Bitcoin is hitting milestone after milestone. The recent listing of a Bitcoin futures exchange-traded fund (ETF) on a New York stock exchange has brought the cryptocurrency even closer to mainstream investors.
But, the US agencies and lawmakers are yet to come up with the legal status of Bitcoin in the country. So what are the current regulations around Bitcoin and other cryptocurrency products?
The Existing Status
Explaining the existing legal framework for cryptocurrency investment instruments, Stan Sater, business and technology attorney at Founders Legal, said: “If your company facilitates the exchange of value whether it is US dollars to bitcoin or bitcoin to other cryptocurrencies, then the company would be engaged in money transmission subject to the Bank Secrecy Act under FinCEN’s jurisdiction. If your company is engaged in facilitating futures contracts and bitcoin derivatives, then your company would be subject to the CFTC’s jurisdiction. If your company is offering a bitcoin ETF, then your company would be subject to the SEC’s jurisdiction. If your company is fractionalizing ownership interests in bitcoin or entering into other investment contracts that involve bitcoin, then your company would be subject to the SEC’s jurisdiction.”
“The regulation of bitcoin requires a facts and circumstances analysis.”
However, the Securities and Exchange Commission (SEC) was very clear that Bitcoin is not a security, and there lie all the complications.
The regulatory position gets even more lengthy and complex when it comes to state regulators. Some states like Wyoming have become crypto-friendly, while crypto companies still need the infamous BitLicense to operate in New York.
Small Cryptos Are Suffering
Though Bitcoin and Ethereum instruments are now being traded by mainstream investors, the legal status of the two cryptocurrencies is murky. It gets more complex when it comes to other cryptocurrencies.
The SEC has dragged Ripple Labs and top management to court alleging that XRP is categorized as security and the company illegally raised around $1.3 billion selling the token. It has become one of the high-profile crypto lawsuits and its outcome could shape the legality industry.
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Many industry lobbyists are pushing for the legal status of cryptocurrencies, including Bitcoin and Ethereum. While the US is still considering the prospect, El Salvador became the first country in the world to make Bitcoin (not any other crypto) a legal tender.
Stablecoins Are Priority
The US agencies, however, are more focused on stablecoins. A recent Bloomberg report revealed that the SEC has gained significant control over the $131 billion stablecoin markets. The agencies are also expected to publish a report, urging Congress to pass legislation for stablecoins regulations on par with bank deposits.
But, it will likely not include anything about Bitcoin and other cryptocurrencies.
Will the ETF Approval Share Regulations?
Meanwhile, the SEC recently allowed a Bitcoin futures ETF for listing on a US stock exchange. While several companies are seeking the approval of the Bitcoin ETF, the agency showed a green light to the Bitcoin futures ETF as its application was filed under the robust laws of the Investment Company Act of 1940.
Though a few industry proponents believe that approving such a mainstream product will expedite the agency’s crypto-specific framework, many are believing otherwise.
“Probably not, at least not standing alone,” said attorney Hilary Miller. “In general, Bitcoin itself is unregulated in the sense that anyone can buy or sell it. However, being “unregulated” does not mean that other laws of general application do not apply equally to Bitcoin.”
Dan Raju, CEO of Tradier, on the other hand, thinks that “these milestones cement the establishment of cryptocurrencies as a valid asset class.”
“I believe that the regulatory oversight of cryptocurrencies is around the corner and that this event is not bound to accelerate any such actions,” he added.