Is Bitcoin Legal in the U.S.?

Is Bitcoin Legal in the U.S.?

Is Bitcoin Legal?

Bitcoin is one of the industry leaders; and by far, it’s now worth $2469 compared to the industry second which averages at $350. Since the decentralized technology in bitcoins has a near-perfect ability to keep transactions verified and safe, there is no need for a central governing authority. The idea behind Bitcoin is that it’s a currency for the people made by the people. Since it’s the most popular name in crypto currencies, you can be sure that it’s a safe investment which will only grow in the future. A lot of people ask this question, for tax purposes, and it’s an interesting issue. In the past, there weren’t any taxes specified for earnings from Bitcoin. If you don’t start making exorbitant sums, you can definitely get away with not paying tax on Bitcoin. It’s like mowing the neighbour’s lawn for $20. You can get away with not paying tax on that. But if you mow 10,000 lawns, try to get away with not paying tax on that. Thus, for most people who invest under $100, it’s relatively safe not to tax your Bitcoin gains.

What if I want to invest large sums?

However, if you were to experience a 200% increase on your investment, you should tax it as part of your gross income. Some states, on the other hand, suggest paying capital gains tax because it’s a long term investment. Thus, earning money from mining would come in gross income as well as trading whilst a coin that you sell after a few months of ownership would be taxed as capital gains. The US Bitcoin Legal system is a bit weird since states in the US have different outlooks and perspectives on Bitcoin.

Thus, the legality isn’t clear at the country’s scale. If you’re in Texas, Kansas, Tennessee, Montana or South Carolina, you have nothing to worry about. In these states, there’s pretty much no Bitcoin legal system. So, you’re free to use bitcoin as you want without any Bitcoin legal issues.

However, you might not want to invest a lot because you might set off a few bells at the IRS if you double your investment. If you don’t want that to happen, you should tax your Bitcoin as part of your income. There are also some states which have some regulation for exchanges, brokers and users. Wisconsin, North Carolina, California, Pennsylvania and Florida are states that have some regulation but you can still use virtual currencies. So, they’re not illegal but there’s regulation such as the AML (anti-money laundering) and KYC (know your customer) laws. Both of these slow and de-anonymize Bitcoin for taxing purposes.

Where to Buy Bitcoins Legally?

Coinbase is a trustworthy exchange since it’s regulated in the US and is backed by several big media such as The Wallstreet Journal, Bloomberg and New York Times. Moreover, it has many security measures in place in order to secure your bank credentials and your online wallet. 

Also, 2-factor authentication is required for all accounts; therefore you need to connect your mobile phone while creating your account. 2-factor authentication is essentially a text that you would receive on your phone which includes a code that will be used to verify any transaction that you carry out on the website. That makes sure that a hacker cannot enter your online wallet and send your money to different accounts. All of these security concerns and measures make sure that Coinbase is quite safe to use for the average Bitcoin enthusiast.

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About Article Author

Michael Serrano
Michael Serrano

Michael is an engineer and a bitcoin evangelist. He has been involved in cryptocurrencies since 2013. His biggest wish? 1 billion users of bitcoin, ether and litecoin by 2020. In the last 10 years he has worked for various early-stage start-up as a back-end developer.

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