Is Crypto Legal In The US? (Laws & Rules Explained)

Crypto is legal in the U.S., and in the upcoming years, the picture will be a lot clearer than it is now. We are mostly past the Wild West phase. 

You can buy, sell, and use digital assets on regulated platforms without guessing whether it is allowed. That part is settled.

What still trips people up is how the government sees crypto. It is treated like property, not money. That means the IRS expects gains to be reported every time they happen.

This guide breaks down how crypto is regulated at both the federal and state levels. 

Is Crypto Legal In The U.S: Key Takeaways

• Crypto is legal in every state of the U.S., but there are several rules that depend on where you live and how you use it.

• The United States does not treat crypto as official currency, but you can buy, hold, trade, and use it.

• Several agencies regulate crypto, and each one covers a different part of the cryptocurrency world.

• State laws vary. Some states support crypto growth while others have tight rules and licensing requirements.

• Businesses that accept crypto must record it as normal income based on its value at the time of payment.

• The rules you need to follow will be based on what you do with crypto, the kind of crypto you use, and the laws in your state.

Crypto Legality In The US 

Cryptocurrency is governed by several government entities in the US and is typically regarded as property for regulatory purposes. 

Companies and exchanges must therefore adhere to certain agency regulations.

Individuals and organizations must comprehend these differences in order to comply with federal law, appropriately report taxes, and fulfill other general U.S. bitcoin requirements.

How Do The Tax Authorities of the U.S. Classify Crypto?

The Internal Revenue Service (IRS) published its recommendations in theIRS Notice of 2014. The notice states that virtual currency is not considered actual currency but rather a property, including convertible virtual currency. 

So if you sell bitcoin, trade it, or use it to get paid, you are expected to keep proper records for tax purposes. There is no way around that.

Exchanges and other businesses dealing in convertible virtual currency fall into the category of money transmitters. That means registration, AML checks, and ongoing reporting are mandatory.

Individuals are treated differently. If you are just buying crypto, holding it, or using it for personal reasons, you are not considered a money transmitter. You still face some regulations.

Agencies That Regulate Crypto In The U.S

In the U.S., cryptocurrency regulation is split across several government agencies.Here are the details of the agencies that regulate crypto in the U.S: 

Regulator	What They Regulate
Internal Revenue Service	The IRS treats crypto as property, which means taxes apply when you sell it, swap it, or receive it as payment.
Financial Crimes Enforcement Network	Under FinCEN, most crypto activity falls under AML and money transmission laws tied to the Bank Secrecy Act. This mainly affects businesses, not casual users.
Commodity Futures Trading Commission	The CFTC steps in when crypto is used in derivatives or commodity-based products.
U.S. Securities and Exchange Commission	The SEC gets involved when a digital asset looks like a security. In those cases, registration, disclosures, and full compliance with securities laws are required.

Source: Britannica

Crypto Legality In The U.S: Key Laws And Policy Shifts

In recent years, U.S. officials have implemented a number of crypto-related regulations, and these guidelines shown below have shaped various laws across several states of the United States. 

Policy	Purpose
2013 – FinCEN Guidance	It defined virtual currency and clarified AML and money transmission rules.
2014 – IRS Notice 2014-21	This notice classifies virtual currency as property for tax purposes, subject to property tax rules. Confirmed crypto is not a legal tender.
2015 – CFTC Coinflip Case	It recognized Bitcoin and other virtual currencies as commodities, derivatives that are regulated by the CFTC.
2018 – SEC ICO Enforcement Actions	The actions clarified that some tokens are securities and must comply with securities laws, providing investor protection.
2023 – IRS Bulletin 2023-19	The bulletin reconfirmed cryptocurrencies as property. It provided updated reporting guidance, reinforced tax obligations, and clarified certain treatments.
2024 – FIT21 (House Passage)	It proposed a framework for federal oversight of digital assets, seeks to clarify which assets are securities vs commodities, and harmonize rules for exchanges.
2025 – GENIUS Act	It is a federal law regulating stablecoins, sets standards for backing, audits, consumer protections, and provides legal clarity for issuers and users.

Source:  Congress.gov, Wikipedia

State-Level Crypto Regulation In The U.S: A Simple Overview

Each state in the United States has its own laws. Some states have stringent licensing and legal requirements, while others are crypto-friendly. 

States	Regulation Level
New York, Hawaii, Louisiana	Very strict licensing
Florida, Texas, Washington, Massachusetts, Illinois	Standard Money Transmitter License required
Wyoming, Colorado, Arizona, Utah, South Dakota, Tennessee	No MTL for crypto-only businesses or very lenient rules
California, Pennsylvania, Georgia, Alabama	Case-by-case, evolving policy

Source: 50 State Review

Crypto Laws In The U.S For Individuals, Businesses, and Service Providers

U.S. crypto rules vary depending on the category in which you operate. Individuals can buy, retain, trade, and use crypto, but must disclose taxes. 

Let’s have a look at how these laws look across these categories.

For Individuals

• Individuals are allowed to buy, hold, sell, and trade cryptocurrencies freely without needing approval or licenses.
• For tax purposes, crypto is considered property, so any sale, trade, or disposal creates a taxable gain or loss that must be reported.
• Crypto can be used to pay for goods or services, but only if both parties agree; no one is required to accept it.
• Personal use of crypto is not subject to AML or KYC rules.

For Businesses

• Businesses can accept crypto as payment, but every transaction must be recorded in U.S. dollars for tax and accounting purposes.
• Companies can pay employees in crypto, with the value fixed at the market price on the day of payment, and taxes apply.
• Crypto held by a business counts as a corporate asset; any gains increase taxable income, while losses may be deductible.
• When handling customer funds, businesses are usually required to obtain a state-level Money Transmitter License.

For Crypto Service Providers

• Crypto exchanges, custodians, and payment processors must follow strict licensing rules, which can include Money Transmitter or crypto-specific licenses depending on the state.
• AML and KYC regulations are mandatory: providers must verify users, maintain transaction records, and report suspicious activity.
• When offering crypto derivatives, service providers are subject to CFTC oversight and must comply with derivative regulations.

Compliance Checklist For Crypto Laws In The U.S

Below you will find a general compliance checklist to help clarify what individuals, businesses, and service providers must follow under U.S. law.

Individual Users

Individuals should focus primarily on protecting their assets, filing taxes, and following these basic rules to stay within the law.

• You should keep records of what you paid and its value in US dollars, along with the transaction data.

• Use legal exchanges only. Do not use wallets subject to U.S. 

• Record your transaction IDs, dates, amounts, and wallet addresses, and save your exchange or wallet statements for at least 5 years.
• Turn on two-factor authentication. Use trusted wallets and avoid services that mix or hide your crypto. You should keep your recovery phrases safe and offline.

Businesses Using or Accepting Crypto

Businesses that accept or use crypto have additional responsibilities, including keeping accurate records, verifying customer identities, and complying with applicable rules.

Also, do remember these basic tips in mind when using or accepting crypto: 

• Treat crypto payments as income and track profits, losses, and payroll.
• Register as a money services business if handling customer funds.
• Verify customer identities and implement AML programs.
• Screen transactions for banned addresses to comply with OFAC rules.
• Document wallet management, transaction approvals, and security procedures.

Crypto Service Providers

Exchanges, custodians, and other service providers must follow the rules given below to stay compliant with U.S. law:

• Register as a Money Services Business with FinCEN and obtain any required SEC, CFTC, or state licenses (e.g., NY BitLicense).
• Set up AML and KYC programs to verify customer identities, assess risk, and report suspicious or large transactions.
• Maintain strong cybersecurity, monitor wallets and transactions, and secure custody of all crypto assets.
• Keep clear records of all transactions, fees, and user activity for transparency and regulatory compliance.
• Report crypto wages, payments, and transfers to the IRS in U.S. dollars, following all broker and tax rules.

Note: Additional documents, filings, or compliance obligations may apply depending on activity type, state-level laws, and specific asset characteristics. Always consult a professional for these matters.

Related Reads:

• NFT vs Crypto
• Is Crypto Legal In The UK?

Conclusion: Crypto Is Legal In The U.S., But Subject to Extensive Regulation

Cryptocurrency is legal in the U.S., and individuals can buy, hold, trade, and use it under the law. Businesses and service providers can operate with crypto if they follow applicable regulations.

The rules around crypto are still evolving, with no single, centralized framework. Regulations are added over time, guidance changes, and assumptions can quickly become outdated.

To stay safe, track all transactions, wallets, and asset values. Proper record-keeping, especially for taxes, prevents problems later.

FAQs