Cryptocurrency Law: A Primer on U.S. Regulations for Retail Investors

Mark Grabowski^†

Although cryptocurrencies such as Bitcoin are often likened to the Old Wild West, that does not mean there are not any laws governing them. While many issues surrounding the decade-old digital asset remain unclear or unregulated, there are some practices that can get the average retail investor in trouble. For example, federal policies adopted in 2017 impact taxes on cryptocurrency and participation in initial coin offerings. More regulations are likely — and that could be a good or bad thing, depending on whom you ask. This plain-language primer provides an overview of the most common legal issues that investors need to be aware of and what the future may hold.

Privacy

Online privacy is a paramount concern these days and happens to be one of cryptocurrency’s greatest strengths. Cryptocurrency transactions can provide more privacy than traditional payment methods, such as checks or credit cards because it is possible to send and receive cryptocurrency without giving any personally identifying information.[1] But there are limits to this privacy. Transactions are not completely anonymous; rather, they are pseudonymous. Sending and receiving cryptocurrency is like writing books under a pseudonym. You can preserve privacy as long as the pseudonym is not linked to your real identity.[2] In cryptocurrency, your nom de plume is a random alphanumeric address like “1Ez49SnczcmAmQX5WpEzKMTdcGF2gpNQ22.” If your address is ever linked to your identity, every transaction will be linked to you because every transaction involving that address is stored forever in the blockchain. As long as you are careful with whom you share both your identity and address with, you probably do not have to worry about your transaction history being publicly exposed.

However, no matter what precautions you take, it is difficult to hide from the government. There are many ways authorities can associate a person’s identity with a cryptocurrency address: registering for an exchange, buying products that are sent to a physical address, or using home WiFi are just a few means.[3] All of this information can be subpoenaed by law enforcement. Although criminals continue to develop sophisticated means to hide their trail when using cryptocurrency, cybersecurity researchers warn that no method is bulletproof.[4] Law enforcement likely has the forensic tools necessary to uncover your identity if they are motivated to. For instance, the founder of Silk Road, an online marketplace that sold drugs for Bitcoin, was convicted in 2015 and sentenced to life without parole after the FBI tracked his IP address to an Internet cafe and caught him in the act of logging into the website.[5] More recently, in July 2018, authorities were able to trace Bitcoin payments allegedly made to Russian agents for meddling in the 2016 U.S. presidential election.[6] These cautionary tales show what can happen if you use cryptocurrency to engage in illegal activities, such as purchasing contraband online, money laundering or tax evasion.

Taxes

Speaking of taxes, yes, you must pay taxes on cryptocurrency. The Internal Revenue Service treats cryptocurrency as property, which subjects it to the same tax regulations as other property investments.[7] It does not matter if you sold your Bitcoin for cash, exchanged it for another cryptocurrency, or used it to buy a cappuccino. In all three cases, the IRS views it as if you sold the coins.[8] Under 2017 tax reform laws enacted by Congress, swapping one cryptocurrency for another is no longer considered a like-kind exchange.[9] Additionally, if you receive free cryptocurrency through a gift or giveaway — such as a fork or airdrop — that is considered a taxable event, too.[10] This can create quite a hassle if you are a cryptocurrency day trader because you must report every transaction and calculate the gain or a loss at the point of each transaction.

If you own a particular cryptocurrency for less than a year, you pay the short-term capital gains tax, a tax rate that is identical to your marginal tax rate. If you hold onto your cryptocurrency for a year or more you qualify for a lower long-term capital gains rate. Any time you sell, trade or buy something with your cryptocurrencies, it resets the counter for long-term capital gains.[11]

The good news is, you only have to pay taxes if you make gains. If you lose money investing, you can at least partially write off the losses.[12] If some of your transactions make profits while others lose money, you simply subtract your losses from your gains and pay taxes on the net profit. If, overall, your losses exceed your gains, you may deduct up to $3,000 per year from your taxable income. Any loss beyond $3,000 may be carried forward, year after year, and deducted until the balance reaches zero. In addition to investment losses, any commission and fees you incur from trading cryptocurrency may be deductible.[13]

It is critical to keep accurate records of all your cryptocurrency transactions — e.g. how much money you invested, which trades you made, how much you lost or profited from each trade, how much you converted back to money or spent on purchases. Record-keeping is your responsibility; exchanges typically do not send you a 1099 detailing your transactions.[14] Penalties may be steep if you do not honestly and accurately report your holdings and returns.[15]

Initial Coin Offerings

Another recent change to cryptocurrency law involves initial coin offerings (ICOs). Blockchain projects frequently raise funds by offering a presale on their cryptocurrency before it hits exchanges.[16] But Americans are effectively barred from investing in these kickstarters. The U.S. Securities and Exchange Commission typically considers ICOs to be securities — a tradable financial asset — which subjects them to more regulation. Oddly, cryptocurrency is not considered a security at the time of this writing, although that could change.[17] Under an SEC policy adopted in 2017, only an elite, wealthy group of Americans known as “accredited investors” can participate in ICOs.[18] Rather than register with the SEC and deal with its tricky regulations, however, many blockchain projects opt to bar any American from investing in their ICO.[19] SEC officials maintain their policy is intended to mitigate risk to investors and protect investors from fraud. According to a study by Satis Group, a staggering 81 percent of ICOs launched since early 2017 have been found to be scams while only 8 percent went on to trade on a exchange.[20]

Exchange Regulations

In addition to exercising caution with ICOs, the SEC advises investors to be careful where they buy cryptocurrency, stating that “many platforms refer to themselves as ‘exchanges,’ which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.”[21] In reality, they are more akin to e-brokerage websites than the New York Stock Exchange. While popular American exchanges Coinbase and Gemini are both registered with and regulated by government agencies in the United States,[22] many platforms that sell cryptocurrency to Americans are not and can do whatever they want with your money.[23]

U.S. officials do not review the trading protocols used by platforms operating outside their jurisdiction, so it is buyer beware if you choose to use popular foreign exchanges such as Binance or Cryptopia.[24]  Some exchanges utilize questionable tactics to manipulate prices and profit off of transactions, according to tech blog TechCrunch.[25] For example, if you submit a limit order, you trust the exchange to strictly follow your order, but it may not. Some exchanges use bots that trade coins with themselves to artificially inflate market demand, driving up prices.

Choose your exchange wisely. Before using an exchange, do a Google search to see if any news stories or forum threads pop up warning about it. For example, a quick search for YoBit at this time of writing revealed that the Russian exchange was being investigated by authorities for fraud[26] and listed many complaints on online forums from users who allege they are unable to withdraw cryptocurrency they purchased on it.[27]

Cybercrime

ICOs and exchanges are just some of the ways you can be defrauded. If you invest in cryptocurrency, you are certainly in the crosshairs of cybercriminals. Hacking and scams are especially rampant in this part of the Internet.

A cryptocurrency exchange is hacked seemingly every month. According to the Wall Street Journal, nearly $1 billion worth of cryptocurrency was stolen by hackers during the first half of 2018.[28] Unlike U.S. banks, cryptocurrency exchanges are not FDIC-insured, so you might not be reimbursed if the exchange has its coins stolen.[29] Meanwhile, Twitter “has been overtaken with accounts impersonating notable figures and businesses” promising thousands of Bitcoin or Ethereum in return for users merely sending a small amount of a cryptocurrency to their accounts.[30]

Law enforcement is aggressively fighting back. The federal government can potentially charge cryptocurrency-related crimes under at least 40 different federal statutes, and there are also a number of traditional criminal statutes that apply to such crimes.[31] However, catching cryptocurrency criminals is not always easy for a variety of reasons.

Lack of information sharing among law enforcement agencies and limited technological resources and experience among local enforcement agencies can make it difficult to uncover a criminal’s true identity and prosecute him.[32] “Cryptocurrencies have actually led to a massive cat and mouse game with law enforcement, as agencies get better at identifying criminal behavior, while criminals come up with new evasion techniques and increasingly anonymous cybercurrencies in order to defeat the efforts of law enforcement,” IT industry analyst Jason Bloomberg wrote in Forbes. [33]

In some cases, laws are murky, enabling exploitation. For example, online gambling involving money is illegal in most states. But some online casinos use Bitcoin to skirt around these bans because it is not considered a currency under IRS regulations.[34] Meanwhile, pump-and-dump trading schemes are common on exchanges, but not explicitly forbidden. This happens when a group of investors coordinates a massive buy and sell off a particular cryptocurrency on a particular exchange. Some people make some profit but many lose money or get left holding the bag. In the traditional investment world such as the stock market, pump-and-dump schemes are illegal. But, because cryptocurrencies are not considered securities, “it is not officially illegal” and happens quite frequently.[35]

Cryptocurrency protocols also present barriers for righting wrongs. To prevent double spending, a transaction cannot be reversed by anyone.[36] If something goes wrong with a transaction, there is no way to recover it. There is no safety net to protect you like there is when you use banks or credit cards.

Finally, there are jurisdictional challenges. There is no international body that regulates cryptocurrency or global agreement on how it should be governed. Each nation makes its own laws and conflicts often emerge.[37] An investor may reside in America, buy cryptocurrency from an exchange located in Malta, and use it to purchase a product in China. If a dispute arises as a result of that chain of transactions, whose laws apply? If you are harmed by a hack or scam involving an overseas transaction, redress may not be available.[38]

Given all these dangers, investors need to be protect themselves online. Taking security measures such as using strong passwords with two-factor authentication, installing anti-malware software on devices, and storing cryptocurrency offline are essential, according to cryptocurrency consultant Casey Leigh Henry.[39]

Future Regulations

 For the most part, the U.S. government has taken a hands-off approach, believing that too much regulation could hinder the budding technology’s growth. In fact, Bitcoin.com ranked the United States among the “World’s Top 10 Bitcoin-Friendly Countries.”[40] Bitcoin Market Journal noted agreed: “In general, the US is a bitcoin-friendly nation and much of digital currency innovation stems from the country’s tech startup scene.”[41]

As more retail and institutional investors enter the market, however, lawmakers are focusing more attention on cryptocurrency. Consider that there were 17 congressional hearings on the topic in 2017 compared to three in 2013.[42] At a U.S. Senate hearing in February 2018, government officials announced the United States would not crack down on cryptocurrencies, but would instead put forth a “do no harm” approach. CFTC Chairman J. Christopher Giancarlo testified: “‘Do no harm’ was unquestionably the right approach to development of the Internet. Similarly, I believe that ‘do no harm’ is the right overarching approach for distributed ledger [blockchain] technology.”[43] But Giancarlo added that U.S. officials were not completely backing away from regulation, and a regulatory approach was in the works. Just one month later, the SEC announced that ICOs and exchanges operating in America must register with the SEC and comply by their strict regulations.[44]

While the market responded with a cheer to February’s hands-off announcement,[45] it dropped by almost 10 percent following the SEC’s crackdown.[46] This was no surprise given that the old guard in cryptoland fears regulation. After all, cryptocurrency was created to rebel against the government. Only 30 percent of Bitcoin owners said “government [should] play a stronger role in regulating Bitcoin and virtual currencies,” according to a December 2017 survey.[47] The Bitcoin Foundation, the oldest and largest Bitcoin advocacy organization, has warned that more regulation could “stifle the adoption and use of so-called ‘virtual currencies’ such as Bitcoin.”[48]

On the other hand, more regulation may do just the opposite. A June 2018 survey found that 21 percent of Americans want to own cryptocurrency in the future, but right now they think it is more risky than traditional investments.[49] The constant parade of media headlines about cryptocurrency scams and hacks certainly cannot inspire investor confidence.[50] Institutional investors, including investment firm BlackRock and major banks such as Goldman Sachs, are also eyeing cryptocurrency.[51] But they have been hanging back due to legal uncertainties. As the Harvard Business Review observed in a July 2018 article, “without clear and coherent guidelines to attract good actors to the U.S. market, fraudsters might push out the good actors.”[52] Indeed, cybercrimes invariably send the market crashing at least as much as, if not more than, new government regulations.[53]

Perhaps that is why most cryptocurrency executives welcome more regulation. A 2018 survey by international law firm Foley & Lardner LLP found that 72 percent think there is much legal uncertainty and 68 percent support government oversight of cryptocurrency trades. “There are plenty of ways to work with regulators and legislatures to develop common sense cryptocurrency laws and regulations,” one executive said.[54]

Although regulations are often viewed as restrictive, they can also open up opportunities. For example, if the SEC authorizes Bitcoin to be included in exchange-traded funds, a collection of assets that can be traded on stock exchanges, many executives surveyed believe it would positively impact the cryptocurrency market.[55] On the other hand, Time financial writer Ryan Derousseau warned that ETFs for Bitcoin might be a case of “be careful what you wish for,” noting that “history is replete with examples of ‘hot’ investing trends turning cold once they reach sufficient popularity for the financial services industry to launch mass-marketed funds.”[56]

While cryptocurrency enthusiasts debate the pros and cons, the only thing that seems certain about regulations, according to Bitcoin Magazine, is “that there will be some [more] soon.”[57]

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† Mark Grabowski is an associate professor at Adelphi University on Long Island, where he teaches Internet Law. The Georgetown Law alum is also author of the forthcoming book, Professor’s Guide to Cryptocurrency, available via Amazon.com beginning in the fall.

 

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[1] See generally Dan Blystone, Bitcoin Transactions Vs. Credit Card Transactions, Investopedia, https://www.investopedia.com/articles/forex/042215/bitcoin-transactions-vs-credit-card-transactions.asp.

[2] Emerging Technology from the arXiv, Bitcoin Transactions Aren’t as Anonymous as Everyone Hoped, MIT Tech. Rev. (Aug. 23, 2017), https://www.technologyreview.com/s/608716/bitcoin-transactions-arent-as-anonymous-as-everyone-hoped/ (“Security experts call it pseudonymous privacy, like writing books under a nom de plume. You can preserve your privacy as long as the pseudonym is not linked to you.”).

[3] See generally Top Seven Ways Your Identity Can Be Linked to Your Bitcoin Address, 99 Bitcoins,
https://99bitcoins.com/know-more-top-seven-ways-your-identity-can-be-linked-to-your-bitcoin-address/.

[4] See John Bohannon, Why Criminals Can’t Hide Behind Bitcoin, Science (Mar. 9, 2016), http://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin (“[E]ven [the latest evasion strategy] has weaknesses that forensic investigators can exploit.”).

[5] Id. (“Once FBI tracked his IP address to a San Francisco, in California, Internet cafe, they caught him in the act of logging into Silk Road as an administrator.”).

[6] Nathaniel Popper & Matthew Rosenberg, How Russian Spies Hid Behind Bitcoin in Hacking Campaign, N.Y. Times (July 13, 2018), https://www.nytimes.com/2018/07/13/technology/bitcoin-russian-hacking.html.

[7] Tax Tips for Bitcoin and Virtual Currency, Intuit TurboTax, https://turbotax.intuit.com/tax-tips/tax-payments/tax-tips-for-bitcoin-and-virtual-currency/L1ZOgU00q (“General tax principles applicable to property transactions apply.”).

[8] See generally Mitchell Moos, The Investor’s Guide to Cryptocurrency Taxes, CryptoSlate (Apr. 9, 2018), https://cryptoslate.com/cryptocurrency-taxes/.

[9] James Markwood, Do You Owe the IRS for Crypto-to-Crypto Trades?, CoinDesk (Apr. 2, 2018), https://www.coindesk.com/owe-irs-crypto-crypto-trades/ (“Buried deep in the massive tax bill enacted at the end of 2017 was a provision that limits like-kind exchanges to real estate transactions, effective after December 31, 2017. As a result, there seems to be zero ability for crypto traders to claim that their coin trades undertaken after 2017 qualify as Section 1031 like-kind exchanges.”).

[10] See Evelyn Cheng, Bitcoin Can Create Some Sticky Tax Situations — Here’s What Experts Say Investors Should Do, CNBC (Apr. 13, 2018), https://www.cnbc.com/2018/04/13/how-to-handle-bitcoin-tax-situations-like-airdrops-and-mining.html (“One key area of confusion is how to handle ‘airdrops’ and ‘hard forks,’ which both distribute new cryptocurrencies to existing investors … it’s probably income more similar to a dividend.”).

[11]  Moos, supra note 8 (stating “if you held onto your cryptocurrency for a year or more you qualify for a lower long-term capital gains rate … Any trades into other cryptocurrencies likely reset the counter for long-term capital gains.”).

[12] Id.

[13] See Kelly Phillips Erb, What You Need to Know About Taxes & Cryptocurrency, Forbes (Jan. 9, 2018), https://www.forbes.com/sites/kellyphillipserb/2018/01/09/what-you-need-to-know-about-taxes-cryptocurrency/ (“If you pay investment-related fees, then you may be able to deduct the fees on your Schedule A, assuming you itemize. But that’s only for 2017. The new tax reform law eliminated the deduction for 2018 through 2025 but there is a work-around: If, instead of owning cryptocurrency personally, your business owns the investments, you can deduct investment-related fees on a Schedule C.”).

[14] Vincenzo Villamena, Cryptocurrency and Taxes: What You Need to Know, CNBC (Jan. 20, 2018), https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html (“Exchanges do not issue a 1099 form, nor do they calculate gains or cost basis for the trader. Many don’t even allow transacting in dollars, instead opting for Ethereum. This means that self-reporting is necessary.”).

[15] See Notice 2014-21, IRS, https://www.irs.gov/pub/irs-drop/n-14-21.pdf (“Taxpayers may be subject to penalties for failure to comply with tax laws.”).

[16] Jason Tashea, Blockchain-based Initial Coin Offerings Chart Uncertain Legal Terrain, ABA Journal (Mar. 2018), http://www.abajournal.com/magazine/article/blockchain_initial_coin_offerings_legal (“[S]ome see the ICO as a creative and legitimate means to raise funds.”).

[17] See Neeraj Agrawal, SEC Chairman Clayton: Bitcoin is Not a Security, Coin Center (Apr. 27, 2018), https://coincenter.org/link/sec-chairman-clayton-bitcoin-is-not-a-security (quoting SEC Chairman Jay Clayton as stating “A pure medium of exchange, the one that’s most often cited, is Bitcoin. As a replacement for currency, that has been determined by most people to not be a security.”).

[18] Investor Bulletin: Initial Coin Offerings, SEC (July 25, 2017), https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings (“Depending on the facts and circumstances of each individual ICO, the virtual coins or tokens that are offered or sold may be securities. If they are securities, the offer and sale of these virtual coins or tokens in an ICO are subject to the federal securities laws … The federal securities laws require securities offerings to be registered with the SEC unless an exemption from registration applies. Many registration exemptions require that investors are accredited investors.”).

[19] See Anna Irrera & Michelle Price, Cryptocurrency Issuers Clean Up, Shun U.S. Investors As SEC Gets Tough, Reuters (Mar. 21, 2018), https://www.reuters.com/article/us-crypto-currencies-usa/cryptocurrency-issuers-clean-up-shun-u-s-investors-as-sec-gets-tough-idUSKBN1GX2OX (“Some companies are shunning U.S. investors altogether in order to avoid U.S. securities law, which generally focuses on where investors are from rather than where the company is based.”).

[20] Sherwin Dowla, ICO Quality: Development & Trading, Satis Group (Mar. 21, 2018), https://medium.com/satis-group/ico-quality-development-trading-e4fef28df04f.

[21] Statement on Potentially Unlawful Online Platforms for Trading Digital Assets, SEC (Mar. 7, 2018), https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading.

[22] Is Coinbase Regulated?, Coinbase, https://support.coinbase.com/customer/en/portal/articles/2689172-is-coinbase-regulated (“Coinbase is also registered as a Money Services Business with FinCEN.”); About Us, Gemini, https://gemini.com/about/ (“We are a New York trust company regulated by the New York State Department of Financial Services”).

[23] Romain Dillet, SEC Says Cryptocurrency Exchanges Are An Unregulated Mess, TechCrunch (May 7, 2018), https://techcrunch.com/2018/03/07/sec-says-cryptocurrency-exchanges-are-an-unregulated-mess/ (stating “The SEC says that many exchanges are currently unregulated and can do whatever they want with your money.”).

[24] SEC Public Statement, supra note 21 (stating “…the SEC does not review the trading protocols used by these platforms, which determine how orders interact and execute, and access to a platform’s trading services may not be the same for all users.  Again, investors should not assume the trading protocols meet the standards of an SEC-registered national securities exchange.”).

[25] Dillet, supra note 23.

[26] William Suberg, Cryptocurrency Exchange Yobit Investigated in Russia on Fraud Claims, Cointelegraph (Mar. 6, 2017), https://cointelegraph.com/news/cryptocurrency-exchange-yobit-investigated-in-russia-on-fraud-claims (“Russian telecommunications regulator Roskomnadzor has opened legislative proceedings against cryptocurrency exchange Yobit, alleging fraudulent activity.”).

[27] See generally Reasons Why I Avoid YoBit and Why You Probably Should Too, Reddit (Feb. 10, 2018) https://www.reddit.com/r/CryptoCurrency/comments/7wobq0/reasons_why_i_avoid_yobit_and_why_you_probably/.

[28] See Steven Russolillo & Eun-Young Jeong, Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy, Wall Street J. (July 16, 2018), https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000 [http://archive.is/2pkx8].

[29] Kyle Torpey, Why FDIC-Insured Exchanges are Significant for Bitcoin (June 5, 2015), CoinJournal, https://coinjournal.net/why-fdic-insured-exchanges-are-significant-for-bitcoin/ (stating “[A]ssessing the risk associated with a lost or stolen bitcoin wallet is still a work-in-progress for most insurance providers. Insured bitcoin deposits would obviously have to come from the private sector, at least for now. . . .”).

[30] Bailey Reutzel, 6 Outrageous Moments in Crypto Twitter Scam History, CoinDesk (May 30, 2018), https://www.coindesk.com/6-outrageous-moments-crypto-twitter-scam-history/ (“Perhaps nowhere else within the cryptocurrency space have scammers become more frustrating than on crypto Twitter. The social media site has been overtaken with accounts impersonating notable figures and businesses promising tens of thousands of bitcoin or ether or XRP, in return for users merely sending a small amount of a cryptocurrency to their accounts in return.”).

[31] Cf. You Could Face Stiff Penalties Under Virginia and Federal Laws If Charged with an Internet Crime, Greenspun Shapiro, http://www.greenspunlaw.com/library/federal-and-virginia-cyber-crime-charges-you-could-face.cfm (“[T]here are approximately 40 different federal statutes used to prosecute people for computer-related crimes, such as Internet fraud, pornography, drugs, software or online piracy, gambling, security fraud, and much more.” All of these crimes could conceivably involve cryptocurrency.).

[32] Cf. Christopher S. Koper et al., Law Enforcement Technology Needs Assessment, Police Executive Research Forum (Jan. 16, 2009), http://www.policeforum.org/assets/docs/Free_Online_Documents/Technology/law%20enforcement%20technology%20needs%20assessment%202009.pdf (listing “Impediments to Information Sharing” on page 10 and “scarce resources” on page 19 as limiting law enforcement’s ability to deal with cybercrime using future technologies).

[33] Jason Bloomberg, Using Bitcoin Or Other Cryptocurrency To Commit Crimes? Law Enforcement Is Onto You, Forbes (Dec. 28, 2017), https://www.forbes.com/sites/jasonbloomberg/2017/12/28/using-bitcoin-or-other-cryptocurrency-to-commit-crimes-law-enforcement-is-onto-you/.

[34] See Cyrus Farivar, Is Online Gambling Legal If Bitcoins, Not Dollars, Are At Stake? (Feb. 6, 2013), NPR, https://www.npr.org/sections/alltechconsidered/2013/02/06/171182974/is-online-gambling-legal-if-bitcoins-not-dollars-are-at-stake (“[I]t might be tough for the Feds to regulate what is just a piece of computer code and not real money. I started to wonder if I broke the law by gambling online using Bitcoin. So I called the Justice Department. It declined to comment for this story.”).

[35] Patrick Thompson, Pump and Dump in Crypto: Cases, Measures, Warnings, Cointelegraph (Feb. 24, 2018), https://cointelegraph.com/news/pump-and-dump-in-crypto-cases-measures-warnings (“Pump and dump schemes are illegal and considered securities fraud by the SEC … However, pump and dump schemes aren’t illegal on cryptocurrency exchanges. Cryptocurrency exchanges are not regulated; there is no piece of the legislature about cryptocurrency exchanges. So even though a pump and dump is unethical, it is not officially illegal . . . .”).

[36] What is Bitcoin? A Step-By-Step Guide for Beginners, BlockGeeks, https://blockgeeks.com/guides/what-is-bitcoin/ (“After confirmation, a transaction can’t be reversed. By nobody. And nobody means nobody. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. Nobody. If you send money, you send it. Period. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.”).

[37] Kate Rooney, Your Guide to Cryptocurrency Regulations Around The World And Where They Are Headed, CNBC (Mar. 27, 2018), https://www.cnbc.com/2018/03/27/a-complete-guide-to-cyprocurrency-regulations-around-the-world.html (“As demand for cryptocurrency grows, global regulators are divided on how to keep up. Most digital currencies are not backed by any central government, meaning each country has different standards.”).

[38] Cf. Kevin A. Meehan, The Continuing Conundrum of International Internet Jurisdiction, 31 B.C. Int’l & Comp. L. Rev. 345, 369 (2008).

http://lawdigitalcommons.bc.edu/iclr/vol31/iss2/8 (stating that, because of a lack of agreement between nations on Internet jurisdiction disputes, “content providers could be sued anywhere and everywhere for unintentionally violating domestic laws they never knew existed. Similarly, Internet users must surf the web without any certainty that redress is available for harms they might suffer in cyberspace.”).

[39] See generally Casey Leigh Henry, Quick Summary of How to Buy Cryptocurrency for Beginners, CryptoCasey (Feb. 9, 2018), https://cryptocasey.com.

[40] Allen Scott, These are the World’s Top 10 Bitcoin-Friendly Countries, Bitcoin.com (Mar. 29, 2016), https://news.bitcoin.com/worlds-top-10-bitcoin-friendly-countries/.

[41] Alex Lielacher, Top 4 Most Bitcoin-Friendly States, Bitcoin Market Journal (Sept. 15, 2017), https://www.bitcoinmarketjournal.com/bitcoin-states/.

[42] Search, U.S. Government Publishing Office, http://govinfo.gov (based on a July 23, 2018 search for congressional hearings in which “Bitcoin” was mentioned).

[43] Written Testimony of Chairman J. Christopher Giancarlo before the Senate Banking Committee, CFTC (Feb. 6, 2018), https://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlo37.

[44] SEC Public Statement, supra note 21.

[45] Ali Raza, Markets Rebound As US CFTC Announces New “Do No Harm” Approach to Cryptocurrency, CryptoSlate (Feb. 6, 2018), https://cryptoslate.com/markets-rebound-us-cftc-announces-new-no-harm-attitude-cryptocurrency/ (“The crypto markets experienced a significant recovery on news that US regulators confirmed that they intended on adopting a “do no harm” approach when it comes to cryptocurrency regulation in an attempt to meet the demands of the new digital era.”).

[46] Kevin Parrish, Digital Currency Prices Fall After SEC Warns About Exchange Dangers, Digital Trends (Mar. 7, 2018), https://www.digitaltrends.com/computing/sec-warning-causes-cryptocurrency-price-drop/ (“The values of many digital currencies took a tumble after the U.S. Securities and Exchange Commission said on Wednesday, March 7, that platforms used to trade digital currencies need to be registered.”).

[47] Mike Brown, Bitcoin Investor Sentiment Heading into 2018 | Survey & Report, LendEDU (Dec. 13, 2017), https://lendedu.com/blog/bitcoin-investor-sentiment-2018.

[48] Matt Nixon, Bitcoin Foundation Seeks Legal Protection from U.S. Currency Regulation, Independent (Aug. 30, 2017), https://www.independent.co.uk/news/business/news/bitcoin-foundation-legal-protection-us-currency-regulation-llew-claasen-cryptocurrency-bitlicence-a7919401.html.

[49] Cracking the Code on Cryptocurrency, Seeking Alpha (June 27, 2018), https://seekingalpha.com/article/4184112-cracking-code-cryptocurrency?page=5 (“Most respondents indicate they perceive cryptocurrency as a riskier investment than cash, gold, real estate, government bonds, investing in your own business, or the share market.”).

[50] Russolillo & Jeong, supra note 28 (quoting John Sedunov, an assistant professor of finance at Villanova University, as saying cryptocurrency exchange hacks are “bad for users, bad for exchanges and terrible for confidence,” and saying  “If I don’t have confidence in where I’m storing my crypto assets or where I’m investing, how can I really trust any of this?”).

[51] William Suberg, FN: BlackRock Eyes Bitcoin Futures, Market Reacts to Increased Institutional Interest, Cointelegraph (July 16, 2018), https://cointelegraph.com/news/fn-blackrock-eyes-bitcoin-futures-market-reacts-to-increased-institutional-interest (“Following in the footsteps of fellow giant Goldman Sachs, the cross-industry working group convened by BlackRock will among other things focus on whether the company should invest in Bitcoin futures . . . .”).

[52] Stephen J. Obie & Mark W. Rasmussen, How Regulation Could Help Cryptocurrencies Grow, Harvard Bus. Rev. (July 17, 2018), https://hbr.org/2018/07/how-regulation-could-help-cryptocurrencies-grow.

[53] See, e.g., Bill Chappell, Cryptocurrencies Lose Billions in Value After an Exchange Is Hacked, NPR (June 11, 2018), https://www.npr.org/2018/06/11/618912309/cryptocurrencies-lose-billions-in-value-after-an-exchange-is-hacked (“The hack of a cryptocurrency exchange in South Korea is being blamed for a sharp drop in bitcoin and other popular currencies, which lost billions of dollars in value.”).

[54] 2018 Cryptocurrency Survey, Foley & Lardner, https://www.foley.com/files/uploads/Foley-Cryptocurrency-Survey.pdf.

[55] Id.

[56] Ryan Derousseau, This Is the Clearest Sign Yet That the Bitcoin Bubble Has Burst, Time (Apr. 4, 2018), http://time.com/money/5227160/this-is-the-clearest-sign-yet-that-the-bitcoin-bubble-may-have-burst/.

[57] Andrew Nelson, Cryptocurrency Regulation in 2018: Where the World Stands Right Now, Bitcoin Magazine (Feb. 1, 2018), https://bitcoinmagazine.com/articles/cryptocurrency-regulation-2018-where-world-stands-right-now/ (“The United States, at the time of this writing, has no coherent direction on its cryptocurrency regulation other than that there will be some soon.”).