2022 was a challenging year for cryptocurrency enthusiasts, but those who persevered and invested in the right altcoins saw significant gains. As we bid farewell to 2023, after a year filled with intensity and sleepless nights, it’s essential to reflect on the regulatory developments in the U.S. and what investors should know as they enter the new year.
The U.S. has struggled to meet expectations regarding cryptocurrency regulations, with some bureaucrats eager to implement rules that seem alien to the nature of crypto. Influential crypto-skeptic senators like Warren have made their opposition heard, leading to conflicting decisions and practices among various government agencies.
Even the judiciary has seen contradictory rulings on crypto-related cases, prompting a judge to advise regulatory clarity over the SEC’s overly interpretive lawsuits, although this advice had no binding effect.
The stance of U.S. institutions on cryptocurrencies can be summarized as follows: the IRS views them as property subject to capital gains tax; FinCEN sees them as “money”; the CFTC classifies most as commodities like oil or gold; and the SEC considers many, especially those that have gone through an ICO process, as securities.
State-level regulations pose a whirlpool that cryptocurrencies should avoid, with the complex nature of the industry further complicated by varying treatments across different states. There has been a longstanding call for federal regulation at the congressional level by crypto advocates.
Following the FTX incident, several states updated their regulatory frameworks. New York, known for its BitLicense regime, proposed updates to its crypto regulations as part of the broader ‘VOLT’ initiative in September, including risk assessments, delisting procedures, and reducing the approved cryptocurrencies to Bitcoin, Ether, and six stablecoins. The varying pace of individual state regulations significantly complicates operations for crypto companies in the U.S., as evidenced by the lawsuit against the Kraken exchange despite its registration with FinCEN and oversight by the Wyoming Banking Division. Additionally, the OCC’s actions have led to the termination of banking charters for Protego and Paxos and the rejection of Custodia Bank’s application to become part of the Federal Reserve System.