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The United States Is Gearing Up to Legislate Crypto. Should Bitcoin Holders Be Worried?

The cryptocurrency market has been surging in recent weeks and months, but there are signs that the party may soon be coming to an end. No, we’re not talking about a sudden market crash, but rather growing attempts to regulate the cryptocurrency industry in the United States.

The United States is getting set to legislate around Bitcoin and other cryptocurrencies

The most recent of these attempts were made in New Jersey, where the state’s Senate introduced a bill on November 5 that would seek to regulate cryptocurrency businesses and ensure that all “digital asset business activity” is licensed within the state. More generally, they’ve also been highlighted by the large number of cryptocurrency and blockchain bills that have been proposed in Congress between 2019 and the end of 2020.

It’s clear that the United States is moving inexorably towards greater regulation of the cryptocurrency industry. However, while this might suggest that the industry will be restricted or even suppressed as a result, most of the bills being proposed will only serve to make crypto safer for retail and institutional investors alike. As a result, they will do more to boost adoption than hinder it.

New Jersey Introduces Cryptocurrency Regulation Bill

Looking at the details of the New Jersey bill, it’s clear that you’d have something to worry about only if you wanted to operate an unsafe and potentially fraudulent crypto-exchange or -business.

There are basically two main prongs to the bill, named the Digital Asset and Blockchain Technology Act. The first is that cryptocurrency businesses must be licensed by the state:

“a person may not engage in a digital asset business activity … unless the person is licensed in this State by the Department of Banking and Insurance … or licensed in another state to conduct digital asset business activity by a state with which this state has a reciprocity agreement.”

The second is that digital asset businesses have to be transparent with their customers and introduce a number of protections:

“The bill requires the terms and conditions of a digital asset business involving a consumer’s account to be disclosed at the time the consumer contracts for a digital asset business service.  The disclosure must be full and complete … and may include, as appropriate and to the extent applicable, certain information concerning fees and charges, risks to the consumer, and any protections or securities that are in place.”

That’s it. If you’re running a legitimate cryptocurrency business, or if you’re a legitimate user or trader of cryptocurrencies (i.e. not a terrorist or money launderer), you really have nothing to fear from the legislation, assuming it’s passed.

It’s notably softer than similar regulation introduced in 2015 in New York, where companies now have to apply for a BitLicense in order to operate. While a number of crypto-exchanges and financial companies (Coinbase, bitFlyer, Circle, Square, BitPay, Bitstamp) have successfully applied for a Bitlicense, others (Kraken, Bitfinex, Poloniex) fled the state as a result of its introduction, with Kraken arguing that applying for a Bitlicense imposes unjustifiable costs (e.g. having to disclose information about its global operations).

United States Legislation = More About Combating Crime Than Crypto

This leads us to considering the cryptocurrency legislation proposed over the past couple of years in the United States Congress, where the onus is more on reducing crime facilitated via cryptocurrency than on restricting crypto itself.

Convened on January 3, 2019 and set to conclude on January 3, 2021, the 116th U.S. Congress has proposed 40 crypto- or blockchain-related bills to date, according to data from non-profit think tank the Value Technology Foundation. 30% of these concern the “Use of Cryptocurrency by Terrorists, Money Launderers, Human and Sex Traffickers,” 22% concern the “Use of Blockchain Technology In Government & Business”, and 8% concern a “Digital Dollar.” The final 40% of proposed bills concern “Regulatory Clarity for Crypto and Blockchain Companies.”

Only two of these 40 bills have been passed into law, with one of these relating to how the Department of Defense might be able to use blockchain technology, and the other forming part of a larger bill on economic sanctions.

In other words, the U.S. Congress has done very little to regulate or restrict cryptocurrency up until now. At the same time, the proposed bills which directly address the cryptocurrency industry are either related to illicit uses of crypto or seek to provide a standardized framework for cryptocurrency regulations throughout the U.S. (e.g. the Digital Taxonomy Act).

Ultimately, this is all positive for the cryptocurrency industry and market, insofar as proposed regulation will ‘clean up’ the space and provide more certainty for businesses, making it more attractive to potential new investors.

Legislation Is Softening Up

In parallel, much of the state legislation being proposed or passed more recently seems more favorable towards crypto than regulation from several years ago.

For example, Wyoming has perhaps taken the lead among U.S. states in passing legislation that will not only make crypto safer for investors, but will foster the industry’s growth. In March, it passed a law permitting insurers to actively invest in cryptocurrencies, while in 2019 it passed a range of laws that provided legal recognition for cryptocurrencies and crypto-businesses.

More recently, the Conference of State Bank Supervisors — which coordinates state banking authorities across the U.S. — announced a new unified compliance regime for money transmitter businesses in 48 states, which includes cryptocurrency businesses. At the moment, such businesses have to apply separately and satisfy different conditions in different states, so this unified approach will go a long way to removing a barrier to the crypto industry’s growth.

Then there’s New York, which this year proposed a number of changes to its controversial BitLicense, which some exchanges have found too restrictive. These include a simplified application process, an extensive FAQ for cryptocurrency businesses, and a proposal to offer a conditional BitLicense (which would allow applicants to begin operating in New York by working with a business that already has a full BitLicense).

They may be modest changes, but as with developments in Wyoming and New Jersey, they indicate that the direction of travel is towards making the current regulatory environment more nurturing for the cryptocurrency industry. So far from representing any kind of attempt to ‘clamp down’ on crypto, the United States’ move towards regulation will mostly help crypto to grow.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge,, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_