The Legal Status of Bitcoin in the United States
Bitcoin is legal to own and use in the United States, but it is not legal tender. That means you can hold,trade,and spend Bitcoin,yet no one is required by law to accept it as payment the way they must accept U.S. dollars. Different federal agencies classify Bitcoin based on their mandates: the Internal Revenue Service (IRS) treats it as property for tax purposes, the Commodity Futures Trading Commission (CFTC) views Bitcoin as a commodity, and the Securities and Exchange Commission (SEC) may treat certain Bitcoin-related products (like some investment contracts or exchange-traded products) as securities. This patchwork creates a situation where Bitcoin itself is generally permitted, but how you use or package it can trigger different legal regimes.
For individuals, the practical takeaway is that simply buying, holding, and using Bitcoin on regulated U.S. platforms is lawful,but you must comply with tax rules and reporting obligations. For businesses, especially exchanges, custodians, or payment processors, BitcoinS status means you may fall under money services, commodities, or securities regulation depending on your activities. That can involve registering with federal or state authorities,implementing anti-money laundering programs,and maintaining detailed records. Anyone operating beyond casual personal use should review guidance from key regulators such as the IRS (https://www.irs.gov/newsroom/irs-virtual-currency-guidance), the CFTC (https://www.cftc.gov/Bitcoin/index.htm), and the SEC (https://www.sec.gov/spotlight/cybersecurity-enforcement) to understand which rules apply to their specific use of Bitcoin.
Key Federal and State Regulators Overseeing Bitcoin
Multiple federal agencies share oversight of Bitcoin activity in the U.S.,each from a different angle. The Financial Crimes Enforcement Network (FinCEN) treats many bitcoin businesses as money services businesses (MSBs),requiring registration,anti-money laundering programs,and customer identification. The Securities and Exchange Commission (SEC) polices bitcoin-related securities,such as some exchange-traded products and investment contracts,while the Commodity Futures Trading Commission (CFTC) oversees Bitcoin derivatives and polices fraud and market manipulation in spot markets. The Office of the Comptroller of the Currency (OCC) provides guidance to national banks on custody and othre crypto services, and the Internal Revenue Service (IRS) enforces tax reporting and payment.Businesses should identify which activities they perform-exchanging, custody, derivatives, fundraising-and then map those to the relevant regulator’s rules and guidance. Official resources such as FinCEN’s virtual currency guidance (https://www.fincen.gov/resources/statutes-regulations/virtual-currencies) and the CFTC’s Bitcoin page (https://www.cftc.gov/Bitcoin/index.htm) are starting points.
At the state level, regulation is led by banking and financial services departments, most prominently in New York, whose “BitLicense” regime sets detailed requirements for Bitcoin exchanges and custodians operating with New York residents. Other states regulate Bitcoin firms under existing money transmitter laws, often requiring a money transmission license, bonding, and regular examinations. Because each state can set different rules, a company serving customers nationwide may need dozens of licenses and must track varying standards for disclosures, cybersecurity, and consumer protection. In practice, operators should assess where their customers live, confirm whether those states treat Bitcoin businesses as money transmitters, and plan for a phased licensing strategy. Checking New York’s Department of Financial Services virtual currency page (https://www.dfs.ny.gov/virtual_currency_businesses) and your own state regulator’s site is a practical first step.
Compliance Requirements for Businesses and Individual Users
Compliance obligations differ sharply depending on whether you are an individual user or a business. For individuals, the core duties are tax reporting and basic recordkeeping. The IRS requires you to report capital gains and losses when you sell, trade, or spend Bitcoin, even for everyday purchases, and to answer the “digital assets” question on form 1040 if you engaged in covered transactions. Practically, that means tracking when you acquired each amount of Bitcoin, your cost basis, and the value when you dispose of it. Using a U.S.-regulated exchange that provides transaction histories, exporting those records annually, and reviewing IRS guidance on virtual currency can reduce the risk of underreporting or audit disputes. See: https://www.irs.gov/newsroom/irs-virtual-currency-guidance
Businesses that deal in Bitcoin face a much broader compliance burden. Exchanges, custodial wallet providers, and many payment processors are generally treated as money services businesses under FinCEN rules and must register, implement written anti-money laundering and know-your-customer programs, file suspicious activity and currency transaction reports, and maintain detailed customer and transaction records. On top of this, most states require money transmitter or virtual currency licenses, with obligations around minimum capital, cybersecurity, compliance officers, and regular examinations. In practice, a startup Bitcoin exchange serving multiple states might need FinCEN registration, a BitLicense in New York, money transmitter licenses elsewhere, and policies designed to satisfy both federal and state expectations. Reviewing fincen’s virtual currency guidance and your primary states’ licensing pages early in the planning process can prevent costly redesigns later: https://www.fincen.gov/resources/statutes-regulations/virtual-currencies
