Cryptocurrencies were designed to be stateless entities that are not bound by the legal frameworks of any state or territory. However, in practice, things are different. The rise of cryptocurrencies has heightened government scrutiny and cynosure. In the United States, indifference and scepticism regarding blockchain and virtual money have given way to anxiety and hesitant acceptance.
Until last year, news outlets commonly classified governments as “friendly” or “hostile” to cryptocurrencies. Since then, the sands have moved. There is a growing recognition that regulation (or simply attention from regulators) is beneficial because it imposes norms and order in an otherwise anarchic jungle that allows questionable people and enterprises free rein. It also indicates a desire to communicate with firms in the crypto ecosystem.
Some states have taken things into their own hands in the absence of a federal rule on cryptocurrency. States are using a mix of old and new legislation to get their brains around cryptocurrency. However, they are particularly worried about three major issues: the usage of cryptocurrencies as legal cash in commercial transactions (including taxes), imposing authority on cryptocurrency exchanges’ activities as money transmitters, and the validity of smart contracts and ethereum tokens. (For further information, see Bitcoin Government Regulations Around the World.)
California and New York Take the Lead
Only a few states have achieved headway on all three fronts. California and New York, both of which have a big number of cryptocurrency firms, are ahead of the pack. Others, though, are swiftly catching up. There are a few unexpected candidates. Wyoming, for example, has emerged as one of the more advanced states in terms of cryptocurrency and blockchain law. Arizona is as well.
Massachusetts, on the other hand, has yet to adopt a position on cryptocurrencies and blockchain. Similarly, Washington, a state with a robust digital economy, approved a measure in 2017 requiring bitcoin exchanges to have cash reserves equal to their platform’s transacted volume. This action is being seen as unfriendly.
The map below shows which states have enacted cryptocurrency legislation. The states in green have taken the lead, while the states in red have yet to take them seriously. States in the middle are exploring regulation and have sponsored or enacted legislation in their legislature to impose additional control over cryptocurrency ecosystems.
As the chart shows, the great majority of nations have yet to establish their position on cryptocurrency. The good news is that regulators’ attention has grown in the last year. Intense media scrutiny and attention are likely to hasten the process of regulating virtual currencies.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns 0.01 bitcoin as of the day this post was published.
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