The Influence of Cryptocurrency Regulation in the USA on the Activities of ICO and Blockchain Startups

USA flag

The market within the United States is a very perspective way for any cryptocurrency project, which, however, is accompanied by state regulations. As a rule, many people in this country create official offices, but conduct ICO and issue tokens through other companies that do not fall under the jurisdiction limiting the cryptocurrency activities.

Restrictive measures of companies towards citizens and residents of the United States are related to the current law and regulation by the Securities and Exchange Commission (SEC).

Despite this, the US is still the most convenient country for the cryptocurrency business. Moreover, large hedge funds, cryptocurrency and stock exchanges, as well as other companies, the activities of which are connected with digital assets, are registered and operating on its territory.

Legal regulation of cryptocurrencies

The US authorities have not established a framework for the legal regulation of cryptocurrency within their state so far. This is due to multiple disagreements between the legal structures of the country, which have been going on since the September of 2015. Therefore, cryptocurrency has not yet been recognized as an official means of payment in the United States.

Legal regulation of tokens and ICO

Digital coins can be considered securities if they meet the conditions set by the SEC in the July of 2017. The following tests are used for this: Howey Test, Family Resample Test, Capital Risk Test and others.

Moreover, documents have been published to warn users of the risks that may accompany them during the ICO.

Legal regulation of cryptocurrency activities

Cryptocurrency activities are regulated through federal law and the legislative state at the same time. Activities of this kind can be legalized if this is established by the state.

Thus, the identity of the user whose account is manipulated by a certain cryptocurrency company should be established in order to determine whether the user is involved in illegal activities or not in case of any suspicion. If suspicions are justified, then the company must inform the relevant authorities.

Taxation of cryptocurrency operations

Questions about taxation are handled by the US Internal Revenue Service (IRS). In 2014 the IRS defined digital currencies as its own property. As a result, there is a tax   for all operations related to them, as well as a tax for mining.

In 2018, it was decided to tax only the completed cryptocurrency transactions.

Income taxes

The tax on cryptocurrency activities in the USA has two types and the corresponding interest rate:

  • The federal tax depends on the volume of pure profit: from 15 to 35%;
  • The state tax depends on the registration: from 0 to 10%.

The federal tax is in direct proportion to the size of the net profit. There is a formula which helps to calculate it:

Net income = Income – Expenses

Sales tax

Sales tax depends on the state and its size ranges from 0 to 8%, excluding local and city taxes. In the United States the tax amount is not taken into account while pricing the goods, which justifies the need for its payment only after the purchase.

Conclusions

Cryptocurrency regulation in the US is conducted at the federal and state levels. However, regulation in the state depends on the established local norms for cryptocurrency.

The Commodity Futures Trading Commission (CFTC) believes that digital currency is a commodity, while the court recognized it as money.

Due to the fact that the regulation of cryptocurrency processes is restricted in the United States, experts do not recommend to conduct ICO on the territory of this country. Moreover, cryptocurrency activity in some states needs a corresponding license. The tax rate depends solely on the state where the company is registered.

Due to these factors, the United States of America is currently not the best place for holding ICO, however, local jurisdiction provides favorable conditions for the conducting and developing business infrastructure.

It is possible that the US will continue to be a popular place to register the main office, but it is clear that the tokens and ICO will need to be produced and issued in another country with a more suitable jurisdiction.

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