Are cryptocurrencies legal in the United States?

Cryptocurrency is a hot topic these days and is getting more popular as an alternative for mainstream investment and payments. Crypto is a decentralized form of currency that can be used for payments and investments. It is a digital or virtual currency, which can be sent to anyone, anywhere, without any bank or third-party intermediaries.

Cryptocurrency uses blockchain technology, which keeps an online ledger to record all the transactions. The digital currency transactions are encrypted, secured by cryptography to secure, validate and make it difficult to counterfeit.

Virtual Currencies not legal tender in the US

Virtual currencies can be traded in the United States, but they do not have legal tender status and are not regulated. The Financial Crimes Enforcement Network views virtual currency as “a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.”

According to the Internal Revenue System website, convertible virtual currencies such as Bitcoin can be digitally traded or exchanged into other currencies. The transactions made with virtual currencies are taxable, just like any other transactions.

READ MORE: Where can you use bitcoin?

Cryptocurrency exchanges are legal

Cryptocurrency exchanges facilitate buying, selling, and transferring of cryptocurrencies. These exchanges are legal and are regulated in the country. FinCEN views cryptocurrency exchanges as a “money transmitter.”

Cryptocurrency exchanges such as Coinbase are registered as “Money Services Business” with FinCEN. They comply with the Bank Secrecy Act by verifying customer identities, maintaining currency transaction records and reporting certain transactions.

Some of the popular cryptocurrency exchanges available in the US are Coinbase, Binance, Bisq, Cash App, Crypto.com and Gemini.

READ MORE: Coinbase Valuation Tops US$100 Billion on IPO Debut

Source: Pixabay

Bitcoin’s volatility

This year, people around the world witnessed how volatile cryptocurrencies can be. For instance, take the case of Bitcoin.

Bitcoin is one of the most prominent virtual curries, created in 2009. The digital currency rallied it to its all-time high of over US$63,000 in April. However, Bitcoin lost around half of its value within a month following a series of events, including Tesla CEO Elon Musk’s tweets on the coins.

Earlier in the year, Musk said Tesla would start accepting Bitcoin, which fueled the virtual currency’s rally. But in May, Musk tweet that Tesla will use Bitcoins in payments, citing concerns regarding the use of fossil fuels in Bitcoin’s mining and transaction.

Some of the companies accepting cryptocurrencies

Microsoft Corp (NASDAQ: MSFT) is one of the first companies to accept payments in bitcoins since 2014. Customers buying Microsoft’s products and services, including Xbox Games, can make the payment using bitcoin at its stores.

In 2019, AT&T Inc. (NYSE: T) became the first US mobile carrier to accept payments in cryptocurrency. The company allows its customer to make online bill payments through cryptocurrency payment processor BitPay.

Home Depot, Inc. (NYSE: HD) has a tie-up with mobile wallet service Flexa to accept Bitcoin.

PayPal Holdings, Inc. (NASDAQ: PYPL)’s Cash or Cash Plus customers in the US trade and pay using cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.

Online furniture retailer Overstock.com, Inc. has teamed up with Coinbase to help its customers pay using Bitcoin.

Coca-Cola Co (NYSE: KO)’s Asia-Pacific distributor Coca-Cola Amatil accepts Bitcoin as payment in the Asia-Pacific region following its partnership with Centrepay.

Source: Pixabay

Concerns related to cryptocurrencies and recent controversies

One of the major issues with cryptocurrency that concerns law enforcement agencies worldwide is its anonymous nature, which makes it difficult to track people behind transactions. The authorities fear this could lead to more criminal using cryptocurrencies for illegal activities and extortion.

Some of the countries, including China, has banned cryptocurrency exchanges, and prohibits trading in digital currency.

In addition, Tesla’s decision to stop accepting Bitcoins has drawn attention towards the energy usage involved in bitcoin mining and its environmental impact.

READ MORE: Is the Crypto Grass Greener? The Search for ‘Greener’ Cryptos

Recently, the US witnessed two major ransomware attacks. The first one was at Colonial Pipeline, which disrupted fuel supply to East Coast for a week. The second one was at meat producer JBS that hit impacted its beef processing at the facilities in the US.

In both cases, the cyber attackers demanded ransom in Bitcoin. JBS paid US$11 million ransom in bitcoin while Colonial Pipeline paid US$4.4 million in Bitcoin as ransom.

READ MORE: Bitcoin for Beginners: 5 things you need to know

El Salvador adopts Bitcoin as legal tender

Recently, El Salvador became the first nation to grant a legal tender status of Bitcoin. The Central American nation’s President Nayib Bukele said Bitcoin adoption could boost the country’s GDP by 25 percent.

El Salvador will collaborate with digital wallet company Strike to set up a domestic financial system using bitcoin technology.

READ MORE: Bitcoin Is Now A Legal Tender In El Salvador