Regulation
More US states may implement cryptocurrency regulations
Originally, cryptocurrencies were supposed to be entities independent of any state or national legal framework. But the reality is different. The appeal of cryptocurrencies has led to increased censorship and disapproval from governments. Indifference and cynicism toward blockchain and virtual currency in the United States has given way to concern and reluctant acceptance.
Until last year, the media regularly classified states as “friendly” and “unfriendly” to cryptocurrencies. The situation has changed since then. There is a growing realization that regulation (or even the attention of regulators) is a good thing because it establishes rules and order in an otherwise lawless jungle that gives free rein to dubious actors and companies. It also signals a willingness to engage in dialogue with companies in the crypto ecosystem.
In the absence of a federal directive on cryptocurrencies, some states have taken matters into their own hands. A patchwork of old and new regulations are being used by states to understand cryptocurrencies. But there are three major areas of particular concern: the use of cryptocurrencies as legal tender in commercial transactions (including taxation), the imposition of authority over the operations of cryptocurrency exchanges as money transmitters, and the status of smart contracts and Ethereum tokens. (See also: Government Regulations on Bitcoin Around the World.)
California and New York take the lead
Very few states have made progress on all three fronts. California and New York, both home to a large number of cryptocurrency businesses, are leading the pack. But others are quickly catching up. Some contenders are unlikely. For example, Wyoming has emerged as one of the most progressive states when it comes to cryptocurrency and blockchain regulation. As has Arizona.
Massachusetts, on the other hand, has yet to take a position on cryptocurrencies and blockchain. Similarly, Washington state, home to a thriving tech scene, passed a law in 2017 requiring cryptocurrency exchanges to maintain liquidity reserves equal to the volume of transactions on their platforms. This measure has been interpreted as hostile.
The map below shows the states that have introduced cryptocurrency regulations. States marked in green have taken the lead, while those marked in red have yet to take these regulations seriously. In between are states that are considering regulation and have introduced or passed bills in their legislatures to exert greater control over cryptocurrency ecosystems.
As the map shows, a large majority of states have yet to decide on their position on cryptocurrencies. The good news is that regulators’ attention has increased over the past year. The intense media attention and scrutiny should further accelerate the movement toward regulating virtual currencies.
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