The week of May 20, 2019 will be remembered as one of the most consequential periods for cryptocurrency regulation worldwide. From Washington to The Hague to Jerusalem, governments accelerated their efforts to bring the rapidly growing digital asset market under formal oversight, signaling that the days of the crypto Wild West were numbered.
TL;DR
- IRS Commissioner Charles Rettig announced the first comprehensive crypto tax guidance update since 2014
- SEC delayed its decision on the VanEck Bitcoin ETF and pursued multiple enforcement actions
- Dutch and European authorities shut down Bestmixer.io, a $200M crypto mixing service
- Montana passed a bill recognizing utility tokens and exempting them from state securities laws
- An Israeli court ruled that Bitcoin is an asset, not a currency, subjecting it to capital gains tax
- Grayscale Ethereum Trust received FINRA approval for public retail trading
IRS Breaks Five-Year Silence on Crypto Taxes
Perhaps the most significant development for everyday cryptocurrency holders came from the Internal Revenue Service. IRS Commissioner Charles P. Rettig announced on May 20, 2019, that the agency was actively working on its first comprehensive cryptocurrency tax guidance since the initial notice issued in 2014. The announcement came in response to a direct request from Representative Tom Emmer, who had been pushing for clearer reporting requirements for digital asset transactions.
The 2014 guidance had provided only basic framework for treating cryptocurrency as property for tax purposes, leaving significant ambiguity around issues like airdrops, hard forks, staking rewards, and the tax treatment of tokens received through decentralized finance protocols. The promised update was expected to address many of these gray areas, providing much-needed clarity for millions of American taxpayers holding digital assets.
At the time of the announcement, Bitcoin was trading at approximately $7,680 according to CoinMarketCap, having more than doubled in value since the start of 2019. The surging prices made tax compliance an increasingly pressing issue for both the agency and taxpayers.
SEC Flexes Enforcement Muscles on Multiple Fronts
The Securities and Exchange Commission was particularly active during this week, pursuing enforcement actions on several fronts while simultaneously grappling with the broader question of how to regulate the rapidly evolving cryptocurrency market.
On May 20, the SEC announced a delay in its decision on the VanEck Bitcoin ETF proposal, adding a 35-day comment period to gather more information and public opinions. The proposal, originally filed by the Chicago Board Options Exchange (CBOE), represented one of the most closely watched regulatory decisions in the cryptocurrency space, with many viewing ETF approval as a potential catalyst for institutional adoption.
The commission also sued California resident Daniel Pacheco for allegedly conducting a multimillion-dollar cryptocurrency pyramid scheme through IPro Solutions LLC and IPro Network LLC. According to the SEC complaint, Pacheco sold unregistered securities from January 2017 through March 2018, defrauding investors out of approximately $26 million by promising points that could be converted into a proprietary digital asset called PRO Currency.
In a separate action, the SEC halted operations of Argyle Coin, a diamond-backed cryptocurrency scheme run by Jose Angel Aman that had allegedly defrauded investors of $30 million. Aman was accused of operating a Ponzi scheme that used investor funds to support his diamond resale business rather than the promised cryptocurrency project.
Kik Battles the SEC Over $97 Million Token Sale
Canadian messaging company Kik revealed that it had spent over $5 million on ongoing negotiations with the SEC regarding its 2017 initial coin offering. The SEC had announced in January 2019 that it believed Kik’s Token Distribution Event, which raised $97 million, violated federal securities laws. After receiving a Wells Notice in November 2018, Kik found itself at the center of a landmark case that could define the regulatory status of utility tokens for years to come.
Montana Embraces Crypto With Utility Token Bill
While federal regulators took a cautious approach, the state of Montana moved in the opposite direction. Governor Steve Bullock signed House Bill 584 on May 8, 2019, a measure that recognized utility tokens and exempted them from state securities regulations. The bill defined a utility token as a digital unit created and recorded on a blockchain, providing a clear legal framework for blockchain projects operating within the state.
The Montana legislation represented a growing trend of individual states taking independent action on cryptocurrency regulation, creating a patchwork of state-level frameworks that stood in contrast to the slower-moving federal regulatory apparatus.
Israel Classifies Bitcoin as an Asset
Internationally, an Israeli court delivered a landmark ruling classifying Bitcoin as an asset rather than a currency, subjecting cryptocurrency profits to capital gains tax. The Central District Court decision came in a case involving Noam Copel, founder of DAV.Network, who had purchased bitcoins in 2011 and sold them in 2013, earning a profit of 8.27 million Israeli new shekels, equivalent to approximately $2.29 million at the time.
The Israel Tax Authority had argued successfully that the profits should be taxed as capital gains on an asset, rather than as currency transactions. The ruling set an important precedent in the global debate over how to classify and tax digital assets.
Grayscale Ethereum Trust Gains FINRA Approval
In a positive development for institutional cryptocurrency adoption, Grayscale Investments confirmed that its Ethereum Trust (ETHE) had received regulatory approval from the Financial Industry Regulatory Authority (FINRA) for retail trading. Described as the first publicly traded security based on Ethereum, the product followed Grayscale’s existing Bitcoin and Ethereum Classic trusts, which were already available to public investors.
With Ethereum trading at approximately $245 on May 22, the approval of a publicly traded Ethereum investment vehicle represented another step toward mainstream institutional access to the cryptocurrency market.
Why This Matters
The confluence of regulatory actions during the week of May 20, 2019 represented a turning point for the cryptocurrency industry. Governments around the world were no longer content to observe from the sidelines — they were actively building the frameworks that would govern the future of digital assets. For investors, developers, and entrepreneurs in the crypto space, the message was clear: compliance was no longer optional. The regulatory infrastructure being constructed during this pivotal week would go on to shape the trajectory of cryptocurrency markets for years to come, influencing everything from token offerings and exchange operations to tax reporting and institutional investment products.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Always conduct your own research before making any investment decisions.
IRS tax guidance was desperately needed back then too many people had no idea what to report
SEC cracking down on fraud is actually good for the industry weeds out the scammers
global coordinated regulation week was wild every regulator wanted to make a statement
still waiting for clear tax guidance that doesnt require a phd to understand
the Hague Jerusalem and Washington all in one week regulators were competing for headlines