USA Law and Practice Contributed by: Gregory Strong, Sarah W. Chen, Brian Farber and Amil Sumaiya Malik, Cahill Gordon & Reindel LLP
National trust banks operate under a limited-purpose charter focused on fiduciary and custodial activities and may engage in crypto-asset custody and related services, subject to applicable supervisory expec- tations. For firms with nationwide operations, these charters can offer efficiencies by pre-empting state- level licensing requirements for certain activities such as custody and money transmission. 1.2.3 ESG/Sustainable Finance There are no ESG/sustainable finance requirements in the USA that specifically apply to digital assets. Though there have been significant mandatory ESG disclosures that the SEC has required of reporting organisations in the past, recently the SEC has been stepping back in regulating the area. Certain legisla- tive proposals regarding ESG and crypto-assets have been introduced, but none have passed and become law. 1.2.4 Tax In 2014, the Internal Revenue Service (IRS) issued Notice 2014-21, its first guidance on digital assets. Notice 2014-21 provides that virtual currencies are treated as non-currency property for US tax purposes, with the result that most dispositions of digital assets for cash, services or other digital assets are taxable dispositions of capital assets for US tax purposes. Since then, the Treasury Department and the IRS have continued to release piecemeal, non-binding guid- ance on the substantive US tax treatment of digital asset transactions. That guidance includes: • Revenue Ruling 2019-24, which concludes that taxpayers who gain dominion and control over new tokens by reason of a hard fork are taxed at ordi- nary rates on the tokens at that time; • Revenue Ruling 2023-14, which similarly treats validator rewards as ordinary income when valida- tors gain dominion and control over them; • Chief Counsel Memorandum 202316008, which treats the Ethereum network’s upgrade to a proof- of-stake consensus mechanism as non-taxable to holders of the network’s native token; and • Revenue Procedure 2025-31, which provides rules under which “crypto ETFs” treated as grantor trusts can stake their digital assets without becom- ing taxable as corporations.
In addition, in July 2024, final regulations significantly expanded tax reporting by brokers in digital assets. However, taxpayers still have very little substantive guidance on the US tax treatment of digital asset transactions. For example, while Notice 2014-21 treats virtual currencies as “property”, it does not indicate what kind of property they are, or whether all virtual currencies are treated similarly for US tax purposes. As a result, there remains significant uncertainty as to the US tax treatment of liquid staking tokens, vault tokens, liquidity provider tokens, governance tokens and non-fungible tokens, and whether bridging, wrap- ping and liquidity provision are treated as taxable events. The US tax consequences for non-US and tax-exempt investors of holding and trading digital assets also remain uncertain. 1.2.5 Insolvency There are no specific resolution or insolvency require- ments or regimes for digital asset firms in the USA. Traditional bankruptcy proceedings have been used in the bankruptcies of several significant digital asset companies in the USA over the last two years. These include FTX, Voyager, Celsius and others. 1.2.6 Industry and Trade Bodies See 1.1.5 Industry and Trade Bodies . 2. Regulation 2.1 Regulators and International Alignment There are a number of regulatory bodies in the USA that are relevant to blockchain and digital assets. The Securities and Exchange Commission (SEC) The SEC has broad regulatory authority over securi- ties transactions, securities professionals, and securi- ties intermediaries in the USA. The threshold question that determines whether the SEC has authority with respect to blockchain or digital assets is whether a “security” is involved. The definition of the term “secu- rity” in both the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) includes a number of enumerated types of securities, includ- ing the term “investment contract”. When a contract,
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