Table of Contents
What is Bitcoin—a currency, commodity, or security?
Is it legal to buy and sell Bitcoins in every state?
Is it legal to mine Bitcoin in every state?
Bitcoin regulation across the world
The bottom line
Jun 21, 2022
6 min read
The Crypto industry is constantly changing, regulators are working to figure out what they want to do and how they’ll regulate Bitcoin and other crypto-related assets.
As cryptocurrencies continue to make headlines, federal, state, and local officials are trying to decide how to regulate these digital assets. The result is still a churning mash that is influenced by the type of crypto, how it’s used, and where an organization or individual is based.
As a quick and broad answer, it's generally legal for individuals to own, buy, and sell Bitcoin throughout the United States—assuming it’s being used for legal purposes, of course. But taking a closer look at some of the cryptocurrency regulations reveals exceptions. The legality can also change as new laws are passed, posing a challenge to those considering investing in crypto.
Deciding if Bitcoin is more like a dollar (currency), gold (commodity), or stock (security) is important for determining who and how different government agencies regulate a cryptocurrency.
As it stands in early 2022, the U.S. Commodity Futures Trading Commission (CFTC) considers virtual currencies to be commodities, and the approach has been generally accepted. However, the CFTC doesn’t regulate the direct purchase or sale of Bitcoin. Instead, it focuses on derivatives, such as Bitcoin futures contracts. (Who regulates the cryptocurrency exchanges that allow people to buy and sell Bitcoin is a separate matter).
The Securities and Exchange Commission (SEC) has found that cryptocurrencies can be securities in some cases, which could give it regulatory oversight. For example, this may apply when a new crypto is offered in an initial public offering or crowdfunding-like campaign, such as an initial coin offering. The SEC may also regulate Bitcoin-related investment funds, such as a Bitcoin exchange-traded fund (ETF).
Taxes on crypto are also complex. For individual investors, the IRS considers cryptocurrencies as property for tax purposes. Investors may need to pay short- or long-term capital gains taxes on their profits, and any sale or swap of cryptos could be considered a taxable event.
For individuals, buying and selling Bitcoin is legal in every U.S. state. However, because Bitcoin isn’t legal tender, people and companies don’t need to accept it as a form of payment. (In some states, legislators have introduced laws declaring crypto as legal tender. But they haven’t passed and may not be constitutional if they do.)
Some businesses accept Bitcoin and Bitcoin holders may be able to get debit cards that are linked to their Bitcoin to make purchases. They can therefore “sell” their Bitcoin to buy products and services. However, the payment-processing services may exchange the Bitcoin for dollars during the transaction, which means the retailer is really accepting dollars.
States do have laws that may either limit or promote the use of cryptos. These laws sometimes refer to cryptos as virtual currency, digitals assets, cryptoassets, or digital tokens instead of cryptocurrencies.
A few examples include:
bans the purchase of alcohol with crypto.
plans to accept crypto as payment for state taxes and fees, although the funds will be converted into dollars before being deposited into the state’s accounts.
requires a special BitLicense for companies and certain individuals who transfer, sell, buy, hold, or issue virtual currencies. Individual investors who buy, sell, or mine Bitcoin don’t need a BitLicense, and neither do businesses that only use crypto for buying and selling products or services.
exempts companies that buy, sell, issue, or take custody of virtual currencies from licensing. Wyoming also exempts certain types of cryptos from state security laws
Overall, state laws are very much a work in progress. According to the National Conference of State Legislatures overview of cryptocurrency legislation, Puerto Rico and 37 states have pending crypto-related legislation in the 2022 session.
Mining Bitcoin is legal in every state, but some organizations and jurisdictions may place limits on mining Bitcoin. For example, the U.S. Marine Corps bans service members from using government-issued devices to mine cryptos. In this case, the ban may be related to security concerns, but Bitcoin mining regulations generally stem from concerns about energy usage.
Bitcoin uses a proof-of-work (PoW) mechanism that requires Bitcoin miners to use large amounts of electricity and computing power to solve complex math problems. Bitcoin miners help verify transactions and keep the Bitcoin network running, and they have a chance to win new Bitcoin in the process. However, the energy usage is only increasing as the remaining unmined supply of Bitcoin decreases and solving the math problems becomes more difficult.
As of March 2022, New York State’s Environmental Conservation Committee is proposing a two-year moratorium on PoW mining for all types of crypto.
Smaller jurisdictions have also had mining-related laws. For example, Plattsburgh, New York, had a moratorium on mining from March 2018 to February 2019. And in 2021, Missoula County, Montana, passed zoning regulations for crypto mining operations, along with a requirement for the operations to mitigate adverse impacts related to energy consumption, noise pollution, and disposing of electronic waste.
Bitcoin isn’t unique with its PoW approach, but there are other cryptos that use an alternative proof-of-stake (PoS) approach that requires much less energy. A few cryptos, such as Algorand, even make a point of offsetting their carbon footprint.
Outside the U.S., the legality and regulations vary widely. In September 2021, El Salvador became the first country to officially declare Bitcoin legal tender—the government even gave everyone about $30 worth of Bitcoin to kick things off. On the other end of the spectrum, some countries ban Bitcoin and other cryptos altogether.
These regulations frequently change, but the Law Library of Congress released an update to its Regulation of Cryptocurrency Around the World report in November 2021. The report states that nine jurisdictions have absolute bans, and 42 have an implicit ban—an increase from eight and 15, respectively, in 2018.
The nine jurisdictions that have an absolute ban on cryptos are:
Beyond the absolute or implicit bans, the report also highlights jurisdictions that have specific tax, anti-money laundering (AML), and combating of financing of terrorism (CFT) laws related to cryptos. The report found that 103 countries have either tax or AML/CFT crypto laws, and most of those have both types of laws. This is an increase from 33 jurisdictions in 2018.
The crypto industry is constantly changing, and regulators are working hard to figure out what they want to do and how they’ll regulate Bitcoin and other crypto-related assets, platforms, and transactions. Within the U.S., buying and selling Bitcoin is legal in every state, and Bitcoin mining is almost always legal for individuals. Organizations can also legally buy, sell, trade, hold, and mine Bitcoin, but they may have to comply with additional local, state, or federal regulations.
At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.
Get started today.
Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.
You might also like
Who Is Satoshi Nakamoto? Exploring the Mystery Behind the Bitcoin’s Founder
Given the mystery around Nakamoto’s identity, people have speculated about who is behind the name. Some claims are more outlandish, while others are based on research.
How to Earn Bitcoin
While investors can buy Bitcoin or swap other cryptos into Bitcoin, there are also ways to earn a lot of Bitcoin, but they tend to require a larger up-front investment.
How to Store Bitcoin Safely
When someone buys Bitcoin, they’re linking the funds to a crypto wallet. Keeping the wallet secure is vital to storing Bitcoin safely and protecting the investment.
What Is Bitcoin Mining and How Does It Work?
Bitcoin mining is the process of using computer power to mint unique digital tokens that can be transmitted across the internet and used as currency to buy goods.
© Copyright 2023 Titan Global Capital Management USA LLC. All Rights Reserved.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan. Cryptocurrency trading is provided by Bakkt Crypto Solutions LLC ("Bakkt Crypto"). Bakkt Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Bakkt Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Cryptocurrency execution services are provided by Bakkt Crypto (NMLS ID 1828849) through a software licensing agreement between Bakkt Crypto and Titan. Please ensure that you fully understand the risks involved before trading: bakkt.com/disclosures.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at firstname.lastname@example.org. 508 LaGuardia Place NY, NY 10012.