United States virtual currency law is financial regulation as applied to transactions in virtual currency in the U.S. The Commodity Futures Trading Commission regulates as commodities. The Securities and Exchange Commission also requires registration of any virtual currency traded in the U.S. if it is classified as a security and of any trading platform that meets its definition of an exchange.
The regulatory structure also includes tax regulations and FINCEN transparency regulations between financial exchanges and the individuals and corporations with whom they conduct business.
The regulatory and market environment The Internal Revenue Service (IRS) describes Virtual Currencies (VCs) as "a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value [and] does not have legal tender status in any jurisdiction."Internal Revenue Service, Notice 2014-21, IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply (Mar. 25, 2014). Although, electronic payment systems have been part of American life since at least 1871 when Western Union "introduced money transfer" through the telegraph"Our Rich History" , Western Union (Nov. 3, 2014). and in 1914 "introduced the first consumer charge-card", virtual currencies differ from these digital payment structures because unlike traditional digital transfers of value, virtual currencies do not represent a claim on value; rather the virtual currency are the value.
The National Automated Clearing House Association (NACHA), through the Automated Clearing House (ACH) moves almost $39 trillion and 22 billion electronic financial transactions each year."ACH Network: How it Works", ACHA (Nov. 30, 2014). These electronic transfers of money through the ACH Network represent a claim to physical legal tender. Alternatively, "unlike electronic money, a VC, particularly in its decentralised variant, does not represent a claim on the issuer.""EBA Opinion on ‘virtual currencies’" , European Banking Authority, (July 4, 2014).
Electronic payment networks, such as the ACH, have decreased the costs and time required to transfer value and increased reliability and transparency. However, traditional electronic payment networks, even with transnational networks and satellite communications, differ from a virtual currency. For example, the Bitcoin exchange Coinbase charges only 1% on all Bitcoin exchanges to legal tender.Payouts, Coinbase (Nov. 3, 2014). https://www.coinbase.com/docs/merchant_tools/payouts Compare this to "2%-4% for traditional online payment systems, like PayPal and credit card companies, or a global average of 7.49% for remittance sent through major remittance corridors.Remittance Prices Worldwide, The World Bank (Issue n. 11, September 2014) https://remittanceprices.worldbank.org/sites/default/files/rpw_report_september_2014.pdf) The lower costs of transferring value is a great incentive to both users and merchants. Faster transaction speed is also an advantage of using VC. VC may also help to reduce identity theft because of the cryptographic nature of some of the currencies.Erika Morphy, "With Bitcoin In Your Pocket, Is Your Identity Finally Safe?", Forbes (Dec. 31, 2013).
Some experts predict various types of VCs will continue to increase, and the demand for the financial system to adopt methods of accepting these currencies will continue to grow. In 2011, Microsoft's Director of Corporate Affairs sent a letter to the Reserve Bank of Australia asking, "whether the domestic payments infrastructure could be modified or adjusted in some way to facilitate and manage the exchange of value beyond traditional currencies".Simon Edwards, Microsoft Letter to the Reserve Bank of Australia. (August 31, 2011). The online sale of goods and services in the United States accounted for an annual total of $283 billion transactions from the start of 3rd quarter 2013 to the end of 2nd quarter 2014 (adjusted for seasonal variation).Quarterly Retail E-commerce Sales, U.S. Census Bureau News (Nov. 9, 2014), https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf VCs are increasing as a percentage of these transactions. The Bitcoin exchange company Coinbase offers a payment service that allows merchants to receive Bitcoin and then automatically exchange the Bitcoin into fiat currency.Legal, Coinbase (Nov. 9, 2014). The speed of this exchange helps merchants to avoid the volatility of Bitcoin. In September 2014, eBay announced that its payment processor Braintree will be accepting Bitcoin. As of November 2014, the market capitalization of Bitcoin was just below $5 billion, but has reached historic highs close to $14 billion."Market Capitalization", Blockchain (Nov. 9, 2014). The growth of Internet use and the virtual world is also increasing. World Internet use increased from 15.8% in 2005 to 38.1% in 2013.Data, The World Bank (Nov. 9, 2014), http://data.worldbank.org/indicator/IT.NET.USER.P2/
This Internet growth is characterized by a consumer demand for a decentralized Internet experience that is not limited or dependent on traditional institutions and governments. This movement aims to create an Internet based on the idea of Virtual, Distributed Parallel (VDP) States, "acting as a kind of organizational counterpoint to that State's governing bodies".Amon Twyman, "The Social Futurist policy toolkit", Institute for Ethics and Emerging Technologies (April 27, 2014). Cryptocurrency and other virtual currencies are the VDP movements' currency alternative to traditional currency and traditional financial institutions.
Regulatory authority The U.S. Congress has the power to regulate VCs as securities, through its power to coin money and prohibit private currencies, and through its constitutional power to regulate insterstate commerce.U.S. Const., art. I, §8, cl. 5, the power to "regulate Commerce with foreign Nations, and among the several States" In a November 2014 decision, the Court upheld the power of regulators to prosecute a defendant who "designed, created and minted coins called 'Liberty Dollars,' coins 'in resemblance or in similitude' [or made to look like] of U.S. coins."United States v. von NotHaus, No. 5:09CR27-RLV, 2014 WL 5817559, at *1 (W.D.N.C. Nov. 10, 2014). Although the defendant did not pass the Liberty Dollars currency as a counterfeit, the currency were in close enough "resemblance of coins of the United States or of foreign countries" and consequently fell under the authority of 18 U.S.C.A. § 486.123 The Court has not decided if § 486 includes the power to prohibit VCs, but if a Court decides that the purpose and intent of VC resembles United States or foreign currency it may fall under § 486.
The Stamp Payment Act of 1862 prohibits anyone from "mak[ing], issu[ing], circulat[ing], or pay[ing] out any note, check, memorandum, token, or other obligation for a less sum than $1, intended to circulate as money or to be received or used in lieu of lawful money of the United States".18 U.S.C.A. § 336 The Court has not decided if Congress has the power to prohibit VCs under this Act or any other existing regulation or statute.
In July 2025, the U.S. enacted the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which establishes the first comprehensive federal framework for regulating payment stablecoins. The Act requires issuers to maintain one-to-one reserves of liquid assets, undergo regular audits, and comply with anti-money laundering and consumer protection rules. It also defines payment stablecoins distinctly from other digital assets and implements safeguards to protect consumer funds through bankruptcy priority provisions.
Tax regulations The IRS treats VC as property and requires for gains or losses upon an exchange of VC to be calculated. This means that every VC user must track the gains or losses of every one of their VC transactions to stay in compliance with IRS regulations.Jose Pagliery, "New IRS rules make using Bitcoins a fiasco", CNN Money (March 31, 2014). The Tax Foundation, a tax policy research organization, argues that the IRS got it wrong by categorizing VC as property because the required record keeping creates compliance obstacles, and by categorizing VC as property, the IRS is ignoring how VC is used and treating it as something that people hold for an investment.Johannes Schmidt, Alexander Derrick, Joseph Henchman, "IRS Says Bitcoin to Be Taxed As Gains; New Rule is Retroactive", Tax Foundation (March 28, 2014). The pseudonymity of VC accounts allow users to hide funds and evade taxes.Omri Marian, "Are Cryptocurrencies Super Tax Havens?", Michigan Law Review Vol. 112:38. Similar to receiving cash, merchants may not report the earnings to the IRS if the merchant believes the IRS will not be able to account for the transaction. The IRS may be able to audit a VC exchange the merchant uses, but if the merchant is using a personal VC account or using multiple exchanges the IRS may not be able to track these transactions.
Electronic Fund Transfer Act Virtual currencies lack many of the regulations and consumer protections that legal tender currencies have. Under U.S. law, a cardholder of a credit card is protected from liability in excess of $50 if the card was used for an unauthorized transaction.15 U.S. Code Section 1643.
The Electronic Fund Transfer Act (EFTA) was written to protect consumers in transfers through ATMs, point-of-sale terminals, ACH systems, remote transfers, and remittance transfers. However, the EFTA does not apply to VCs, and due to the nature of many VCs, it may not be possible for VCs to be in complete compliance with the Act. For example, the regulations require for a consumer to be allowed 30 minutes to cancel an electronic transfer.Jerry Brito, Andrea Castillo, "Bitcoin A Primer for Policymakers", Mercatus Center at George Mason University (2013). Many VCs, such as Bitcoin, do not allow chargebacks, so cancelling the Bitcoin transfer is not possible. Additionally, a credit card that transacts in VC is not protected by the fifty-dollar maximum liability for the holder of the credit card.15 U.S.C.A. § 1643
FinCEN regulations In 2013, the Financial Crimes Enforcement Network (FinCEN) released a paper stating exchanges and administrators of VC are subject to the Bank Secrecy Act (BSA) and must register as a Money Services Business (MSB)."Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies", FinCEN. The stated purpose of this legislation was to prevent financial exchanges from being used to launder money or finance crime, including terrorism."What We Do", FinCEN (last retrieved Nov. 30, 2014). The European Central Bank has also recommended registering exchanges to "reduce the incentive for terrorists, criminals and money launderers to make use of these virtual currency schemes for illegal purposes"."Virtual Currency Schemes", European Central Bank 36 (Oct. 2012).
Monetary policy The current amount of VC use in the global market is unlikely to significantly affect the Federal Reserve's ability to conduct monetary policy; however, if the size of the VC market were to grow larger it may affect monetary policy."CFPB Warns Consumers About Bitcoin", Consumer Financial Protection Bureau (Nov. 8, 2014). Even with the impact VC could have on monetary policy, the Reserve does not have the authority to supervise or regulate VC.Dominic Rushe, "Janet Yellen: Federal Reserve has no authority to regulate Bitcoin", The Guardian (Feb. 27, 2014).