Cryptocurrencies might soon receive the acknowledgment they deserve in the United States.
The United States Federal Reserve has disclosed that it might be considering classifying digital currencies as a legitimate currency. This announcement closely follows the submission of a proposal by both the U.S. Federal Reserve and FinCEN (Financial Crimes Enforcement Network). Both government-backed regulatory agencies are looking to classify digital currencies as money.
Although it is quite too soon to make any conclusions, however, the fact that these entities are looking in this direction is impressive. If this pulls through, it would spearhead the global acceptance, regulation, and adoption of cryptocurrencies.
Classifying crypto as money equals more control
According to the U.S. Fed and FinCEN, classifying crypto as money will provide regulators with more control over the currency. This would be like putting digital currencies on a short leash. Plans are in place to compile data and feedback on the effects of reclassifying digital currencies. Digital currencies worldwide have all the features required to be recognized as money. It is divisible, a reliable store of value, and a medium of exchange. Although the classification is a great step, there’s, however, still a lot to be done before it is actualized.
Both regulatory platforms plan to lower the threshold for cryptocurrency transactions. The threshold currently stands at $3,000. This means that any transaction above $3,000 needs to be reported. The U.S. Federal Reserve and FinCEN plan to push back the threshold to $250, all in a bid to better regulate the fast-growing U.S. crypto space.
Major drawbacks of the classification
A major challenge with regards to the proposal is the generally negative perception of digital currencies. Many people are still in the dark about crypto, and many see it as shady and illegal. The crypto space has also attracted a lot of nefarious characters, with many investors losing their funds to hacks and scams.
The U.S. Federal Reserve, on its website, disclosed that the proposed rule will help “modify the threshold in the rule implementing the Bank Secrecy Act (“BSA”).” The BSA, simply put, expects all financial institutions to obtain data on all fund transfers exceeding their commenced threshold. As previously stated, both platforms want the threshold reduced to $250.
The proposal also clarifies the term “money,” ensuring that these “rules apply to domestic and cross-border transactions involving convertible virtual currency (‘CVC’).”
Acknowledging crypto and classifying it as “money” will revolutionize the financial industry as we know it.
The United States IRS also recently revealed details of its crypto taxation plan.
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