Regulating Digital Currency

Digital currency, also known as virtual currency, allows people to make purchases and other transfers over the Internet.  Bitcoins are the most widely used form of digital currency.  No state or federal laws specifically govern digital currencies and they are not considered legal tender in any country. A recent article from the Pew Charitable Trusts discusses state and federal attempts to regulate digital currencies.

Following is a list of some of the actions that the article highlights:

1. New York has proposed regulation for digital currencies that would (a) require compliance with anti-money laundering laws and (b) establish licensure and bonding requirements.
2. California recently passed legislation allowing the use of alternative currencies, including digital currencies.
3. The Texas and Kansas banking departments have recently announced that they do not consider digital currencies to be money.
4. The federal Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has stated that digital currencies are subject to money laundering rules and exchanges must register with FinCEN.
5. The federal Internal Revenue Service announced that, for tax purposes, bitcoins are property not currency.
6. The federal Government Accountability Office recommended that the federal Consumer Financial Protection Bureau participate in inter-agency working groups on virtual currencies.