What Is Cryptocurrency and Crypto Law?


Cryptocurrency has become a buzzword among investing elites and amateurs alike in the last decade, beginning with the advent of Bitcoin, which ushered in a new era when it comes to untracked and untraceable currencies.

Today, there are thousands of different cryptocurrencies available on the market, and that number is growing fast with consumer demand.

Because this market has become so valuable, reaching upwards of $160 billion in Bitcoins alone and growing exponentially each day, it’s apparent that stricter laws and regulations will also come into play as this money changes hands–there is where crypto law comes in.

Before you go big on investing into cryptocurrency, it’s important to take into account your home country’s laws in relation to crypto in order to maximize your outcome and avoid breaking any laws accidentally.

Crypto law can be difficult to understand, even for those who are well-versed in investment and financial matters. One poll showed that even though knowledge of cryptocurrency is widespread, most people do not have much of an inkling of the workings behind it as well as its effect on the economy.

This is the reason why it’s important to hire a lawyer who is knowledgeable in this growing field of law–to protect yourself and your assets from being taken from you.

In the United States, the IRS levies steep fines against those who do not report their income, and it remains to be seen if they will do the same for crypto investment profits as well. Be on the right side of history and ensure your back is covered in the event of an issue with cryptocurrency.

What Penalties Come Along With Breaking Crypto Law?

While crypto law may be a relatively new field of law, lawmakers are scrambling to keep up with investors who want a piece of this cryptocurrency pie.

In March 2020, while the United States was in the thick of the COVID-19 quarantine, a bill was proposed to Congress that detailed plans to establish a regulatory group to oversee cryptocurrency and cryptosecurity. But as of yet, there has been little formal guidance on how exactly crypto law cases will be handled in the future, including laws that set down exactly what penalties are associated with each type of crypto crime.

However, like any investment opportunity, there will always be a chance of financial issues cropping up that may cause you legal trouble in the future, such as fraud, embezzlement, money laundering, and other illegal practices. These types of crimes carry severe federal penalties, including thousands of dollars in fines and time spent in federal prison.

To keep yourself safe, the best option is to talk to an experienced legal professional if you have any worries about cryptocurrency law undoing your financial progress in the future.

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Cryptocurrency Compliance

crypto complianceCryptocurrency is still a relatively new form of money. Unsurprisingly, new laws and regulations are getting created every day. If you’re interested in investing, trading, or even receiving payments in the form of cryptocurrency, then it’s necessary to research the local, state, and federal laws that will impact your business dealings. Below, we’ll go over some of our top tips to help you stay compliant.

Know Who You’re Doing Business With

Your first step in staying compliant is knowing who you’re doing business with. You need to both identify and verify the identity of the individual, customer, or company you are going to do business with. Crypto Exchanges usually fulfill KYC (know your customer) requirements by requesting identifying data like a person’s Social Security Number, financial statements, or Driver’s License numbers. This verification helps ensure compliance with global regulations.

Do Your Due Diligence When it Comes to Your Business

The next step is to do your due diligence when it comes to your business. As an investor or user of a cryptocurrency, you want to verify that the business is legitimate, legal, and compliant. You can do so by using public information sources, reviews, and the business’s reputation in the market.

Cryptocurrency platforms must fulfill this requirement through KYB (know your business) procedures. Companies must verify their user’s safety and comply with anti-money laundering requirements both nationally and internationally.

Both KYC and KYB procedures work together to prevent terrorism, money laundering, and other financial crimes.

Understand and Document Your Transactions

Another common error newcomers to the cryptocurrency market make often is failing to account for every single crypto transaction they make. While the market has been fairly unregulated in the past, things are changing. Now, you’ll be expected to report your cryptocurrency transactions to the IRS if they exceed $600 USD.

Further, you want to do your due diligence when it comes to ensuring your transactions are legal. Some nefarious actors believe they can skirt the law by dealing with online currencies, but that’s rarely the case. Multiple agencies, like the SEC and the CFTC, monitor cryptocurrency markets and have the authority to charge individuals discovered breaking the law.

Companies and crypto markets fulfill this requirement through KYT (know your transaction) procedures.

Consider Running Your Plans Past a Lawyer

Of course, the best way to ensure that you’re following the law is to hire a cryptocurrency legal expert who can help. A lawyer can overlook your finances, business transactions, and investments to ensure that everything is being handled appropriately. They will have spent the time necessary researching the local, federal, and state laws that might apply to your transactions. If they don’t know the answer to a specific legal question, then they’ll use their resources to find the proper solution and answers.

Cryptocurrency-Related Litigation

crypto litigationCompliance with national and international criminal cryptocurrency laws is only one piece of the very complex nature of staying upright when it comes to cryptocurrency transactions. Making these transactions could also potentially open you up to civil legal liability.

Negligence Claims

One of the top types of cryptocurrency lawsuits revolves around negligence. Platforms have a legal obligation to ensure their marketplaces are safe for consumers, so they’re responsible for doing their due diligence when it comes to preventing fraud, stopping hackers, and preventing theft on their platforms.

If the platform fails to prevent unauthorized transactions, then they might open themselves up to this type of litigation.


While financial fraud is a crime, it can also become a civil matter if the person who suffered losses as a result of the fraudulent cryptocurrency transactions decides to file a civil lawsuit. Similarly, if you get impacted by cryptocurrency fraud, then it might be in your best interests to file a claim against the person who committed the fraud. By doing so, you might be able to recover compensation for your losses.

Watch for Arbitration Clauses

Many cryptocurrency platforms ask users to agree to an arbitration clause. These agreements usually mean that the customer, if they suffer losses, must seek recourse through arbitration rather than in court.

For platforms and markets, it makes sense to ask customers to sign arbitration clauses. Doing so helps protect the platform. For consumers, it might make the most sense to speak about the situation with a lawyer first.

If you feel like arbitration will still be in your best interests, then signing the contract might tie your hands in the event of a future loss. Make sure you’re confident in your decisions before signing any contracts with a cryptocurrency market.

Protecting Yourself From Criminal Charges and From Becoming a Victim of Financial Crimes

Just because cryptocurrency may not be regulated on a mass scale in the United States at the moment, this does not mean you are safe from being accused of financial crimes or becoming a victim of one just because your money is invested in Bitcoin or one of the myriad other cryptocurrencies out there. Here are a few common things to watch out for when it comes to crypto law.

ICO (Initial Coin Offerings): While many cryptocurrency startups are legitimate, one thing to watch out for are ICOs, or Initial Coin Offerings. These occur during the first stages of setting up a cryptocurrency, but they may just end up being a cash grab by scammers who never intend to fulfill their end of the crypto bargain. Also, because ICOs may be considered securities offerings, they fall under the jurisdiction of the SEC and are not exempt from their rules and regulations. Be careful before buying into one of these, but if you already have, we can help.

Cryptocurrency Compliance: Because cryptocurrency is such a newcomer to the money-investing game, ensuring that you comply with all of the laws and regulations surrounding it can be incredibly difficult. In the United States, states like New York have restricted the trade of cryptocurrency, making it almost impossible to invest in this new technology. To ensure that you are complying with local laws and rules, contact an expert attorney who can help you sort it out.

Crypto Fraud: Because cryptocurrencies are untraceable, they have become the new best way for online scammers to commit fraud without leaving a paper trail for the authorities to follow. This means that scammers and criminals may use them to commit fraud–or that businesses may commit fraud without intending to just by dint of investing in these currencies.

To best take care of your future finances, contacting an attorney with a wide depth of knowledge in this subject will benefit you greatly.

Expert Attorneys With Experience in Crypto Law

Crypto law is a new field and many attorneys may claim to be experts, but it’s hard to gauge at this early stage in the game. What you need when you are dealing with crypto law problems is an attorney who is willing to dive deep into every aspect of your case to ensure that you receive the best outcome for your business and your finances.

Do not hesitate if you have any questions regarding crypto law or your specific case–we are here to answer all of your questions and guide you through this confusing process.

Give us a call today to get started with your crypto law case.

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