Is Crypto Legal in US (State-Wise Rules & Regulations)

Cryptocurrency is legal in the United States, though it is subject to a complex web of federal and state regulations.

Unlike some countries that have banned digital assets outright, the US permits ownership, trading, and use of cryptocurrencies within regulatory frameworks overseen by various agencies.

Recent developments, including President Trump’s March 2025 Executive Order establishing a Strategic Bitcoin Reserve, signal increasing government acceptance.

In this article, I will help you examine the legal status of cryptocurrency in the US, covering federal and state regulations, tax implications, recent legislative initiatives, and how US policies compare to international approaches to cryptocurrency regulation.

Let us get started!

Is Cryptocurrency Legal In The USA?

Cryptocurrency is legal to own, buy, sell, and trade in the United States.

However, it exists within a regulatory framework administered by multiple federal agencies. Here are a few of the important frameworks:

• The SEC oversees cryptocurrencies that qualify as securities under the Howey test, while the CFTC regulates crypto derivatives and has jurisdiction over crypto commodities.
• FinCEN monitors cryptocurrency businesses for compliance with anti-money laundering regulations, and the IRS treats cryptocurrency as property for tax purposes.
• The legal classification of a particular cryptocurrency (whether as a security, commodity, or property) determines which regulations apply and which agencies have oversight.

Is It Legal To Be Paid In Cryptocurrency In The US?

Receiving compensation in cryptocurrency is legal in the United States.

Employers can pay employees or contractors in Bitcoin or other cryptocurrencies, provided they comply with applicable tax laws.

This means reporting the fair market value of the cryptocurrency as income on the date of receipt. Employment tax obligations, including Social Security and Medicare contributions, must still be fulfilled in US dollars.

Employees paid in crypto should be aware that value fluctuations after receipt don’t affect the taxable amount but may trigger capital gains taxes upon conversion or use.

How Are Cryptocurrencies Taxed In The US?

The IRS classifies cryptocurrency as property, not currency, making it subject to capital gains tax rules.

When you sell, trade, or use crypto to purchase goods or services, you trigger a taxable event. The gains or losses are calculated based on the difference between your cost basis (purchase price) and the fair market value at the time of disposal.

Holding crypto for more than a year qualifies for lower long-term capital gains rates, while shorter periods are taxed as ordinary income. Mining rewards and staking income are taxable upon receipt.

Is Bitcoin Mining Legal In The US?

Bitcoin mining is completely legal in the United States, making it one of the world’s most active mining hubs.

Though no federal laws prohibit mining operations, miners must comply with local regulations regarding power usage, noise ordinances, and zoning requirements.

Some states have embraced mining with tax incentives, including Kentucky and Oklahoma, while others like New York have considered a few restrictions discussed below.

Miners must report earnings to the IRS and may need business licenses depending on the operation scale.

What Licenses Do Crypto Businesses Need In The US?

Cryptocurrency businesses typically need several licenses to operate legally in the US. Here are a few of them:

• Companies providing exchange or wallet services usually require money transmitter licenses in states where they operate—potentially up to 49 separate licenses.
• Businesses trading securities tokens need broker-dealer registration with the SEC and FINRA membership.
• Companies offering derivatives require CFTC registration as swap execution facilities.
• Crypto businesses must register with FinCEN and implement AML programs.

Federal Regulatory Framework for Cryptocurrency

The SEC has taken an active role in regulating cryptocurrencies that function as investment contracts under the Howey test.

Through enforcement actions against companies like Ripple, Telegram, and Kik, the SEC has established a precedent for treating many tokens as securities, particularly those sold to fund business operations with an expectation of profit. (Read details of it on SEC Newsroom.)

The agency has also targeted unregistered exchanges and insisted that platforms trading security tokens register as broker-dealers or alternative trading systems.

Here are a few other key points of the Federal Regulatory Framework for Cryptocurrency:

1. CFTC:

Regulates crypto as commodities (Bitcoin, Ethereum), overseeing derivatives and pursuing fraud/manipulation cases.   

The CFTC maintains jurisdiction over cryptocurrencies classified as commodities, including Bitcoin and Ethereum. The agency regulates derivatives markets, including futures and options contracts based on cryptocurrencies. 

The CFTC also pursues cases involving fraud and market manipulation in spot cryptocurrency markets, as seen in its enforcement action against Mango Markets for “oracle manipulation” in the complaint on Avraham Eisenberg.

This regulatory overlap with the SEC has created jurisdictional tensions that recent legislative proposals aim to resolve.

2. FinCEN:

Enforces AML/KYC for crypto businesses (exchanges, wallets), requiring registration and reporting. 

FinCEN enforcement actions oversee cryptocurrency businesses under Bank Secrecy Act provisions. 

As per these regulations, Exchanges, wallet providers, and other “money transmitters” are required to register as Money Services Businesses, implement Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols, report suspicious transactions, and maintain comprehensive records.

FinCEN has actively enforced these requirements, including a settlement with Kraken for allowing transactions from sanctioned jurisdictions.

3. IRS:

Treats crypto as property for tax, requiring capital gains/loss reporting and implementing standardized reporting for custodial platforms.

The IRS established in 2014 that virtual currencies are treated as property for tax purposes. This classification means cryptocurrency transactions can trigger capital gains or losses, which must be reported on tax returns.

The agency has increased enforcement efforts, including adding a cryptocurrency question to Form 1040 and finalizing regulations in June 2024 that standardize how digital asset transactions are reported from custodial platforms.

Cryptocurrency Laws by State

Cryptocurrency regulations in the U.S. vary widely, creating a complex legal landscape. Some states encourage blockchain innovation, while others enforce stricter controls.

Here are Crypto-Friendly States In the USA:

1. Wyoming

• Special banking charters for crypto institutions
• Legal recognition of DAOs
• Wyoming Stable Token Act (potential state-issued stablecoin)

2. Utah: 

• Passed a Decentralized Autonomous Organization (DAO) Act that allows government agencies to accept crypto payments.

However, there are a few challenges. Crypto exchanges and wallet providers must often obtain licenses in every state where they operate.

Additionally, Multi-state coalitions have been formed to enforce regulations, leading to actions against companies like Coinbase and Nexo.

A few Strictly Regulated States and their laws that you must know are as follows:

• New York: Requires a BitLicense (established in 2015), making compliance costly for businesses.
• California & Florida: Recently updated money transmitter laws to require state-issued licenses for crypto intermediaries.

Recent US Crypto Regulation News

The Trump administration has dramatically shifted US crypto policy, replacing the previous “regulation by enforcement” approach with pro-industry initiatives.

Let us check key developments, including the Strategic Bitcoin Reserve Executive Order, the appointment of a White House crypto czar, and the congressional committee leadership changes favoring crypto-friendly legislation below.

Trump Administration’s Crypto Initiatives

The Fact Sheet regarding the establishment of the Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile by President Donald J. Trump took place in March 2025.

President Trump established the U.S. Strategic Bitcoin Reserve, funded by assets seized in legal cases. An executive order prevents the sale of these holdings and promotes budget-neutral Bitcoin acquisitions.

Here is what Trump’s vision to make America the “Crypto Capital of the World” includes:

• Appointing crypto-friendly regulators
• Creating a “crypto czar” to oversee policy
• Promoting digital assets for economic growth

This marks a major shift from the previous administration’s cautious, enforcement-driven approach.

Major US Crypto Legislative Proposals In Congress

With crypto-friendly leaders like Rep. French Hill and Sen. Cynthia Lummis in key positions and SEC nominee Paul Atkins favoring a more balanced approach, the Crypto industry may see clearer, less punitive regulations.

Several key bills aim to bring clarity to cryptocurrency regulation. For example:

1. FIT21 Act (Passed House, May 2024) –

Establishes clear roles for the SEC (securities oversight) and CFTC (commodity regulation) to reduce uncertainty for crypto businesses. 

(Read all information on this bill here.)

2. Lummis-Gillibrand Act –

Defines which cryptocurrencies are commodities vs. securities, strengthens consumer protections and mandates 100% reserve backing for stablecoins to ensure financial stability.

(Read all information on this bill here.)

Additionally, Recent court rulings, such as Ripple vs. SEC, have further limited the SEC’s broad classification of cryptocurrencies as securities, reinforcing the need for legislative clarity.

Bitcoin Legal Tender Status

Bitcoin is not legal tender in the United States, meaning there is no requirement for businesses or individuals to accept it as payment for debts or purchases.

While the US government recognizes Bitcoin as property for tax purposes and permits its use in transactions, it does not have a status equivalent to the US dollar.

Payments can be made in Bitcoin if both parties agree, but no law compels acceptance, and the dollar remains the only official legal tender for public and private debts as established by the Coinage Act of 1965.

In contrast, countries like El Salvador made history in 2021 by adopting Bitcoin as legal tender, requiring businesses to accept it alongside the US dollar.

The U.S. is more likely to integrate crypto with traditional finance rather than grant it legal tender status. The Trump administration’s Bitcoin Reserve initiative acknowledges Bitcoin’s value as a strategic asset but stops short of making it an official currency.

Cryptocurrency Banned Countries List vs. US Approach

While the United States maintains a regulated but generally permissive approach to cryptocurrency, several countries have implemented outright bans.

China enacted the most notable prohibition in 2021, declaring all cryptocurrency transactions illegal and forcing miners to relocate. Other countries with CRYPTO bans include:

• Algeria
• Bangladesh
• Bolivia
• Egypt
• Iraq
• Morocco
• Nepal
• United Arab Emirates
• Pakistan
• Saudi Arabia
• Tunisia
• Bolivia 

These nations typically cite concerns about financial stability, capital flight, monetary sovereignty, and criminal activities as justifications for their prohibitive policies.

The US allows cryptocurrency businesses to operate within established frameworks. This balanced approach is similar to the more embracing stance of countries like Switzerland and Singapore, which have actively positioned themselves as crypto innovation hubs.

US cryptocurrency policies exert substantial influence on global adoption due to the size of its economy and the international reach of its financial system. When US regulators approve cryptocurrency products like ETFs or provide regulatory clarity, it often catalyzes similar developments worldwide.

Suggested Reads:

• Impact of Blockchain in Future
• Role of NFTs
• Scalability of Blockchain

Final Verdict: Cryptocurrency Is Legal In The USA

Cryptocurrency is definitively legal in the United States, though it is subject to a complex regulatory framework that continues to evolve. 

While federal agencies like the SEC, CFTC, FinCEN, and IRS maintain oversight of different aspects of the crypto ecosystem, recent administrative and legislative initiatives signal a more supportive approach to the industry. 

The establishment of the Strategic Bitcoin Reserve and the shift away from “regulation by enforcement” demonstrate the growing institutional acceptance of digital assets.

New laws and agency guidelines are shaping more defined regulations. The SEC and CFTC may soon settle their oversight dispute, bringing much-needed clarity. With pro-crypto leaders in place, the U.S. is working to protect consumers while fostering innovation.

For individuals and businesses, staying compliant is crucial. Keep detailed tax records, understand licensing rules, and follow AML protocols where required. 

However, before you make any decisions, make sure you consult crypto-savvy legal and tax experts who can help navigate these changes.

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