Cryptocurrencies have become very popular recently as there are many investors worldwide who are starting to realize their value. That’s to say the financial gain they tend to produce and the prospect of decentralized transactions as their use increases. However, the best crypto to buy now according to finance writer Michael Graw should only include assets that are compliant with regulations. That’s why we’ll be reviewing the most important of these that you need to be aware of.

Overview of US Crypto Regulations

US crypto regulations are overseen by different bodies of government depending on what these digital currencies are used for. For example, crypto poker chip purchases might also fall under the purview of gambling boards. Now let’s see the bodies that govern all crypto purchases and the regulations they’ve enacted.

  • Securities and Exchange Commission (SEC): The SEC’s job is to ensure market efficiency and to ensure that investors are protected in the crypto space. Currently, the SEC has classified most cryptocurrencies as securities except Bitcoin which is classified as a commodity. All crypto companies that want to operate in the US are expected to register with the SEC and adhere to regulations like adequate reporting.
  • Financial Crimes Enforcement Network (FinCEN): FinCEN focuses on enforcing anti-money laundering (AML) regulations. These regulations include compliance with Counter-Terrorist Financing (CTF) obligations and registering with the Financial Intelligence Centre (FIC) to offer crypto or crypto-related services.
  • Office of the Comptroller of the Currency (OCC): Even though the OCC doesn’t directly regulate crypto, it still oversees all national banks and requires national banks and federal savings associations to engage with crypto according to their guidelines.
  • Internal Revenue Service (IRS): The IRS handles cryptocurrency-related taxes and requires all businesses and individuals to report their crypto transactions, gains, and losses, so they can pay appropriate taxes.

Let’s move on to what you need to check for before you invest in any crypto venture now that we’ve got an idea of the regulations that govern this space below.

  • Registration: You need to check if the company you want to invest in or buy from is registered with either the SEC or FinCEN.
  • AML and CTF Compliance: The crypto venture you’re interested in needs to enforce robust AML and CTF measures to ensure compliance with industry regulators so check if they have any in place.
  • Reporting Requirements: All crypto businesses need to release their financial reports to authorities which is why you need to be wary if you find out a company won’t release these.

Michigan-Specific Regulations

Like many other states, Michigan doesn’t have any laws that specifically regulate cryptocurrencies but there are still some interesting points worth mentioning about this situation.

  • No Specific Laws: The fact that Michigan hasn’t passed any laws to regulate cryptocurrencies is both a challenge and a blessing since investors don’t get the specifics of what can be done with crypto. On the other hand, many investors see the lack of exact regulations as more freedom given to them as crypto isn’t banned.
  • Supportive Environment: Michigan has a very supportive environment for crypto enthusiasts like the Blockchain Crypto Club at Western Michigan University who can help you with identifying safer investments in the absence of local regulations.
  • Not Legal Tender: Another thing you need to know about the lack of regulations in Michigan is that cryptocurrencies are not recognized as legal tender yet. You can still transact using cryptocurrencies but for now, they don’t have the same status as fiat currencies.

Investment Considerations

Even though it’s been a slow process crypto assets have become a popular alternative investment, and the legal landscape has adopted a favorable view of them, here are important points you’ll need to consider before investing.

  • Legality: Crypto assets are legal in the US. Contrary to some countries that have banned or restricted the ownership of digital currencies you can trade them freely here.
  • Use Cases: Both businesses and individuals can legally utilize cryptocurrencies for various uses beyond investing, such as international transactions, online poker, and everyday shopping.

Even though you can use crypto in the US, you need to know about the tax implications that come with using these digital assets. Here’s what they are.

  • Capital Gains and Losses: When you’re trading cryptocurrencies, all the gains and losses you’ll get will be taxed, so you need to keep a record of your trades.
  • Short-Term vs. Long-Term: How long you hold your crypto will affect how you get taxed as short-term gains made from assets that have been held for less than a year get taxed as income. Contrarily, long-term gains from assets you’ve been holding for over a year get taxed lower at capital gains tax rates.
  • Mining and Staking: The money you can make from staking or mining cryptocurrencies is also taxable. That’s because the IRS can view what you’ll make as income from self-employment or as profits from investments.