Cryptocurrencies Laws and Regulations

Practice Areas Investment Fraud Bitcoin & Cryptocurrency Cryptocurrencies Laws and Regulations

Our Cryptocurrency Attorneys Help You Understand How Cryptocurrency is Regulated

Cryptocurrencies like Bitcoin have become increasingly popular, even among mainstream investors, but the regulatory climate surrounding cryptocurrencies is still evolving. Those involved with cryptocurrency transactions need to understand both the legal requirements imposed on cryptocurrencies as well as the limitations of the legal protections that are in place. Zamansky LLC can provide assistance to individuals and entities that want to ensure compliance with cryptocurrency rules and regulations and can provide help taking action when problems arise. When you need a cryptocurrency law firm with extensive knowledge of financial rules and regulations, we can provide the help you need. Give us a call today to find out more about the assistance we can offer.

Investing in cryptocurrencies and understanding the legal issues surrounding them is a very complicated prospect.

- Jacob H. Zamansky

Are Cryptocurrencies Safe Investments?

Whether cryptocurrencies are a wise investment or not is a decision all investors will need to make independently after considering the fundamentals of the coins they are investing in.

For a currency like Bitcoin that has been around for a long time, there is a risk that the currency will fail or that it will decline in value, just like any other investment. However, there is, at least, a history behind the coin and a proven record of transactions that suggest the blockchain technology backing the currency actually works.

Unfortunately, because of the cryptocurrency craze, there have been endless examples of investment opportunities in companies and products that aren’t really even attempting to be legitimate currencies but that have been able to ride the blockchain wave.

One example: Long Island Ice Tea changed its name to Long Island Blockchain and shares of the unprofitable company rose 289 percent, despite the fact that it did not actually begin developing blockchain technology. Instead, the beverage company indicated it would seek to partner with or invest in companies developing blockchain.  And, in another instance, a Bitcoin parody called Dogecoin, reached a value of more than a billion dollars even though the coin was created only to mock the cryptocurrency.

Investors need to ensure they are researching carefully and that they are making investments only in legitimate cryptocurrencies with solid technologies behind them.  This is easier said than done because there is little regulation of the cryptocurrency marketplace. Initial coin offerings (ICOs) are not as well regulated or as well structured as Initial Public Offerings (IPOs) that occur when companies are taken public and shares are made available to investors for the first time.

Regulators are struggling to catch up with the blockchain craze and to determine the form and scope of the rules they will put in place – and in the meantime, investors are essentially operating in an almost wild-west environment where due diligence is key.

Those who wish to invest in altcoins should make certain to do careful research and to get legal advice as needed. Even investors in more established cryptocurrencies like Bitcoin would do well to talk with  cryptocurrency attorneys to get a full picture of the legal issues surrounding any cryptocurrency investment they are considering making.

Our Cryptocurrency Law Firm Outlines Laws Regulating Cryptocurrencies

In 2013, the Financial Crimes Enforcement Network (FinCEN) published guidance on virtual currencies which created different categories of persons involved with cryptocurrencies who could be subject to obligations under the Bank Secrecy Act.

Administrators and exchangers were classified as money transmitters and are thus subject to regulations found within the Bank Secrecy Act.  Exchangers are persons engaged in a business involving the exchange of virtual or real currency, while administrators are engaged in the business of issuing virtual currencies and have the authority to redeem virtual currencies.  Users, who are not subject to Bank Secrecy Act obligations, are persons who obtain virtual currency in order to purchase goods or services.  Miners, those who mine for bitcoin or other cryptocurrencies, are typically not considered to be either exchangers or administrators.

Administrators and exchangers are subject to a host of regulations related to collecting accountholder information and sharing it with FinCEN. Money transmitters, which are a subset of exchangers who both buy and sell bitcoins, are also subject to special rules including required registration with FinCen, complying with know-your-customer rules related to account verification to prevent money laundering, and filing reports of suspicious activity.

While the Bank Secrecy Act requires compliance and reporting, it is important for investors to note that no cryptocurrency exchanges or virtual wallets are provided with the protections that banks have in the United States. There is no FDIC Insurance coverage for cryptocurrency marketplaces or virtual wallets.  If companies go out of business or are hacked and funds are lost, the money may be gone permanently and there are no protections from the U.S. government to guarantee investments.

Investors and those involved in Bitcoin or cryptocurrency exchanges also must understand obligations under U.S. tax law. Bitcoins must be reported as property, and Coinbase has been ordered to turn over information to the IRS connected with Bitcoin transactions valued at $20,000 or more. It is likely that as the regulatory framework surrounding cryptocurrencies develops, coin trading platforms will be subject to similar reporting requirements as domestic and foreign banks that are required to report large transactions.

The Securities and Exchange Commission has also issued recent guidance indicating that Initial Coin Offerings (ICOs) will be subject to federal securities laws.

Get Help from Zamansky, LLC Today — We Protect Investors 

Zamansky LLC, a Bitcoin and cryptocurrency law firm can help you understand and comply with laws related to bitcoin and other cryptocurrencies and can explain the limitations of the regulations that provide you with protection when trading Bitcoin or altcoins. To find out how an attorney can help you, give us a call today.