COVID-19 ushered in a period of economic uncertainty. Stimulus, liquidity, and mounting debt have fueled inflation and in turn, the rise of cryptocurrency. (Julia La Roche, Yahoo Finance). Companies have been looking for alternatives to traditional securities in order to build and sustain their wealth during the period of economic uncertainty caused by COVID-19. Id. On February 8th Tesla, Inc. (“Tesla”) purchased a $1.5 billion stake in Bitcoin—a popular cryptocurrency. (Sam Shead, CNBC). On April 13, a single bitcoin was valued at approximately $65,000. (Omkar Godbole, CoinDesk). However, even with Bitcoin’s rising popularity, billionaire and manager of Bridgewater Associates, Ray Dalio recently predicted that the use of cryptocurrency will be prohibited in the United States in the coming months, citing the Gold Reserve Act of 1934. (Billy Bambrough, Forbes).

Prior to the inception of Bitcoin in 2009, the United States government had an almost exclusive monopoly on issuing currency. (Daniel Sanches, Federal Reserve Bank of Philadelphia). The United States government has taken drastic measures in the past to maintain its monopoly—especially in the face of adversity. For example, during the Great Depression gold emerged as a legitimate threat to the U.S. Dollar because the public did not have faith in financial institutions. (Lindsey Konkel, The History Channel). In response, the United States Congress ("Congress") introduced the Gold Reserve Act that outlawed gold, which Act was not repealed until 1974. Id. There are certainly parallels between gold and cryptocurrency. But Congress has been reluctant to regulate the latter. (Joe Dewey, Global Legal Insight). Guidelines have been issued by several administrative agencies including the United States Department of Treasury, the Securities and Exchange Commission (“SEC”), the Federal Trade Commission (“FTC”), the Internal Revenue Service (“IRS”), and the Financial Crimes Enforcement Network (“FinCen”). Id.  

Congress has thus far offered limited guidance but piecemeal legislation has been introduced over the past ten years in 32 states ranging in scope and purpose. (Business Insider). Wyoming has been described as the friendliest jurisdiction for cryptocurrency because of a law passed by the Wyoming Legislature that exempts cryptocurrency from state securities regulations. (Joe Dewey, Global Legal Insight). In 2019, Colorado enacted similar legislation in an attempt to court investors. Id. On the other hand, New York, along with Iowa and Oklahoma, passed a series of restrictive regulations intended to protect consumers. Id. For instance, the Iowa state legislature introduced a bill that would prohibit local municipalities from accepting cryptocurrency as payment. Id.

Outside of the United States, other countries such as China, Russia, and Columbia have made an effort to ban the use of cryptocurrency. (Prableen Bajpai, Investopedia). In April, India announced a proposal representing the most restrictive regime to date. (Aftab Ahmed, Reuters). The legislation recently introduced in the Indian Parliament makes it a crime to possess, issue, mine, trade, or transfer cryptocurrency, including Bitcoin. Id. These measures will likely have a drastic impact on India’s economy. (Shruti Rajagopalan, Bloomberg). An outright ban will discourage investors and eliminate a sector of the global economy that was worth an estimated $792.5 million in 2019 and is expected to grow 30% annually in the next seven years. Id.

The United States government is unlikely to pursue similar measures for this very reason. Maintaining a monopoly over currency is no longer an option. Cryptocurrency has simply become too popular. Further, some experts speculate that legislation banning cryptocurrency would be difficult to implement and enforce. (Julia La Roche, Yahoo Finance).

Even so, regulation is likely on the horizon. Cryptocurrency raises several legitimate concerns for the United States aside from illicit finance and tax evasion, namely a lack of economic data. (Shobhit Seth, Investopedia). Without data, the United States Federal Reserve cannot effectively stimulate the economy during a recession. Id. Because Bitcoin is almost completely anonymous, it is near impossible to produce data summarizing consumer habits. Id. Measures requiring private entities, as well as exchanges like Coin Base, to provide data to the government and report suspicious activity on their platform are likely to gain prominence. Id. Subsequently, it is possible that these types of monitoring mechanisms will frustrate the fundamental purpose of Bitcoin—anonymity—and render it useless to consumers.