In the United States, each regulatory body has characterised crypto to extend its jurisdiction. The Internal Revenue Service (IRS) treats cryptocurrency as property for tax purposes, subjecting gains from trading or disposal to capital gains tax. FinCEN, responsible for anti-money-laundering oversight, has taken a different view. As early as 2013, it characterised “virtual currency” as a medium of exchange with some features of fiat currency and, on that basis, regulates crypto exchanges and intermediaries as money transmitters under the Bank Secrecy Act.
In effect, nearly all cryptocurrencies are treated as ‘currency’ from a regulatory point of view. The US Securities and Exchange Commission (SEC) has repeatedly relied on the Howey Test to classify certain crypto assets as investment contracts and, therefore, securities. In SEC v. Terraform Labs Pte Ltd, the SEC successfully contended that the tokens under consideration, like TerraUSD (UST) and LUNA, qualify as investment contracts. A similar approach was adopted in SEC v. Ripple Labs Inc, where it was held that certain sales to institutional investors qualified as securities transactions under the Howey test, as investors reasonably expected profits based on Ripple’s efforts.
Concurrently, the Commodity Futures Trading Commission has consistently characterised major cryptocurrencies such as Bitcoin and Ether as commodities, asserting jurisdiction over crypto-derivatives and market manipulation. As a result, the same cryptocurrency may be treated as property, currency, security, or commodity, depending on the regulatory context, reflecting an approach that may be understood as ‘functional’ but fragmented.