Regulation of cryptocurrency remains broadly uncharted in the United States, even as its popularity has exploded. The uncertainty shrouding crypto regulation stems largely from complexities within the blockchain on which it is based and from difficulties with its classification – is it a commodity? Is it a security? Is it property? Experts, agencies, and blockchain companies all disagree.
Currently, the United States has neither comprehensive legislation nor a comprehensive regulatory scheme to govern the classification, usage, and taxation of cryptocurrency. As it stands, the sale of crypto is regulated by the U.S. Securities and Exchange Commission only if the crypto in question is considered a security.
This can present some thorny issues, particularly when tokens represent themselves as “utility tokens” with value beyond equity or a share in a company. Such tokens do not fall under the purview of the SEC and can thus result in a lack of investor protections. 
So then, what is classified as a security? According to the Supreme Court’s decision in SEC v. W.J. Howey, a security is defined as “an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.” In line with this definition, SEC officials in recent years have been clear that even if a token is advertised as a utility token during an Initial Coin Offering (ICO), it can still be classified as a security, and thus be subject to SEC regulation.
The SEC recently released its regulatory agenda for 2021, and crypto regulation was noticeably absent. Despite not being formally included on the agenda, SEC chairman Gary Gensler has been vocal in his efforts to warn against bad actors in cryptocurrency, while reminding the public of potential enforcement actions the SEC may take. 
Beyond SEC regulation, there has been consistent chatter about crypto regulation amongst other industry entities this year. The Federal Deposit Insurance Corporation (FDIC) has published a request for information to banks, inquiring how they are using digital assets and in what ways the FDIC can assist. There has also been discussion of forming an intra-agency consortium on crypto policy between the FDIC, the Federal Reserve, and the Comptroller of the Currency. The Fed has even released a plan to publish the first research paper on the digital dollar during Summer 2021. 
A bit more clarity on cryptocurrency regulation exists with regard to its taxation. The U.S. Treasury Department now requires any cryptocurrency transfer that is worth $10,000 or more at fair market value to be disclosed to the IRS, in an effort to avoid tax evasion relating to cryptocurrency transactions. 
Despite the unique regulatory challenges posed by crypto, some other countries have begun to make definitive progress in their classification and regulatory efforts. Japan recently passed the Virtual Currency Act, which defines cryptocurrency as an asset for accounting purposes, and also provides a list of legitimately recognized cryptocurrencies.  And in June 2021, El Salvador became the very first country to begin accepting cryptocurrency as a legal tender. 
While the United States builds out its regulatory scheme for cryptocurrency in the coming years, investors should keep themselves carefully informed on the crypto investments they make, and continue to watch for progress at the state, federal, and international level to ensure their investments are secure.