Cryptocurrency is a type of currency that is basically controlled by cryptographic formulas, which are often used by computers to create secret codes for communications. These formulas have unusual properties that allow them to be used for alternate uses, including limiting the amount of computer-generated currency in circulation, recording its movement, and identifying accounts that hold it without revealing the identity of the person who owns the account. The complexities of digital currency can lead to some distinctive legal issues, for which you may need the guidance of a knowledgeable lawyer. From his Orange County office, California Bitcoin attorney Roger E. Naghash assists a broad range of clients from not only Southern California but throughout the United States.Federal and State Recognition of Cryptocurrency
By allowing computers and cryptography to control important aspects of commercial transactions, virtual currency aims to avoid the potential for human error that can plague conventional currencies. However, it is not formally recognized as a currency in the same way that U.S. dollars and other government currencies are recognized. The U.S. federal government and some state governments have placed some restrictions on digital currency that suggest a tacit acceptance of its existence.
At the federal level, the IRS has declared that cryptocurrencies should be treated as assets under tax regulations. Therefore, the acquisition of virtual currency can count as taxable income. When it gains value, that value can be taxed under some circumstances as a capital gain.
Furthermore, U.S. federal agencies have moved to regulate digital currency. For example, the Securities and Exchange Commission (SEC) has begun enforcing laws against pyramid schemes that use cryptocurrency, and the SEC has also made moves towards regulating its use in stock exchange transactions. Some law enforcement agencies have begun to apply anti-money laundering laws and other measures intended to curtail the funding of organized crime and terrorism.
Similarly, some state governments have made moves to deal with the impact of digital currency. For example, California repealed a law that previously strictly forbade the use of currency other than U.S. dollars in transactions. This suggested that it would allow the federal government to control the process of regulating virtual currency.Trends in Regulation of Digital Currency
U.S. federal agencies continue to emerge with more regulatory plans, and further regulation of cryptocurrency is expected in the future. Internationally, several major countries are following a similar approach to the U.S., but regulatory schemes vary among them. These nations also seem to be increasing the scope of their regulations in a similar fashion. Since digital currency is creating new regulatory challenges, many countries are working to broaden existing laws and regulatory frameworks to cover the issues that arise as this phenomenon gains more widespread acceptance.California Attorney Ready to Answer Your Virtual Currency Questions
When you need advice on how to comply with digital currency regulations, you should consult an experienced attorney. Based in Orange County, Bitcoin lawyer Roger E. Naghash has helped many clients in California and other regions explore the nuances of this complex subject area. Give us a call at 949-955-1000 to set up a free initial consultation, or use the contact form on our website.