Crypto Trading in the US
In this guide, we will investigate the legality of crypto trading in the US, as well as available platforms for American traders. We go over the institution which oversees the market, tax implications, and policies regarding cryptocurrencies. We conclude with future prospects, as well as platforms where US traders can engage in crypto trading.
We would suggest for you to check out our guides about mobile apps and instruments to complement your knowledge form this article.
Is Crypto Trading Legal in the USA
Currently, bitcoin and all other cryptocurrencies are legal to trade and make a profit from. You can purchase, sell, trade, loan out and mine cryptocurrencies if you happen to live in the US. At this moment, crypto coins fall under the category of online commodities and assets. Thus, the same tax treatment is in store for digital coins as it is for commodities and stocks.
This means that bitcoin and other altcoins are not a legal tender like fiats (USD, EUR). You purchase the coin, sell it, later on, earn a profit, and pay income tax for it. You also have capital gains taxes, much like with companies’ shares or gold.
Fiat vs. Crypto
As mentioned before, regulation for fiats and cryptocurrencies differ greatly. Many traders and market participants might view them to be similar in their functions. However, when it comes to US regulations (and many other countries), cryptos are not viewed as currencies. Rather, governmental bodies treat them as online assets, like stocks.
The main argument for such treatment lies in the fact that the Federal Bank does not control cryptocurrencies. Crypto power is also low when compared to USD’s, as a limited number of firms accepts it as a payment method. The US might be the leader in the field of industry application but digital coins still have a long road ahead.
Since digital money classifies as a commodity, the responsible agencies for cryptocurrencies are the same as for other assets. U.S. Treasury controls classifications of currencies and assets under the overall regulations system, including cryptos. The Commodity Futures Trading Commission (CFT) under it is responsible for policies concerning GAAP accounting system and taxation.
On the State level, each State has a right to impose its own rules, though that is mostly limited to platforms. That is why New York State issues a ruling in which all businesses related to cryptocurrencies should obtain BitLicense. The body responsible for this particular policy is called NYSDFS, department of financial services. You can check out the website containing all information regarding the BitLicense in the picture below.
Thus, it is evident that in some States, companies and traders would need to account for additional expenses. Other than these bodies, decentralization of the blockchain technologies is still in power. No one can really control the market, as participants decide trends. The before-mentioned agencies act as regulative bodies but they do not control the flow of cryptos.
When bitcoin started out in 2009, practically nobody knew about it. Regulative bodies did not have any need to propose any sort of regulations regarding the industry as of whole. However, in 2013, cryptos grew considerably, pushing government officials to take a stance. IN 2013, U.S. Treasury declared virtual currencies as a tradable item.
Furthermore, in 2015, Commodity Futures Trading Commission (CFTC) declared bitcoin and its altcoins as a commodity. This classification brought a number of implications for firms and traders, as tax consideration was finally introduced. According to the GAAP and IRS rules, digital coins became part of the commodity classification.
Thus, income and capital gains taxes applied at that time. Since then, very little to no policy adjustments were brought up. The potential reason for the lack of modifications of the law lies in the fact that only recently industry grew (end of 2017). It is still too early for cryptos to pass through the stage of commodities.
What Future Holds
We can safely say that bitcoin and all other cryptocurrencies will remain legal in the US, especially in terms of trade. There is no reason for the situation to change since most businesses within the US borders operate under GAAP rules and have necessary licenses. Tax implications are also a plus for the market to continue its existence.
More advanced policies concerning digital coins are still reserved for the future. The market is still small when compared to commodities and, especially, fiat currencies. Without general implementation in other industries, it is hard to view cryptos as anything else as online assets.
The overall value of the market is above 1 $ billion but it fluctuations greatly on daily basis. Without stability, it would be hard to set any specific policies, other than how it is viewed in the accounting system. Thus, we do not expect any significant changes in regulations for foreseeable future.
The US does have good support in terms of trade platforms where you can invest in cryptos. Wee compiles reports on several large ones, including GDAX, Robinhood, and Kraken.
Coinbase/GDAX – It is an obvious choice to choose a platform which bases its operations in the US. Moreover, it offers services regrind cryptos only while margin trading is possible through GDAX. You do need a verified account to trade coins in this platform. To know more about the company, visit our review, as we go through the advantages and disadvantages of trading at GDAX..
Robinhood App – This is a mobile app that exists for some time now, since 2013. Started by Vladimir Tenev and Baiju Bhatt, it offers services solely for American clients. Apart from commodities, you can trade cryptocurrencies as well, though only a few States are actually supported. We would recommend you to read our article about the platform as we provide an in-depth analysis of the app.
Kraken – Regulated in EU and USA, this platform allows you to trade coins but without margin trading. It is also crypto oriented, meaning stocks and commodities are not supported. However, you can trade privately (no verification) up to $2.000. You can check out Kraken’s interface in the picture below.
We also made a review about Kraken that you should not miss out and read, as we provide the latest information regarding its marketplace.
In this article, we strived to provide you with the latest information regarding crypto trading in the US. American traders do need to account for income taxes when trading crypto coins but also enjoy adequate market support in terms of platforms.
As Bitcoin and altcoins are part of the online assets classification, you are able to trade and mine coins without issues. To complement reading this article, we prepared guides regarding different trading platforms that you should read. They offer the latest information regarding top marketplaces, such as CEX.IO, Bitfinex, Binance, Poloniex, and many more.