In 2008, amidst a global financial meltdown, someone calling himself Satoshi Nakamoto—who has kept his identity a secret to this day—published a paper introducing the idea of Bitcoin. [1] Before Nakamoto’s foundational document of cryptocurrency, there was no functioning blockchain. Bitcoin, like other cryptocurrencies, is an “electronic coin.” It exists on a public ledger called a “proof-of-work chain” (PoW) blockchain, where transactions are verified by “miners,” or programmers who solve complex computational puzzles to add new transactions to the existing chain. [2] Each successful verification adds a block to the blockchain, which is publicly accessible and ensures that the transfer of funds is tamper-proof. This process is decentralized, meaning it can happen anywhere worldwide.
This article explores the limitations of current U.S. regulatory frameworks—securities laws, anti-money laundering (AML) rules, and tax enforcement—in addressing the unique challenges posed by decentralized cryptocurrencies. Examining cases such as SEC v. LBRY, United States v. Harmon, and IRS v. Coinbase reveals the urgent need to develop a nuanced “Digital Asset Framework” (The Organization for Economic Co-operation and Development (OECD) has developed the “Crypto-Asset Reporting Framework” (CARF), which is a global initiative aimed at promoting the automatic exchange of information between countries to tackle emerging tax evasion risks related to cryptocurrency and digital assets. While CARF is an acronym related to digital assets, it pertains explicitly to reporting standards rather than a general evaluation framework. Therefore, no formal acronym is currently used for “Digital Asset Framework” in cryptocurrency.) to balance innovation, privacy, and accountability in this transformative sector, which drives innovation through decentralized technologies, emphasizes privacy in peer-to-peer transactions, and challenges traditional notions of accountability. These cases underscore this struggle as regulatory agencies seek to balance privacy, tax compliance, and innovation with the need for oversight in a rapidly evolving digital economy.
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