Crypto Compliance and Taxation Outlook of the America - Espay Exchange
                     
Introduction
● Cryptocurrencies in America are not considered legal tender. However, Cryptocurrency 
exchanges are legal and the regulations vary by state. In this article, we will be discussing the 
entire regulation and taxation situation in the US, along with state laws that pertain to 
Cryptocurrency and blockchain technology. Let’s get started!
N. America
S. America
Cryptocurrency Regulation Outlook
● It is quite overwhelming to find a reliable lawful approach to Cryptocurrencies in the 
US. Every law that is governing centralized crypto exchanges varies by state. 
Moreover, federal authorities differ in their definition of the term – Cryptocurrency. 
The FinCEN (Financial Crimes Enforcement Network) doesn’t consider 
Cryptocurrencies to be a legal tender. However, FinCEN has been considering 
exchanges as money transmitters since 2013, based on the fact the tokens are other 
value that substitutes for currency. On the contrary, the IRS considers 
Cryptocurrencies as property and has issued tax regulation for that reason.  
● Regulatory laws for Cryptocurrency exchange in the US are also in an indecisive 
lawful territory. Many of the federal regulators allege jurisdiction. The Securities and 
Exchange Commission has indicated that it considers Cryptocurrencies as securities. 
In March 2018, SEC stated that it was seeking to apply securities laws 
comprehensively for exchanges and digital wallets. On the contrary, the Commodities 
Futures Trading Commission has adopted a friendly and do-no-harm approach, 
explaining Bitcoin as a commodity and permitting Cryptocurrency derivatives to buy 
and sell openly. 
Cryptocurrency Regulation Outlook
● The Justice Department is working with the CFTC and SEC over future Cryptocurrency 
regulations to make sure that the customers are effectively protected and regulatory 
oversight is more streamlined. Treasury of the US has emphasized an urgent need for 
crypto regulation to combat domestic and global criminal activities. In January 2018, 
Steve Mnuchin and Treasury Secretary declared a new FSOC working group to look at 
the progressively more crowded Cryptocurrency marketplace.
● In June 2015, New York managed to become the first state of the US to regulate 
virtual currency companies via state agency rulemaking. In 2019, there were 32 
states of the US that introduced legislation accepting or encourage the utilization of 
Bitcoin and blockchain distributed ledger technology (DLT). A few states passed them 
into law. However, some of them established task forces to revise the further use of 
technology. In 2017, the FTC gave LedgerX – Crypto trading platform operator in the 
US, permission to become the first federally regulated digital currency options 
exchange and clearinghouse.
 New York
● Crypto Regulatory Sandbox – In 2015, New York released the “BitLicense” that is 
needed by any virtual currency company serving New York business owners or 
residents. The New York State Department of Financial Services (NYDFS) established 
the BitLicense to provide guardrails that safeguard customers and root out illegal 
doings without stifling advantageous improvement.  According to the legislation, any 
individual or company who is involved in any of the following activities in New York 
should obtain a BitLicense:
New York
1. Performing exchange services as a customer business
2. Trading virtual currency as a customer business
3. Virtual currency transmission
4. Issuing, controlling or administering a virtual currency
5. Maintaining custody of virtual currency on the behalf of others
 New York
 Trading Ban – No
 Banking Ban – No
 Tax Haven Region – No
● Is it best Place for License – Yes, BitLicense can be acquired by following simple 
instructions in New York
New York
 Washington State
● Crypto Regulatory Sandbox – In December 2014, the DFI in Washington State formed 
the Emerging Payments Task Force during the annual conference of State Bank 
Supervision (CSBS). In September 2015, the annual conference of State Bank 
Supervision released a model regulatory platform for virtual currencies. 
● According to the Washington State’s government, virtual currencies are considered as 
a digital currency or Cryptocurrency. Virtual currencies are the medium of exchange 
not adopted by a government. In December 2014, Bitcoin was added to the 
definition of Money Transmission. Every virtual currency in the state of Washington is 
Washington State
subject to the UMSA – Uniform Money Services Act.
 Trading Ban – No
 Banking Ban – No
 Tax Haven Region – Yes
● Is it best Place for License – Yes, Washington has generated a multi-state licensing 
program to make it easy for companies to comply with crypto regulations.
 California
● Crypto Regulatory Sandbox – The legislature of California is working on a new set of 
regulations specifically designed for virtual currencies and inspired by the New York 
BitLicense. In February 2017, the Virtual Currency Act was a bill proposed to the 
California Legislature. The Assembly Bill was released by the Legislature in August 
2016. Just like the New York BitLicense, already established banks would not be 
needed to apply for the California Virtual Currency License if they want to involve 
themselves in the activities of the Cryptocurrency business. Nonetheless, the bill will 
be needed for any new businesses that lack a bank charter.
● This bill would prohibit an individual from involving in any virtual currency business, 
as defined, in California unless the individual is licensed by the Commissioner of 
Business Oversight or is exempt from the licensure prerequisite, as provided. This bill 
will also need applicants for licensure, including an applicant for licensure and California
approval to get control of a licensee, in order to pay the commissioner a 
nonrefundable application fee and finish an application form, amongst other things, 
prior virtual currency services offered by the applicant, detail of the applicant, a 
sample form of receipt for transactions concerning the virtual currency business, and 
specified financial statements. 
 California
 Trading Ban – No
 Banking Ban – No
 Tax Haven Region – No
● Is it best Place for License – No, it’s too early to create a license on Bitcoin and other 
virtual currencies since they are still in the earliest stages of development.
California
 Argentina
● According to the National Constitution of this country, the only authority that is able 
to issue legal currency is the Central Bank. Bitcoins are not lawful currency strictly 
speaking, as they are not issued by the monetary authorities of the government and 
are not a legal tender. 
● Hence, they can be considered money but not legal currency. They are not an 
essential means of cancelling debts or obligations. 
Argentina
● Even though Bitcoins are not certainly regulated, they are increasingly being used in 
this country that has strict controls over foreign currencies. According to some 
professionals, a bitcoin can be considered a good or a thing under the civil code, and 
transactions related to Bitcoins can be governed by the rules of the sale of products 
under the civil code. The latest amendment to the Income Tax Law provides that the 
gain derived from the sale of digital currency will be considered income and taxed as 
such. 
 Trading Ban –No
 Banking Ban – No
 Tax Haven Region – No
 Is it best place for License – No
 Cryptocurrency Taxation Outlook of 
America
● In October 2019, the US Internal Revenue Service (IRS) issued new guidelines on the 
tax treatment of virtual currency willing to assist taxpayers to understand tax and 
reporting obligations for transactions including virtual currency, along with tax 
treatment of “hard fork” transactions.
● In the same year, the IRS also released a draft of Schedule 1 to Form 1040. That draft 
would need taxpayers to answer whether they had any virtual currency-related 
transactions during the tax year.
● The guidelines issued by IRS and the proposed amendment of Schedule 1 Form part 
of the Virtual Currency Compliance Campaign of the IRS that was initiated in July 
2018 and emphasizes that the tax outcomes of Cryptocurrency or virtual currency 
transactions are a focal point for the IRS.
● The new guidelines also mention that the income tax treatment of certain 
transactions that are unique to Cryptocurrency, for example, airdrops and hard forks.
 Cryptocurrency Taxation Outlook of 
America
● According to the new guidance issued by the IRS:
 A person who is paying tax does not recognize gross income as an outcome 
of the hard fork of the Cryptocurrency owned by the taxpayer if that person 
does not receive units of new Cryptocurrency.
 A person who is paying tax does recognize gross income, ordinary in 
character, as an outcome of an airdrop of new Cryptocurrency following a 
hard fork if the person who is paying tax receives units of Cryptocurrency. 
The total amount of the gross income to be recognized is the fair market 
value of the new Cryptocurrency.
 If the person who is paying tax is capable of selling, transferring, or 
exchanging, or otherwise disposing of Cryptocurrency, which will be the case 
once the Cryptocurrency is recorded in the distributed ledger of the taxpayer, 
then the taxpayer has the vital extent of control and dominion.
 In cases where the ledger of the taxpayer at a Cryptocurrency exchange does 
not get credited due to the reason that the exchange does not yet favors the 
new Cryptocurrency, the person who is paying tax does not have dominion 
until the new Cryptocurrency is accredited. 
Final Thoughts
● Before you get started with centralized exchange development or 
white label crypto exchange software development in America, you must 
know about the crypto regulatory and taxation outcome of that region. As a 
crypto owner, you must stay updated with the compliance of the Commodity 
Futures Trading Commission and the US Securities Exchange Commission and 
then think of making your Cryptocurrency decision!
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