Cryptocurrency Regulations in the United States

People used to think that cryptocurrency was a niche innovation, but it didn’t take long for this conception to change. It has become so prevalent that it is now considered a financial phenomenon. Of course, this has put the businesses in a critical position, which requires them to navigate the legal and regulatory framework in the United States, and now, we will expansively cover cryptocurrency in the U.S., from its legal status to the overseeing regulatory bodies.

Is Cryptocurrency Legal in the United States?

Cryptocurrency is legal in the United States, but not considered legal tender. What this distinction means is that individuals and businesses can hold, trade, and use cryptocurrency, but it does not mean that the government doesn’t recognize it as a government-backed currency for paying debts or taxes. The legal status of cryptocurrencies remains the same throughout the U.S.A., but how regulatory treatment differs is another story. 

Federal Stance on Cryptocurrency

Cryptocurrencies are treated no differently than a commodity or property, which is dependent on their use case but several states impose additional requirements, such as New York, which enforces the BitLicense framework, which governs businesses that engage with virtual currencies, but its attempts to enhance consumer protection equally caused criticisms due to its complexity. On the contrary, what Wyoming offers is more crypto-friendly and has fewer restrictions due to its desire to attract blockchain innovation.

This disparity highlights the need for thorough jurisdictional research when operating cryptocurrency-related businesses.

Which Regulatory Bodies Oversee Cryptocurrency in the U.S.?

The U.S. regulatory landscape for cryptocurrency is fragmented because various agencies oversee different aspects, and it is important to understand these to an extent. 

What Is the Role of the SEC in Crypto Regulation?

It can be said that the Securities and Exchange Commission (SEC) focuses on the regulation of digital assets that qualify as securities, like initial coin offerings (ICOs) and token sales, but we also have to mention the SEC vs. Ripple case, which has been particularly influential in discussions around the classification of cryptocurrencies as securities (e.g., Ripple's XRP) or commodities. A decision in this case could significantly alter the ecosystem for token issuers. 

How Does the CFTC Classify Digital Assets?

The Commodity Futures Trading Commission treats cryptocurrencies like Bitcoin and Ethereum as commodities, hence it primarily oversees derivatives trading that involve these digital assets but also it obligates companies that offer futures contracts on cryptocurrencies to register with the CFTC and adhere to strict regulations at the same time.

What Is FinCEN’s Approach to Crypto Anti-Money Laundering (AML)?

The Financial Crimes Enforcement Network (FinCEN) classifies cryptocurrency exchanges and wallet providers as Money Services Businesses (MSBs), which requires them to implement robust anti-money laundering (AML) programs.

How Does the IRS Treat Cryptocurrency?

The Internal Revenue Service (IRS) defines cryptocurrency as property for tax purposes, and this definition influences how gains, losses, and mining revenues are taxed. Proper reporting on IRS Form 8949 and Schedule D is mandatory in this regard. 

Do Crypto Companies Need to Register in the U.S.?

Crypto companies that operate in the United States are required to comply with a variety of federal/state-level registration and regulatory requirements that are designed to ensure transparency, protect investors, and maintain fair practices in the rapidly evolving crypto industry. If they remain non-compliant, they can face significant penalties, legal action, or even the shutdown of operations.

SEC Registration for Token Issuers

If the tokens meet the definition of securities under the Howey Test, token issuers have to register their offerings by the requirements of the U.S. Securities and Exchange Commission, by including detailed disclosure of the business model, risks, and financial information. To put it simply, this means that if tokens are sold as investment contracts, from which buyers expect to profit based on the efforts of others, they must be registered with the SEC.

CFTC Oversight for Derivatives and Leveraged Trading

In simple terms, we can say that the Commodity Futures Trading Commission (CFTC) regulates companies that deal in crypto derivatives, such as futures, swaps, and options, to prevent market manipulation and protect customers from unfair practices in these high-risk areas of trading. The businesses that offer leverage or margin trading for cryptocurrencies are also not able to escape the grips of the CFTC and strict legal frameworks as well. 

State Money Transmitter Licenses

It doesn’t matter if you have a crypto business or a company that facilitates the transfer/exchange of digital assets. You need to navigate state-level regulations, such as obtaining Money Transmitter Licenses (MTLs). Each state has its own licensing requirements, so it is a rather complex and time-consuming process. For example, New York’s BitLicense is one of the most comprehensive and stringent frameworks due to its requirement for businesses to meet high standards for cybersecurity, anti-money laundering (AML) practices, and financial reporting. Other states have their own variations of licensing laws that further add to the complexity of multi-state operations.

What Are the AML/KYC Requirements for Crypto Exchanges?

Cryptocurrency exchanges must meet stringent compliance measures to detect, prevent, and report financial crime.

Are Crypto Exchanges Considered MSBs? 

FinCEN's (Financial Crimes Enforcement Network) regulations classify cryptocurrency exchanges as Money Service Businesses (MSBs). If something is considered as MSB, this means that they are required to register with FinCEN and comply with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) protocols. These include the implementation of robust systems for transaction monitoring, reports of suspicious activity, and the maintenance of detailed records. Again, non-compliance can result in severe penalties, just like how FinCEN imposed fines totaling $210M on 17 cryptocurrency platforms because they failed to meet regulatory requirements back in 2023.

How Do U.S. VASPs Comply with FinCEN Rules? 

Virtual Asset Service Providers (VASPs) that operate in the U.S. must adhere to strict FinCEN guidelines, such as the development and maintenance of robust transaction monitoring programs to detect and report suspicious activities, the submission of Suspicious Activity Reports (SARs), and having detailed records of all transactions. Should VASPs fail to comply, they can face hefty fines, reputational damage, and even operational shutdowns.

What KYC Data Must Be Collected? 

Know Your Customer (KYC) requirements are very important in ensuring compliance with AML regulations, and in order to do this VASPs must collect and verify data from their customers, such as their government-issued identification, proof of residential address and detailed transaction records to ensure customer identities are verified and help prevent fraudulent or illegal transactions.

What Is the Travel Rule? 

The Travel Rule is a regulatory requirement under FinCEN guidelines that mandates financial institutions, including crypto businesses, to share specific customer information like the sender’s and the receiver’s name, account details, and address for transactions exceeding $3,000. The reason the Travel Rule was enacted is to enhance transparency and traceability across jurisdictions in order to facilitate the detection of illicit activities like money laundering, fraud, and terrorism financing. At this point, it shouldn’t come as a surprise that failure to comply can result in significant legal and financial consequences as well. 

How Is Cryptocurrency Taxed in the U.S.?

Cryptocurrency taxation has implications for both individuals and businesses.

Does the IRS Treat Cryptocurrency as Property or Currency? 

The IRS classifies cryptocurrency as property rather than a currency, which means that any transaction that involves cryptocurrency is treated similarly to transactions that involve stocks or real estate. When you sell, trade, or use cryptocurrency, you may incur capital gains or losses depending on how its value has changed since you acquired it. This classification affects how cryptocurrencies are taxed and requires careful record-keeping.

What Is Taxable? 

There are several types of cryptocurrency transactions that we consider as taxable events. If you sell or exchange cryptocurrency and its value has increased, you will owe taxes on the capital gains. Conversely, if the value decreased, you may claim a capital loss. Also, rewards earned from staking or mining cryptocurrencies are treated as taxable income and must be reported at their fair market value when received. Another example is paying for goods or services with cryptocurrency. The IRS views this as a sale, requiring you to calculate any gain or loss based on the cryptocurrency’s value at the time of purchase compared to when you obtained it. 

What Forms Do You Need to File? 

If you wish to report your cryptocurrency transactions properly, you need to file the IRS Form 8949, which is used to report capital gains and losses from the sale or exchange of cryptocurrencies, and Schedule D, which is used to summarize your capital gains and losses from all sources. 

What Are the Rules for Stablecoins and CBDCs?

Stablecoins and Central Bank Digital Currencies (CBDCs) are emerging areas of interest.

Currently, USD-backed stablecoins operate in a semi-regulated framework, and this may leave some uncertainty for issuers and users. What the Proposed Stablecoin Regulation Act offers is that it establishes a clearer legal structure, ensures better consumer protection, financial stability, and market integrity to tackle this uncertainty.

Despite the challenges like privacy concerns and implementation logistics, the Federal Reserve continues to explore the feasibility of a U.S. Digital Dollar, which is a Central Bank Digital Currency (CBDC) that could transform the financial system into a more accessible and efficient one with improved transparency, streamlined transactions, and reduced costs by offering a secure, government-backed digital currency,

What Are the Reporting Requirements for Crypto Users and Platforms?

Legislation introduced under the 2024 Infrastructure Bill imposes reporting obligations on both individual users and crypto platforms.

New Broker Reporting Rules

Starting in 2024, brokers and exchanges must issue Form 1099-DA to the IRS to report customers’ digital asset transactions to ensure tax compliance.

When Must You Report Foreign Holdings?

You must disclose under IRS regulations if the cryptocurrency that you hold is valued above $10,000 in foreign accounts. 

What Are the Legal Risks of Operating a Crypto Business in the U.S.? 

If you are operating a cryptocurrency business in the United States, we can almost assure you that you have high chances of facing several legal challenges and risks due to the complex and evolving regulatory landscape. 

There were some allegations about offering unregistered securities, and it didn’t take long for the Securities and Exchange Commission (SEC) to start targeting token issuers, exchanges, and DeFi platforms. Businesses may go through potential money transmission violations, and they have to address them through proper federal and state licensing under the Bank Secrecy Act. The same applies to the violation of the OFAC sanctions, and in the absence of these measures, the chances of encountering substantial fines, reputational damage, and criminal penalties increase significantly. 

How Do U.S. Regulations Compare with Global Crypto Rules? 

From a global perspective, we can say that cryptocurrency regulations vary greatly. This means that differences can easily arise. For example, the MiCA (Markets in Crypto-Assets) framework proposed by the European Union is in stark contrast to the fragmented and multi-agency structure of the US. These inconsistencies often create uncertainty in the industry.

Most Popular Cryptocurrencies in the United States in 2025

Top Cryptocurrencies by Popularity in the U.S. :

According to Coinbase and Kraken, USDC usage has surged in remittance apps and fintech services. This is due to the growing demand for stable, U.S.-regulated digital dollars. Meanwhile, there is also a rising demand and market liquidity that have come with Bitcoin ETFs, which have made BTC more accessible to traditional investors.

The data we obtained from Statista/Pew Research also demonstrates that the United States continues to hold its place as the global leader in cryptocurrency trading and innovation, which is reflected in the fact that it had over 46 million active crypto users as of early 2025. The factors like growth in institutional adoption, spot ETF approvals, and regulatory clarity are what made the U.S. stand out as one of the top three crypto markets worldwide.

Is the United States a Crypto-Friendly Country in 2025?

We can say it is partially friendly. While we can say that the U.S. has one of the most active and innovative crypto markets, its regulatory environment still remains fragmented and evolving. However, the progress in clarity and infrastructure was too significant to dismiss in 2024–2025, which has paved the way for the country to be more navigable for legitimate projects.

U.S. Crypto-Friendliness Overview (2025):

The growth in tokenized securities, institutional DeFi, and widespread use of stablecoins like USDC helped the U.S. to be ranked #4 globally in crypto adoption in Chainalysis' 2024 report and it involves more than just this. An active legislative approach to crypto oversight and modernization is further signaled by federal discussions on Digital Dollar (CBDC) and the Financial Innovation Act.

What Are the Key Crypto Trends in the U.S. for 2025? 

Adoption of regulatory-compliant DeFi protocols to balance innovation and oversight; growth of institutional adoption through products like ETFs/advanced custodianship services; increasing tension between privacy-focused crypto projects and compliance requirements; and focus on achieving federal regulatory clarity through legislative efforts like the Lummis–Gillibrand bill are some of the trends that we think worth mentioning.