Currently, the realm of digital currencies remains a wild west. With limited powers, governments and regulators are finding it hard to control crypto. But with the increasing number of scams, frauds and other illicit activities lawmakers around the world are passing laws which substantially increase government’s power. In the United States, multiple agencies have failed to prosecute a number of cases in court over lack of legislation. This is about to change as a number of laws have been presented to the House of Representatives which are specifically meant for crypto and other financial assets.
The Current Situation
As it stands, there is no consistent legal status for cryptocurrencies in the United States. Laws governing crypto exchanges vary from state to state, and there is no clear definition of cryptocurrency in the federal level among different agencies. Financial Crimes Enforcement Network (FinCEN) does not give cryptocurrencies the status of legal tender, but from 2013 onwards they have considered crypto exchanges as money transmitters( subjected to their jurisdiction ) on the notion that tokens are “other values that substitute for currency”. Meanwhile, the IRS regards cryptocurrencies as property holdings and has issued tax guidance accordingly. SEC and CFTC consider ICO as security and has tried to deal with it accordingly but the courts have put a stop to it. All of this is creating confusion among investors and users but all of it is about to change.
H.R.56: Financial Technology Protection Act
This bill calls for the investigation of new Financial Technologies or FinTech (e.g., digital currencies) and their use in illicit activities like terrorism and trafficking. The bill will establish the Independent Financial Technology Task Force to Combat Terrorism and Illicit Financing, which is tasked with researching terrorism financing and other illicit use of new financial technologies and issue an annual report. The bill has a provision which directs the Department of the Treasury to provide a reward for individuals who provide information leading to the conviction of an individual involved with terrorist use of digital currencies. Under this law, FinTech Leadership in Innovation and Financial Intelligence will be used to support the development of tools and programs to detect terrorist funding and illicit use of digital currencies. The bill sponsored by Reps Ted Budd (NC-13th district) is co-sponsored by 4 representatives in total, including both Republicans and Democrats making it a bipartisan bill. From the Republican side, Meadows Mark (NC-11th district) and Davidson Warren (OH-8th district), and from the Democratic side, Stephen F.Lynch (MA-8th district) and Soto Darren (FL-9th district) co-sponsored the bill. It was introduced in the House, and as of now, stands referred to the House Committee on Financial Services.
H.R.502 – FIND Trafficking Act
The Fight Illicit Networks and Detect (FIND) Trafficking Act of 2019 (H.R. 502) was introduced in the House by Rep. Ann Wagner (MO-02) and Rep. Juan Vargas (CA-51). This bipartisan bill would require the Comptroller General of the United States to study how online marketplaces and virtual currencies are used to facilitate drug or sex trafficking and propose legislative and regulatory actions to put an end to these illicit activities. Through the Comptroller General’s findings and proposals, Congress would craft legislative solutions to regulate the use of virtual currencies to prevent crimes such as illegal drug sales and sex trafficking. The bill is currently referred to the Committee on Financial Services and in addition to the Committee on Energy and Commerce. While evidence points to the growth of virtual currencies as a payment method for drug trafficking and illicit sex, the true scope of the problem and their potential solutions have not been fully established. H.R. 502 would analyze and study how online marketplaces and virtual currencies are used to facilitate drug and sex trafficking to determine how to fight these illicit and harmful activities.
H.R.2433 – Homeland Security Assessment of Terrorists Use of Virtual Currencies Act
This bill was introduced in the previous Congress (115th Congress 2017-18) by Rep. Rice Kathleen M, a Democrat from New York 4th district. The bill directs Under Secretary of Homeland Security for Intelligence and Analysis to disseminate and develop a threat assessment regarding terrorist use of virtual currency. The bill passed House and currently is referred to the Committee on Homeland Security and Governmental Affairs by the Senate. Unlike other bills, this one specifically focuses on terrorist use of virtual currencies.
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