CNBC. «How cryptocurrency investors could be behind bars.» Retrieved 24 October 2021. Former federal tax attorney Kevin F. Sweeney gave a hint about how foreign cryptocurrency exchanges could complicate tax issues for U.S. digital currency investors: «There`s probably an FBAR requirement, but I wouldn`t go so far as to say there always is,» he explained, adding that the lack of IRS guidance has created a «black hole» of uncertainty for investors and digital currency professionals. taxation. «It would be terribly unfair to them to expect taxpayers to know — and then impose penalties on taxpayers who haven`t done so — when practitioners can`t even 100 percent determine if there is an FBAR requirement,» Sweeney added in his interview with CNBC. Most of the law has nothing to do with cryptocurrencies. However, there is a section where centralized crypto exchanges are required to issue a Form 1099-B to each user and to the IRS. The regulation of cryptocurrency exchanges in Japan is also gradual.
Exchanges are legal in Japan, but after a series of high-profile hacks, including Coincheck`s infamous theft of $530 million in digital currency, crypto regulation has become an urgent national concern. Japan`s Financial Services Agency (FSA) has stepped up its efforts to regulate trading and exchanges: changes to the PSA require cryptocurrency exchanges to be registered with the FSA to operate – a process that can take up to six months and imposes stricter AML/CFT and cybersecurity requirements. Due to a subsequent amendment in mid-2019, the registration obligation was extended to depositary banking service providers. In Louisiana, crypto exchanges are subject to the Louisiana Virtual Currency Businesses Act. Anyone who exchanges, transfers or stores cryptocurrencies on behalf of others needs a license. Japan remains a favorable environment for cryptocurrencies, but growing anti-money laundering concerns are drawing the FSA`s attention to further regulation. In December 2021, the FSA announced that it would propose legislation to regulate stablecoin issuers in 2022 to address risks to customers and limit the ability to use stablecoin tokens for money laundering. The legislation is likely to include new security protocols and new obligations for crypto service providers to report suspicious activity. Cryptocurrency exchanges are legal in the United States and fall under the regulatory scope of the Bank Secrecy Act (BSA).
In practice, this means that cryptocurrency exchange service providers must register with FinCEN, implement an AML/CFT program, maintain proper records, and submit reports to authorities. Meanwhile, the U.S. Securities and Exchange Commission (SEC) has stated that it considers cryptocurrencies to be securities and broadly applies securities laws to digital wallets and exchanges. In contrast, the Commodities Futures Trading Commission (CFTC) has taken a more user-friendly «Do No Harm» approach, which describes Bitcoin as a commodity and allows for public trading of cryptocurrency derivatives. The United States does not have a comprehensive federal data protection framework. Instead, industry-specific privacy and data security laws and regulations apply, such as the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act (HIPAA), and the California Consumer Privacy Protection Act (CCPA). Existing privacy and data security laws and regulations in the United States do not address the privacy concerns that have arisen due to blockchain technology. For example, the distributed peer-to-peer network architecture of blockchain technology is widely seen as contradictory to the CCPA`s traditional notion of a controller-based centralized data processing system. In other words, the CCPA`s assumption of controller-based centralized processing is not applicable to cryptocurrencies because it ignores the decentralized nature of the new technology.
FinCen issued guidelines in 2013 to include cryptocurrency exchanges (places where you can buy and sell cryptocurrencies) in the definition of a money sender, subjecting them to BSA and Patriot Act rules. According to the Colorado Division of Banking, centralized exchanges require a license when selling crypto for cash, transferring cash from one customer to another, or transferring crypto from one customer to another. If they don`t trade fiat at all and don`t handle transfers between users, they don`t need a license.