Regulators classify tokens as securities or commodities
U.S. regulators determine token status by evaluating an asset’s role. They check whether an asset operates as an investment contract or as an underlying commodity. This legal distinction decides which federal agency exercises primary oversight.
According to the Commodity Futures Trading Commission, virtual currencies such as Bitcoin qualify as commodities under the Commodity Exchange Act. This status gives the commission direct authority over crypto futures contracts.
These are agreements to buy or sell an asset at a set price on a future date. It also gives the agency enforcement power against spot market fraud. Spot markets are places where assets are bought and sold for immediate delivery.
Other digital assets face scrutiny under federal securities laws. The Securities and Exchange Commission evaluates digital tokens under the Howey test.
This test is a legal standard determining if an asset qualifies as an investment contract, or security. If buyers invest money in a common enterprise expecting profits from promotional efforts, the SEC treats the token as a security.
According to the Securities and Exchange Commission, the agency proposed new rules titled Regulation Crypto Assets on August 18, 2026. The agency introduced the proposal under the Securities Act of 1933.
The SEC designed those proposals to establish registration exemptions. They also create safe harbor pathways (legal protections against penalties) for qualifying token contracts.
Token issuers must follow specific disclosure standards under these regulatory frameworks:
- Token sales qualifying as securities require formal SEC registration or an exemption
- Trading venues listing security tokens must register as national securities exchanges
- Commodity derivatives platforms must register directly with the Commodity Futures Trading Commission
- Market operators must maintain customer asset segregation to prevent commingling (mixing customer funds with company funds)
When regulators classify a token as a security, trading platforms cannot list it without a broker-dealer license. This license is official regulatory approval to buy and sell securities for clients or a firm’s own account. Crypto exchanges often delist questioned assets to avoid federal lawsuits.
The IRS treats cryptocurrency as taxable property
The Internal Revenue Service classifies cryptocurrency as property rather than foreign or domestic legal tender (official government currency).
According to the Internal Revenue Service, Notice 2014-21 issued on March 25, 2014, established that general property principles govern virtual currency transactions. Every trade, sale, or retail purchase made with crypto creates a taxable capital gain or loss.
Paying for a cup of coffee with Bitcoin counts as a taxable disposal event. The user must calculate the difference between the purchase price and the fair market value at sale.
Short-term gains face ordinary income tax rates. Long-term holdings qualify for lower capital gains rates.
Federal authorities enforce this rule on individual annual tax filings. According to the Internal Revenue Service, taxpayers must answer a mandatory question on individual income tax returns.
It details any receipt, sale, exchange, or disposition of digital assets. Failing to answer this question accurately risks financial penalties and audit scrutiny (a detailed tax examination).
Mining rewards and staking yields (earnings received from locking up tokens to support a blockchain network) also trigger immediate tax events. The IRS treats newly minted tokens as gross income based on their fair market value on receipt day. Investors must keep detailed transaction ledgers to calculate their yearly tax liabilities correctly.
Keeping track of every single transaction can feel overwhelming, but you really have to keep your wits about you. I hold wallets with Bitcoin, Ethereum, and Solana myself, and I use a crypto card for daily purchases. When tax rules treat ordinary spending as a taxable event, keeping a clear and structured record is simply common sense.
How do individual states regulate crypto businesses?
States regulate cryptocurrency companies through individual money transmitter licenses, consumer protection statutes, and specialized operational charters (state-issued business permits). This federalist system requires firms to secure permission in each state where they serve customers.
According to the Wharton School of the University of Pennsylvania, digital asset companies must satisfy separate money transmission statutes across different state jurisdictions. Each state sets its own net worth standards, compliance audits, and surety bond minimums. A surety bond is a required third-party guarantee ensuring a company fulfills its legal obligations.
New York enforces a specialized licensing framework for digital assets. According to the New York State Department of Financial Services, regulation 23 NYCRR Part 200 was adopted in June 2015.
It requires virtual currency firms operating in New York to obtain a BitLicense or a limited purpose trust charter. This requirement forces startups to spend substantial capital on legal compliance before serving local residents.
State frameworks impose clear operational conditions on crypto companies:
- Money transmitter licenses required across individual state banking departments
- Mandatory capital reserves held in approved fiat currency instruments (financial holdings denominated in government-issued money such as the U.S. dollar)
- Specialized operational permits such as New York’s BitLicense were established under regulation 23 NYCRR Part 200, adopted in June 2015, according to the New York State Department of Financial Services.
- Independent examinations conducted by state financial regulators
Wyoming created special purpose depository institutions to let banks custody digital assets under state charters. California enacted its own digital asset business licensing framework to supervise customer disclosures and corporate governance (company management rules).
Congress has not passed comprehensive federal legislation
Congress has failed to enact a unified digital asset statutory framework. This leaves companies subject to piecemeal agency enforcement.
Legislators attempted to solve this inter-agency overlap through statutory reform. According to the U.S. House of Representatives, lawmakers passed H.R. 4763, the Financial Innovation and Technology for the 21st Century Act.
They approved it on May 22, 2024, by a bipartisan vote of 279 to 136. The bipartisan FIT21 vote sought to assign regulatory authority over digital assets between the SEC and the CFTC.
Despite House approval, the legislation stalled in the upper chamber. According to law firm Mayer Brown, the Senate took no action on the bill following the May 2024 House passage.
This left firms without a single federal regulatory code. This statutory gap forces market participants to interpret decades-old securities and commodities laws.
Users do not get the automatic federal deposit insurance that traditional bank accounts provide.
Without explicit federal statutes, regulatory rules shift whenever agency leadership changes. Companies often face enforcement lawsuits rather than formal notice-and-comment rulemaking (public rule proposals open for comment). This dynamic drives some crypto businesses to seek licenses overseas.
Much of the debate gets stuck on the hype around Bitcoin, but this is already a trillion-dollar market. Many people do not realize that major companies like Boeing and Volkswagen actually use blockchain for inventory management. That is why clear rules are needed, because you have to know what you are dealing with to navigate it safely.
Bloomberg Television covers congressional crypto legislation and Trump earnings
Bloomberg Television reported on legislative negotiations surrounding the Clarity Act. The network highlighted ethics disputes linked to presidential crypto earnings. It also examined the political tensions shaping new financial legislation in Washington.
Bloomberg Television noted that Bitcoin fell below $60,000 after dropping about 10.5% between early June and late July. During this market drop, congressional negotiators sought clarity on crypto rules under the Clarity Act. They worked to define joint regulatory authority between the SEC and the CFTC.
Bloomberg Television cited a disclosure released by the U.S. Office of Government Ethics. The filing revealed that Donald Trump brought in at least $1.4 billion from cryptocurrency operations. That figure exceeded the $1.25 billion in net income that public exchange Coinbase reported, according to Bloomberg Television.
The disclosure revealed varied revenue streams across multiple digital enterprises. According to Bloomberg Television, Trump earned $594 million from the crypto venture World Liberty Financial.
He also earned $636 million from token ventures, and almost $200 million from an equity holding. Bloomberg Television reported that Senate negotiations included a provision sunsetting (ending) ethics requirements on January 20, 2029.
Financial institutions also pushed for restrictions on digital assets during these legislative talks. Bloomberg Television cited the Independent Community Bankers of America. That group represents community lenders that make over 60% of small business loans and 80% of agricultural loans.
Bloomberg Television reported the group’s warning about interest-bearing stablecoins (cryptocurrencies pegged to the U.S. dollar that pay interest). According to The Guardian, the banking group warned that these tokens could drain $1.3tn (£980bn) of deposits and deprive small businesses and farmers of $850bn-worth of loans.
