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6.04 Rather Enabling Environment
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As of today, the U.S. is one of the pivots of the global blockchain industry, with an approximately 30% concentration of all businesses. The U.S. dollar is the second currency in the total volume of transactions in the cryptocurrency market. The federal authorities, just as the authorities of states, show considerable interest in regulating blockchain- and cryptocurrencies-related businesses.
The regulatory framework for virtual currencies was first formed before the blockchain era. In 2006, following the legal suit filed by the Department of Justice (DOJ) against e-gold, the definition of money transfer was expanded. It was determined that the concept of money transfer included not only the transfer of cash or currency, but also the transfer of the value of this currency by any other instrument of circulation. In 2013, Financial Crimes Enforcement Network (FinCEN) issued Regulations to Persons Administering, Exchanging, or Using Virtual Currencies with the main purpose of clarifying the provisions of the Bank Secrecy Act with respect to persons creating, acquiring, distributing, exchanging, accepting or transferring virtual currencies. In fact, rules were established obliging businesses related to monetary services (including transactions with virtual currencies) to register with FinCEN and strictly comply with anti-money laundering (AML) and Know Your Customer (KYC) rules.
Since 2013, the United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also played a significant role in the cryptocurrency market regulation. In 2013, the SEC disseminated Investor Alerts related to the use of cryptocurrency in Ponzi schemes. In September 2015, the CFTC classified bitcoin as an exchange commodity. In 2017, the SEC started classifying issues of any tokens as issues of securities, which de facto results in a ban on ICOs in the United States.
US ranks as 'most favorable' country for ICOs in the recent report, despite the strict ICO's rules. Analysts associated with the Crypto Finance Conference highlights the U.S. as the most favorable country for ICOs with a total of 30 companies launched in the field.
At the level of states, there are different approaches to blockchain- and cryptocurrencies-related regulating businesses. A special license for transactions with virtual currencies has been required only in the state of New York since 2015 (the so-called BitLicense). Attempts have been made to unify the legislation of individual states in the domain of virtual currencies. In particular, various states are invited to adopt a model law on the regulation of businesses related to virtual currencies (the Uniform Regulation of the Virtual Currency Businesses Act (URVCBA), 2017).
Neutral Political Environment
American regulators are actively discussing the issues of cryptocurrencies and blockchain technologies. They pay special attention to weaknesses and threats that have cryptocurrencies and thus try to protect financial system by adopting laws that are rather hinder the development of technology. Central Bank of the United States consistently demonstrates their negative attitude towards the cryptocurrencies and, in particular, the central bank-issued digital currency.
Rather not Enabling Legal Environment
Regulatory Convergence At the moment, the U.S. is characterized by regulatory divergence. There is no comprehensive legislation about cryptocurrencies and blockchain. Legal issues related to cryptocurrencies are regulated by different branches of law and by different bodies. These bodies have absolutely different legal approaches to cryptocurrencies. Due to the fact that U.S. is a federal state, regulation is carried out both at the federal level and at the level of states
Definiteness of Legal Regulation At the moment, there is no comprehensive legislation about cryptocurrencies and blockchain. Legal issues related to cryptocurrencies are regulated by different branches of law and by different bodies. State bodies made many statements and published many guidelines, that explain how the existing rules should apply to crypto-activities. Issues related to the cryptocurrencies are regulated not only by federal law, but also by state law. The state bodies in U.S. apply the absolutely different approaches in cryptocurrencies regulation e.g concerning the legal status of cryptocurrencies: IRS – property, CFTC – commodity, FinCEN – currency.
Stability of Legal Regulation The regulatory framework is in the process of formation, lawsuits are pending, with future rulings (contributing to regulatory development) hard to predict. Legal regulation of cryptocurrencies in the U.S. is constantly changing.
Adequacy of Legal Regulation Current regulation can be considered as inadequate, because it hinders the development of innovative blockchain technology-related projects, forcing startups to comply with numerous, often inconsistent rules, face regulatory uncertainty, pay for constant monitoring of numerous state and federal regulatory bodies.
Situation with the Rule of Law The United States has high scores in the Rule of Law Index and is ranked 19th out of 113 countries. The conditions of the legal regulation of blockchain and cryptocurrencies are low, and since the values of the sub-criterion of the rule of law are quite high (0.73), the amount of the difference between weighted (multiplied by Rule of Law Index score) and unweighted assessments are not significant.
Enabling Infrastructure Environment
In the U.S., there is a highly developed E-Government infrastructure, telecommunications infrastructure and online services. The United States ranks 11th out of 193 countries in the UN E-Government Development Index.
Furthermore, the U.S. has a very high score of doing business conditions, ranking sixth in the world.