocurrencies into account. As the new asset class gains further mainstream acceptance it will almost certainly be one of the largest growth areas in the U.S. investment marketplace.

Perhaps the greatest sign of this came on Oct 15, 2018, when Fidelity Investments, one of the largest asset management companies in the world, announced they were forming a new company to handle the trading and storage of cryptocurrencies for their institutional clients.

Certainly this is only the first step into mainstream acceptance in the trading and investment industry.