United States of America

**Report on Retail Cryptocurrency Trading Status in the United States of America**

**Date:** 2025-06-26

**Topic:** Retail_Trading_Status

**Description:** An assessment of whether individual citizens and residents in the United States of America are legally permitted to buy, sell, and hold cryptocurrencies, detailing the regulatory environment surrounding this activity.

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**1. Current Status**

**Allowed-Regulated:** Retail cryptocurrency trading is legally permitted but subject to specific regulations, such as KYC/AML requirements, licensing for exchanges, or specific tax rules.

**2. Detailed Narrative Explanation**

In the United States, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies. However, this activity is subject to a complex and evolving regulatory framework involving multiple federal and state agencies. There is no single, comprehensive federal law specifically governing all aspects of cryptocurrency. Instead, existing financial regulations are often applied to cryptocurrencies, and new rules and guidance are periodically issued.

**Federal Regulatory Landscape:**

*   **Securities and Exchange Commission (SEC):** The SEC has asserted jurisdiction over cryptocurrencies that it deems to be securities. This means that issuers of such crypto assets and platforms that facilitate their trading must comply with federal securities laws, including registration requirements and investor protection rules. The SEC has taken numerous enforcement actions against entities offering unregistered crypto asset securities.
*   **Commodity Futures Trading Commission (CFTC):** The CFTC generally views certain cryptocurrencies, notably Bitcoin, as commodities. As such, it has jurisdiction over derivatives contracts based on these cryptocurrencies (e.g., futures and swaps) and has taken action against fraud and manipulation in the spot markets for crypto commodities.
*   **Financial Crimes Enforcement Network (FinCEN):** FinCEN, a bureau of the U.S. Department of the Treasury, plays a crucial role in regulating cryptocurrency intermediaries to prevent money laundering and terrorist financing. Entities such as cryptocurrency exchanges and administrators are generally considered money services businesses (MSBs) under the Bank Secrecy Act (BSA). This requires them to register with FinCEN, implement robust Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) programs, and comply with Know Your Customer (KYC) requirements. They must also report suspicious activities.
*   **Internal Revenue Service (IRS):** The IRS treats virtual currencies as property for federal tax purposes. This means that taxpayers must report gains or losses from cryptocurrency transactions. The IRS has issued guidance on the tax treatment of cryptocurrencies and is actively working to ensure compliance.
*   **Office of the Comptroller of the Currency (OCC):** The OCC has issued interpretive letters regarding the authority of national banks and federal savings associations to engage in certain cryptocurrency-related activities, such as providing custody services for crypto assets.

**State-Level Regulation:**

In addition to federal oversight, many states have their own regulations pertaining to cryptocurrencies. Some states, like New York with its BitLicense framework, have implemented comprehensive licensing regimes for businesses involved in virtual currency activities. Other states have varying approaches, leading to a patchwork of regulations across the country. This necessitates that cryptocurrency businesses understand and comply with regulations in each state where they operate.

**Key Regulatory Requirements for Retail Trading:**

*   **KYC/AML:** Cryptocurrency exchanges and other financial institutions dealing with crypto assets are generally required to implement KYC procedures to verify the identity of their customers and AML programs to monitor and report suspicious transactions. This is a critical component of the U.S. regulatory approach.
*   **Taxation:** Retail traders are responsible for reporting their cryptocurrency transactions to the IRS and paying taxes on any capital gains. Exchanges may issue Form 1099-B or similar tax reporting documents to users and the IRS.
*   **Investor Protection:** While the regulatory framework aims to protect investors, the SEC and other agencies frequently issue warnings about the speculative nature and risks associated with cryptocurrency investments. Efforts are ongoing to enhance investor protection in this space, particularly concerning disclosures and market integrity.

**Historical Context and Nuance:**

The U.S. regulatory approach has been characterized by enforcement actions and evolving guidance rather than a single, overarching legislative act specifically designed for cryptocurrencies. This has led to some uncertainty and calls for greater regulatory clarity from the industry. Various legislative proposals have been introduced in Congress to address different aspects of cryptocurrency regulation, but comprehensive federal legislation has yet to be enacted. The landscape is dynamic, with ongoing discussions among policymakers, regulators, and industry stakeholders about the appropriate regulatory framework for digital assets. The focus remains on balancing innovation with investor protection and financial stability.

**3. Specific, Relevant Text Excerpts**

*   **FinCEN on Money Services Businesses (MSBs):**
    *   "A person that provides money transmission services is a money transmitter and must register as an MSB. An administrator or exchanger of virtual currency is a money transmitter." (Summarized from FinCEN Guidance FIN-2019-G001). This guidance clarifies that businesses facilitating cryptocurrency exchange are subject to BSA obligations.
*   **IRS on Taxation of Virtual Currency:**
    *   "The IRS recognizes that virtual currency may be used to pay for goods or services, or may be held for investment. Virtual currency is treated as property for Federal income tax purposes...A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received." (Summarized from IRS Notice 2014-21 and subsequent FAQs).
*   **SEC on Digital Asset Securities:**
    *   The SEC has consistently stated that "whether a particular digital asset is a security will depend on the facts and circumstances, including the economic realities of the transaction." (Paraphrased from various SEC speeches and enforcement actions). The SEC applies the Howey Test to determine if a digital asset constitutes an investment contract and therefore a security.
*   **CFTC on Virtual Currencies as Commodities:**
    *   "The CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce." (Summarized from CFTC statements and primers on virtual currencies).

**4. Direct, Accessible URL Links**

*   **FinCEN Guidance (FIN-2019-G001):**
    *   [https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-models](https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-models) (Note: While the specific document FIN-2019-G001 is referenced, the link provides access to FinCEN's guidance page where such documents are typically found or can be searched for.)
*   **IRS Notice 2014-21 (Virtual Currency Guidance):**
    *   [https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21](https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21)
*   **IRS Frequently Asked Questions on Virtual Currency Transactions:**
    *   [https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions](https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions)
*   **SEC Statements and Guidance on Digital Assets (General Page):**
    *   [https://www.sec.gov/finhub/digital-assets](https://www.sec.gov/finhub/digital-assets) (This page often contains links to relevant speeches, frameworks, and enforcement actions.)
*   **CFTC Primer on Virtual Currencies:**
    *   [https://www.cftc.gov/sites/default/files/2019-12/oceo_bitcoinbasics0218.pdf](https://www.cftc.gov/sites/default/files/2019-12/oceo_bitcoinbasics0218.pdf) (While dated February 2018, it provides foundational CFTC views. More recent statements can be found on the CFTC website.)
    *   General CFTC information on digital assets: [https://www.cftc.gov/digitalassets/index.htm](https://www.cftc.gov/digitalassets/index.htm)

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This report reflects the status as of the indicated date based on publicly available information. The regulatory landscape for cryptocurrencies is highly dynamic, and changes can occur frequently.