US Regulators to Treat Crypto as Cash in New Rules
US regulators are set to redefine "money" to include cryptocurrencies, enforcing the same reporting rules as traditional cash to boost oversight and transparency.
US federal agencies are gearing up to redefine "money" to include cryptocurrencies under the same reporting requirements as traditional currency. This regulatory shift aims to ensure that financial institutions treat cryptocurrencies on par with fiat currency when it comes to reporting domestic and cross-border transactions.
The US Department of the Treasury recently released its semiannual regulatory agenda, outlining plans to tighten oversight on digital assets. Key agencies like the Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) are leading efforts to revise the definition of "money" in the Bank Secrecy Act (BSA). Their goal is to ensure that convertible virtual currencies, which act as substitutes for legal tender, fall under the same reporting rules as traditional money. The new regulations will also cover digital assets with legal tender status, such as central bank digital currencies (CBDCs).
This move reflects a broader push by the US government to address the challenges posed by the rise of cryptocurrencies. The final proposed rules are expected by September 2025, emphasizing the urgency in updating financial regulations to keep pace with the digital economy.
The decision to include cryptocurrencies under the definition of money comes amid other significant government actions. Recently, around 10,000 Bitcoin linked to an old Silk Road raid were moved by federal authorities, underscoring the importance of tracking and regulating digital assets.
At the same time, the Department of Justice is updating its guidelines to tackle crimes committed with the help of artificial intelligence (AI). On August 7, the DOJ urged the United States Sentencing Commission to enhance penalties for such crimes, reflecting the growing concern over AI's role in illegal activities.
Recent legal changes have also complicated the regulatory landscape for cryptocurrencies. In June 2024, the US Supreme Court overturned the Chevron doctrine, which had previously allowed agencies like the Securities and Exchange Commission (SEC) significant leeway in interpreting laws. This decision could weaken the SEC's authority over crypto regulations, creating uncertainty about future policies.
Additionally, new tax regulations introduced by the US Treasury and IRS in May 2024 will require cryptocurrency brokers to report transactions and maintain detailed records starting in 2026. This is part of a broader effort to tighten control over digital assets.
However, not everyone agrees with the current regulatory direction. Senators Ron Wyden and Cynthia Lummis have criticized the DOJ for treating crypto software services like unlicensed money transmitters, arguing that this approach might conflict with First Amendment rights. This debate highlights the ongoing tensions and complexities in regulating the crypto space.
In summary, US regulators are increasingly recognizing the importance of cryptocurrencies in the financial system. By aligning reporting requirements for digital assets with those of traditional currency, they aim to enhance transparency and combat illegal activities, marking a significant step forward in crypto regulation.
