Federal Cryptocurrency Regulations 2026: SEC, CFTC, FinCEN, IRS Form 1099-DA, FIT21

Federal Regulators

Securities and Exchange Commission (SEC): The SEC regulates digital assets that qualify as securities under federal law, applying the Investment Company Act, Securities Act, and Securities Exchange Act to token issuers, exchanges, and intermediaries. It brings enforcement actions against unregistered offerings and operates the FinHub for industry engagement. The SEC's jurisdiction hinges on whether a crypto asset meets the Howey test for an investment contract.

Commodity Futures Trading Commission (CFTC): The CFTC oversees digital commodities, derivatives, and futures markets involving crypto assets like Bitcoin and Ethereum when traded as commodities. It regulates designated contract markets, swap execution facilities, and brings enforcement actions for fraud and manipulation in spot and derivatives markets. The agency shares jurisdiction with the SEC where assets may have characteristics of both commodities and securities.

Financial Crimes Enforcement Network (FinCEN): FinCEN enforces Bank Secrecy Act compliance for virtual currency businesses, requiring money services businesses dealing in convertible virtual currency to register, implement anti-money laundering programs, and file suspicious activity reports. It issues guidance on which crypto activities trigger MSB registration and reporting obligations. FinCEN's rule at 31 CFR §1010.100(ff) defines "convertible virtual currency" and establishes key compliance frameworks.

Internal Revenue Service (IRS): The IRS treats convertible virtual currency as property for tax purposes, requiring taxpayers to report gains, losses, and income from crypto transactions. It enforces information reporting by brokers under IRC §6045, which as of 2025 mandates new Form 1099-DA reporting for digital asset proceeds. The agency issues guidance on staking, hard forks, airdrops, and NFT tax treatment.

Office of Foreign Assets Control (OFAC): OFAC enforces economic sanctions by prohibiting transactions with blocked persons and designated addresses in the crypto ecosystem. It maintains the Specially Designated Nationals List and issues guidance holding virtual currency exchanges and administrators responsible for sanctions compliance. The office has sanctioned mixers, exchanges, and individual wallet addresses linked to illicit actors.

Office of the Comptroller of the Currency (OCC): The OCC supervises national banks and federal savings associations, issuing interpretive letters that permit federally chartered banks to provide crypto custody services, hold stablecoin reserves, and use blockchain for payment activities. Interpretive Letters 1170, 1172, and 1174 clarified that banks may custody crypto assets, operate nodes on blockchain networks, and use stablecoins for payment functions. These letters provide legal certainty for traditional banking institutions entering the digital asset space.

Department of the Treasury: Treasury coordinates federal crypto policy across agencies, conducts national risk assessments on digital assets, and issues reports on financial stability, illicit finance, and consumer protection. It supervises FinCEN, OFAC, and works with the Financial Stability Oversight Council to monitor systemic risks. Treasury provides strategic direction on international crypto standards through the Financial Action Task Force.

Key Federal Statutes & Rules

Securities Act of 1933: This Act requires offers and sales of securities to be registered or qualify for an exemption, applying to token offerings through the Howey test established in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). Under Howey, an investment contract exists when there is an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. Digital assets marketed with promises of appreciation or where promoters build value through development typically satisfy this test, triggering registration requirements under Securities Act §5.

Commodity Exchange Act: Codified at 7 U.S.C. §1 et seq., the CEA grants the CFTC jurisdiction over commodity futures and derivatives, including those based on digital assets the CFTC has recognized as commodities. The Act prohibits fraud and manipulation in both derivatives and underlying spot markets for commodities in interstate commerce under 7 U.S.C. §9, giving the CFTC enforcement authority even where assets trade outside registered venues.

Bank Secrecy Act / 31 CFR §1010.100(ff): The BSA requires financial institutions to maintain records and file reports useful in criminal, tax, and regulatory investigations. The FinCEN rule at 31 CFR §1010.100(ff) defines "convertible virtual currency" as currency with an equivalent value in real currency or that substitutes for real currency, triggering money services business registration and AML/KYC requirements. Administrators and exchangers of convertible virtual currency must register under 31 CFR §1022.380.

IRC §6045 Broker Reporting: The Infrastructure Investment and Jobs Act amended Internal Revenue Code section 6045 to expand broker reporting to digital assets. Beginning with 2025 transactions, brokers must file Form 1099-DA reporting gross proceeds from sales of digital assets, including cryptocurrency and NFTs. The IRS issued final regulations in 2024 defining "broker" and "digital asset" for these purposes, with phased compliance deadlines through 2027.

OFAC Sanctions Guidance: OFAC published guidance in October 2021 clarifying that sanctions compliance obligations apply fully to the virtual currency industry. Entities must screen counterparties against the SDN List, block property of designated persons, and reject prohibited transactions. The guidance addresses decentralized finance, noting that U.S. persons remain liable even when interacting with non-custodial protocols if they facilitate sanctions evasion.

OCC Interpretive Letters 1170/1172/1174: These 2020-2021 letters authorized national banks to custody digital assets for customers (Letter 1170), participate in independent node verification networks (Letter 1172), and use stablecoins for payment activities and issue stablecoins (Letter 1174). The letters clarified that these activities represent modern forms of traditional banking functions permissible under the National Bank Act.

Lummis-Gillibrand Responsible Financial Innovation Act (RFIA): Introduced in 2022 and reintroduced with revisions in subsequent sessions, this comprehensive framework bill would clarify SEC vs. CFTC jurisdiction using an "ancillary asset" test, create a new regulatory regime for digital asset intermediaries, establish consumer protections, and provide tax treatment certainty. While not yet enacted as of early 2026, it represents significant congressional consensus on key jurisdictional and definitional issues.

Financial Innovation and Technology for the 21st Century Act (FIT21): Passed by the House in May 2024 (H.R. 4763), FIT21 would establish a regulatory framework distinguishing digital commodities from digital asset securities based on whether a blockchain system is decentralized. Assets on decentralized systems would fall under CFTC jurisdiction, while centralized systems would remain with the SEC. The bill creates registration categories for digital commodity exchanges and dealers, though Senate action remains pending as of 2026.

Federal vs. State: Who Has Authority?

Federal crypto regulation operates within a complex preemption landscape where both federal and state authorities claim jurisdiction. The constitutional framework follows traditional lines: federal agencies exercise enumerated powers over interstate commerce, securities, commodities, money transmission, and banking, while states retain general police powers over intrastate commerce, consumer protection, and business licensing.

Federal securities laws establish a floor, not a ceiling. Securities Act §18 and Securities Exchange Act §28(a) preserve state authority to regulate securities through "Blue Sky" laws, meaning token issuers must comply with both SEC registration and state securities requirements unless specifically preempted. States may impose additional disclosure, registration, and antifraud requirements on securities offerings within their borders.

Money transmission represents a shared domain. The BSA requires federal registration with FinCEN, but does not preempt state money transmitter licensing. Virtual currency businesses must typically obtain licenses in each state where they operate, complying with varying bonding, net worth, and consumer protection requirements. No federal license substitutes for state licensure, creating a 50-state patchwork that significantly burdens multi-state operators.

Banking preemption provides the strongest federal supremacy. National banks operating under OCC charters enjoy preemption of state visitorial powers and state laws that interfere with or condition federal banking powers under 12 U.S.C. §484 and Dodd-Frank Act §1044. OCC interpretive letters granting crypto custody and stablecoin authority thus shield national banks from contrary state prohibitions, though state-chartered banks remain subject to state restrictions.

Commodity regulation is predominantly federal. The CEA at 7 U.S.C. §16(e)(2) preempts state laws that prohibit or regulate commodity transactions executed on registered entities or subject to CFTC rules. However, states retain antifraud and general contract enforcement authority, and may regulate spot commodity transactions not involving interstate commerce.

Tax authority remains concurrent. The IRS enforces federal tax treatment of digital assets as property, but states independently classify and tax crypto activities. State income, sales, and property taxes apply based on state law, with no federal preemption of state taxation absent direct conflict with federal statutes.

Pending Federal Legislation

Congressional activity on crypto regulation intensified following high-profile exchange failures in 2022-2023, with dozens of bills introduced each session addressing market structure, stablecoin regulation, consumer protection, tax clarity, and illicit finance prevention. Legislative proposals generally fall into several categories: comprehensive market structure bills that divide regulatory authority between the SEC and CFTC; stablecoin-specific frameworks requiring reserves and prudential oversight; blockchain infrastructure bills addressing node operation and mining; DeFi-focused legislation on intermediary definitions; and targeted amendments to tax, sanctions, or banking laws.

The primary jurisdictional question—whether a given digital asset is a security or commodity—remains central to most legislative frameworks. Bills typically use functional tests examining network decentralization, governance structures, or economic purpose to allocate regulatory authority. Stablecoin legislation has seen bipartisan interest, with proposals requiring issuers to maintain 100% reserves in specified high-quality liquid assets and obtain banking or special-purpose charters.

Tax legislation frequently addresses issues including the de minimis exemption threshold for personal transactions, clarification of staking and DeFi income timing, wash sale rule application, and like-kind exchange prohibition enforcement. Banking-focused bills propose explicit statutory authority for depository institutions to engage in crypto custody and stablecoin issuance, addressing uncertainty after judicial challenges to OCC interpretive letters.

Because legislative status changes rapidly with committee markups, floor votes, and amendments, readers researching current federal bills should consult live trackers that pull directly from Congress.gov. Such trackers provide real-time sponsor information, text versions, and procedural status that cannot be accurately captured in static guidance.

Frequently Asked Questions

Q: Does my crypto exchange or trading platform need to register with the SEC, CFTC, or both?

Registration requirements depend on what you offer. If your platform lists tokens that are securities under the Howey test—typically those involving ongoing efforts by a central team to increase value—you must register as a national securities exchange or alternative trading system with the SEC. If you offer margined, leveraged, or financed digital asset transactions, or futures and derivatives on any digital commodities, you need CFTC registration as a designated contract market or swap execution facility. Many platforms deal in both securities and commodity derivatives, requiring dual registration or operational separation. Spot commodity trading of fully decentralized assets like Bitcoin may fall outside both regimes, but custody and clearing services may still trigger state money transmitter requirements. Consult counsel to analyze your specific product mix.

Q: What are my reporting obligations when I sell cryptocurrency, and what information will the IRS receive?

As a seller, you must report capital gains or losses on disposed digital assets using Form 8949 and Schedule D, calculating basis from acquisition cost and fair market value at disposition. Beginning with 2025 transactions, brokers and exchanges must report your gross proceeds to the IRS on Form 1099-DA under IRC §6045(g)(3)(D), similar to stock sales reported on Form 1099-B. The form will include transaction dates, proceeds, and potentially basis information if the broker tracked your acquisition. For self-custody wallets and peer-to-peer transactions, no third-party reporting occurs, but you remain obligated to self-report all taxable events. Mining, staking rewards, airdrops, and compensation in crypto constitute ordinary income at fair market value when received.

Q: We want to provide crypto custody services through our state-chartered bank. What federal and state approvals do we need?

State-chartered banks need approval from their state banking regulator, which will assess capital adequacy, cybersecurity controls, risk management, and consumer protection measures. Federally, if your bank is FDIC-insured or a Federal Reserve member, you should notify the FDIC and Federal Reserve of the new activity; these agencies may require enhanced capital allocations or operational controls. Unlike national banks operating under OCC interpretive letters, state banks cannot rely on federal preemption and must comply with state laws that may prohibit or condition crypto activities. Some states have issued guidance permitting custody with conditions, while others maintain restrictive positions. Your insurance coverage, including whether FDIC deposit insurance applies to custodied crypto (it does not, per current FDIC guidance), must be clearly disclosed to customers.

Q: Our company received a token airdrop. How should we handle the tax and accounting treatment?

An airdrop of tokens to your company constitutes gross income in the year of receipt at the tokens' fair market value on the receipt date, following IRS Revenue Ruling 2019-24. Book this as ordinary income, not capital gain, since you performed no investment sale. Your tax basis in the tokens equals the income amount recognized, establishing your starting point for later gain or loss calculations if you sell. For financial accounting, classify the tokens as intangible assets if held for investment, or inventory if held for sale in the ordinary course. If the tokens are securities, consider whether consolidation, equity method, or fair value accounting applies. Airdrops received for past activity (such as prior protocol usage) are taxable immediately; airdrops conditioned on future services may require analysis under compensation or revenue recognition rules.

Q: How do OFAC sanctions apply to cryptocurrency transactions, and what screening obligations do we have?

OFAC sanctions prohibit U.S. persons and entities from transacting with blocked persons, entities, or digital currency addresses on the Specially Designated Nationals and Blocked Persons List. Your exchange, wallet provider, or DeFi interface must screen wallet addresses against OFAC's published lists of sanctioned addresses, rejecting transactions involving blocked addresses even if the underlying customer passed KYC. This obligation applies regardless of technological architecture; OFAC has stated that U.S. persons may be liable for sanctions violations even when using smart contracts or decentralized protocols if they had reason to know a transaction involved a blocked person. Implement real-time address screening at transaction initiation, maintain audit logs, and file blocked property reports (within 10 days) and annual reports of blocked property using OFAC reporting forms. Geofencing users from sanctioned jurisdictions provides additional protection but does not eliminate address-screening obligations.

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State-by-State Guides

Federal law sets the floor — but every state layers its own rules on top. Find your state's specifics:

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Pending Federal Cryptocurrency & Digital Asset Legislation

Live data from Congress.gov. Updated daily. Pending = introduced and not yet enacted, vetoed, or signed into law.

HR 6180 (119th Congress)

What it does: Bitcoin for America Act.

Latest status: Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. (2025-11-20)

HRES 849 (119th Congress)

What it does: Ban Crypto Corruption Resolution.

Latest status: Referred to the Committee on Financial Services, and in addition to the Committees on Oversight and Government Reform, House Administration, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. (2025-10-31)

HRES 580 (119th Congress)

What it does: Providing for consideration of the bill (H.R. 4016) making appropriations for the Department of Defense for the fiscal year ending September 30, 2026, and for other purposes; providing for consideration of the bill (H.R. 3633) to provide for a system of regulation of the offer and sale of digital commodities by the Securities and Exchange Commission and the Commodity Futures Trading Commission, and for other purposes; providing for consideration of the bill (H.R. 1919) to amend the Federal Reserve Act to prohibit the Federal reserve banks from offering certain products or services directly to an individual, to prohibit the use of central bank digital currency for monetary policy, and for other purposes; providing for consideration of the bill (S. 1582) to provide for the regulation of payment stablecoins, and for other purposes; and waiving a requirement of clause 6(a) of rule XIII with respect to consideration of certain resolutions reported from the Committee on Rules.

Latest status: On agreeing to the resolution Agreed to by recorded vote: 217 - 212 (Roll no. 198). (2025-07-16)

HR 4374 (119th Congress)

What it does: American Homeowner Crypto Modernization Act of 2025.

Latest status: Referred to the Committee on Financial Services, and in addition to the Committee on Veterans' Affairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. (2025-07-14)

S 2207 (119th Congress)

What it does: A bill to amend the Internal Revenue Code of 1986 to reform the treatment of digital assets.

Latest status: Read twice and referred to the Committee on Finance. (2025-06-30)

HR 3573 (119th Congress)

What it does: Stop TRUMP in Crypto Act of 2025.

Latest status: Referred to the House Committee on Financial Services. (2025-05-21)

HR 3314 (119th Congress)

What it does: Stop Presidential Profiteering from Digital Assets Act.

Latest status: Referred to the House Committee on Financial Services. (2025-05-08)

S 1668 (119th Congress)

What it does: End Crypto Corruption Act of 2025.

Latest status: Read the second time. Placed on Senate Legislative Calendar under General Orders. Calendar No. 71. (2025-05-08)

HR 2982 (119th Congress)

What it does: Fair Taxation of Digital Assets in Puerto Rico Act of 2025.

Latest status: Referred to the House Committee on Ways and Means. (2025-04-21)

S 1223 (119th Congress)

What it does: Prohibiting Foreign Adversary Interference in Cryptocurrency Markets Act.

Latest status: Read twice and referred to the Committee on Agriculture, Nutrition, and Forestry. (2025-04-01)

Source: Congress.gov. Data refreshes daily — verify with the linked bill page before relying on it.

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