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Libra Association Taps Saumya Bhavsar as General Counsel for Payments Subsidiary

5 years 10 months ago

The Libra Association, the organization developing the Facebook-backed cryptocurrency project libra, has hired a former banking regulator and industry veteran as general counsel for its payments subsidiary.

The hire, Saumya Bhavsar, will assist Libra Networks in “launching and managing a compliant payment system,” the Swiss-based association said Wednesday. That could be crucial for a project that faces regulatory headwinds at seemingly every turn.

Bhavsar will be calling upon 25 years in banking regulation across the public and private sector. She was a senior attorney at the U.S. national banking regulator the Office of the Comptroller of the Currency in the late 1990s and early 2000s.

Related: Twitter Hires Noted Hacker as Head of Security Months After Bitcoin Scam

She then pivoted to private sector regulatory roles at Euroclear, UBS and Credit Suisse, her LinkedIn profile shows. Bhavsar spent the most recent three years at Credit Suisse.

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Square Agrees to Buy Credit Karma’s Tax Preparation Service for $50M

5 years 10 months ago

Payments company Square said Tuesday it will buy Credit Karma’s tax business for $50 million and integrate it into its Cash App, a major hub for bitcoin sales.

Cash App will make Credit Karma’s do-it-yourself tax-preparation software available to its 30 million monthly users for free, Square said. Those users already send payments, manage credit cards, invest in stocks and increasingly purchase bitcoin from the popular app.

Credit Karma is selling the operations as a condition to gain U.S. Department of Justice approval for its $7.1 billion acquisition by Intuit.

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VanEck Launches Bitcoin Exchange-Traded Note on Deutsche Boerse

5 years 10 months ago

VanEck, the New York-based investment management firm with around $50 billion in assets under management, has launched a bitcoin exchange-traded-note (ETN) for trading on the Deutsche Boerse Xetra.

Listed on the Frankfurt, Germany-based trading venue Wednesday, the VanEck Vectors Bitcoin ETN (VBTC) is physically backed by bitcoin and tracks the MVIS CryptoCompare Bitcoin VWAP Close index.

“Bringing to market a physical, fully-backed major exchange-listed bitcoin ETP [exchange-traded product] was a top priority of our firm,” Gabor Gurbacs, director of digital-asset strategy at VanEck, said. “We hope to serve many clients and partners in Europe, Asia and across the world using our innovative, investment-friendly and regulatory-conscious access vehicles.”

Related: ‘Bypass’ Attack in Coldcard Bitcoin Wallet Could Trick Users Into Sending Incorrect Funds

An ETN is a type of unsecured debt security payable to the bearer that tracks an underlying asset or an index. In effect, investors can gain exposure to an asset class without owning it.

See also: Deutsche Borse Exchange to List New Bitcoin Exchange-Traded Product

VanEck has partnered with Liechtenstein-based crypto custodian Bank Frick for secure bitcoin storage services. The total cost associated with managing and operating the instrument, or the total expense ratio, is 2%. The investment product is currently limited to investors from Germany, the Netherlands and the U.K.

There are now three bitcoin ETNs listed on Xetra. ETC Group was first listed in late June, followed by crypto ETP issuer 21Shares in July.

Related: First Mover: Why Bitcoin Isn’t a Replacement for Gold Just Yet

The firm’s decision to launch an ETN comes after several failed attempts to win approval for an exchange-traded fund, or ETF, from the U.S. Securities and Exchange Commission.

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US Intelligence Chief Raises Concerns With SEC Over China’s Crypto Dominance: Report

5 years 10 months ago

The U.S. Director of National Intelligence has written to the Securities and Exchange Commission (SEC) over fears China’s dominance in the area of digital currencies could put the U.S. at a disadvantage.

  • According to the Washington Examiner on Tuesday, John Ratcliffe wrote to SEC Chairman Jay Clayton earlier in November in an effort to push the agency to bring in rules that would allow U.S. businesses to be more competitive.
  • Ratcliffe is said to have raised the fact that over half of the global cryptocurrency mining power is based in China, and that the People’s Bank of China is already developing its national digital currency.
  • Ratcliffe reportedly offered to have senior economic intelligence officials brief Clayton on the issues.
  • The Examiner said the SEC did not respond immediately to its question asking if Clayton will accept the briefing.
  • Ratcliffe is also said to have attached a copy of a letter sent Clayton by U.S. Sen. Tom Cotton (R-Ark.) in the summer stating the need for “clearer articulation of policy” and formal guidance on digital currencies.
  • Clayton will step down from his SEC role at the end of this year.

See also: Coinbase Will Suspend All Margin Trading Tomorrow, Citing CFTC Guidance

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In India, a Clash of Digital Innovation and Internet Censorship

5 years 10 months ago

Earlier this month, reacting to a decision by India’s highest court, prominent comedian Kunal Kamra tweeted that India’s Supreme Court is the “most Supreme joke of this country.” 

The following day, local media reported that Attorney General K. K. Venugopal greenlighted court proceedings against the comedian, based on a few tweets criticizing the Supreme Court. The charge levied against him: contempt of court. Kamra has refused to apologize for his tweets and local reports indicate proceedings have yet to begin. 

This should be shocking, but unfortunately it’s not. In India, speaking out on the Internet can be dangerous. Kamra told CoinDesk that public figures can receive threats on social media, noting that users leaked his phone number on Twitter multiple times. “They dox people, they release information sometimes. … That’s very normal,” Kamra said.

Related: Goldman Sachs Expects Digital Yuan to Reach 1B Users Within 10 Years

With over 700 million internet users, India’s booming digital market collides with internet censorship or outright bans.

A similar dynamic plays out in India’s crypto market. Trade on Indian crypto exchanges exploded earlier this year after the Supreme Court ruled to reverse the decision by the country’s central bank (RBI) to ban local financial institutions from providing services to crypto firms. Now, just a few months later, the federal cabinet is reportedly discussing another potential ban. 

While regulators haven’t clarified their stance on digital assets, they have expressed concern over the fiscal and monetary policy implications of fintech applications, including distributed ledger technology (DLT). Regulators have continued to push for local control over fintech payment platforms like WhatsApp Pay, which received approval from the Indian government only after owner Facebook agreed to store user data locally in India and not offshore.

This is part of a much broader trend. Kamra’s case is the latest in a series of targeted attacks on internet users in the country. In a 2019 report, Freedom House warned internet freedom in India had declined “for the fourth year in a row” due to increasing arrests for online activity and frequent internet shutdowns.

Related: DefiDollar Raises $1.2M to Be the Risk-Insured Stablecoin Layer for DeFi

Localized internet shutdowns, restrictions on certain content (like pornography) and wholesale bans on select mobile applications are some of the more visible ways in which the Indian government has sought to control the internet. According to a report by local media outlet Mint, in 2017 and 2018 at least 50 individuals were arrested for comments made on social media, largely for posts considered offensive to politicians. 

Digital India

India’s digital ecosystems, from cloud computing to digital payments, are expanding. According to a report by consulting firm McKinsey, core sectors of the digital economy could double their contribution to India’s GDP by 2025, adding up to $435 billion.

On Nov. 19, in his inaugural address at the Bengaluru Tech Summit, India’s Prime Minister Narendra Modi said his administration’s governance model is “technology first” citing his Digital India initiative that launched five years ago. 

“Digital India has become a way of life, particularly for the poor, marginalized and for those in government,” Prime Minister Modi said.

Yet, since 2014, government authorities have enforced about 450 regional internet shutdowns, with 134 in 2018 alone, according to a local internet shutdown tracker. 

Reasons for the crackdowns range from anticipated public unrest to curbing malpractice in school examinations. This blunt-force approach can also lead to monetary loss for businesses and the disruption of web-based services.  

If there is no internet, there is no cryptocurrency, there is no blockchain, there is no technology. The internet is the crux.

The longest internet shutdown ever recorded in a democracy was implemented by the Indian government in the disputed Kashmir region after the Modi government revoked the state’s semi-autonomous status in August 2019. 

Indian officials justified the extended ban by calling it a necessary move to curb anticipated unrest that might have followed the administrative decision. While services were gradually restored, the blackout lasted over seven months and disrupted some 12 million people’s access to the internet. 

Qazi Zaid, chief editor of Free Press Kashmir (FPK), a local media outlet, said his newsroom had to be shuttered during the blackout. The primarily online publication halted all coverage and risked losing its online readership of over 300,000 people, Zaid told CoinDesk.  

When phone lines were restored, reporters called each other and dictated stories in an attempt to type and publish them, he added. 

“But then we also realized that our audience is not there,” Zaid said.

While FPK managed to gradually come back online in May this year, the blackout had hit local businesses and dried up advertising revenue, Zaid said. He stressed that media censorship in Kashmir hasn’t changed so much after last year’s decision to revoke the region’s special status but it may have been further formalized under recent amendments to digital media policy, giving the government regulatory control over digital news and content providers. 

Loopholes

When the Indian government wants to shut the internet down, it sometimes invokes a 135-year-old law: the Indian Telegraph Act of 1885. The act was created by the British rulers in colonial India to curb uprisings, Indian journalist Sonia Faleiro said in a recent MIT Technology Review podcast. The law gives the government authority over all forms of electronic communications (in 1885 that meant telegrams) in the event of a public emergency. 

“In 2017, the law was amended to specify that it allowed the temporary suspension of telecom services,” Faleiro said. 

One of the many problems with the law, Faleiro added, was it did not specify or define “public emergency,” thus allowing the government to label any incident as such and shut down communications. 

Additionally, a controversial 2008 amendment to The Information Technology Act of 2000, Section 66A, allowed the government to imprison any person sending messages deemed “offensive,” “menacing,” “false” or “causing annoyance” through any electronic communications device. Using this law, in 2012 the government arrested two women for Facebook posts critical of the government. 

In 2015, the Supreme Court of India shot down Section 66A, calling it unconstitutional. However, arrests over social media activity continued: In 2016, a Kashmiri man was charged with sedition for liking and sharing anti-India posts on Facebook.

The security argument

Amid a tense border standoff with China earlier this year, India’s government banned 60 China-based apps, including the popular social media platform Tik Tok. 

When border tensions continued, leading to an Indian soldier reportedly being killed by a Chinese landmine, the Indian government restricted 118 more mobile applications from Chinese tech companies in September 2020. 

The government’s statement alleged it had received “several reports” of these applications misusing user data and “surreptitiously transmitting” it to servers located outside India. 

Described as a move to ensure “safety, security and sovereignty of Indian cyberspace” in the government’s September statement, the restrictions took aim at apps from WeChat, Baidu, Alipay and the popular mobile game PlayerUnknown’s Battlegrounds (PUBG), which had over 33 million active users in India at the time. 

While the restrictions could have been a knee-jerk reaction to a geopolitical situation that has since cooled down, concerns about the integrity of user data and government surveillance on the internet have persisted as India works on the proposed Personal Data Protection Bill (2019). 

According to Anirudh Burman, associate fellow at Carnegie India, the draft law, introduced in December 2019, deploys an approach quite similar to the European Union’s General Data Protection Regulation (GDPR). 

Burman explained that although both frameworks are based on a user-consent model, the Indian bill limits data storage outside the country’s borders and also creates compliance requirements that could burden small enterprises. 

“If there is a medium or small enterprise firm going to get a data protection officer or get an annual data protection audit, it’s a significant cost,” Burman said. 

The draft law’s requirement to store certain types of data locally or always have a copy of it available on local servers has also stoked fears of increased state surveillance, according to a report by DW. Requiring platforms to store data locally could also afford easier access to local law enforcement which, if stored off-shore, would be subject to a different set of laws. 

“U.S. law permits the disclosure only of non-content data. So if you want detailed subscriber information or content data, then you have to go through the due process,” said Burman. Content data here refers to data, processed or unprocessed, that can convey the substance of a communication. 

The draft bill also provides for the creation of a dedicated body, the Data Protection Authority of India, to ensure compliance with the law. A portion of the legislation also grants the federal government the power to “exempt any agency of Government from application of the Act,” thereby creating broad loopholes for the state to duck requirements levied on private enterprises.

The draft law, India’s first attempt at creating a digital privacy and data management framework at the national level, is currently before a joint parliamentary committee. The committee also recently held discussions on law with representatives from companies including Amazon, Twitter, Mastercard, Visa and PayPal. 

Reported to be in the final stages of discussion, the committee is expected to file its recommendations on the bill before the next session of parliament begins. 

Sisyphus’ boulder

Despite the Indian government’s efforts to exercise control over cyberspace, internet policing can only go so far. 

Vikram Subburaj and Arjun Vijay launched Indian crypto exchange Giottus in 2018, just a week after the central bank of India published a circular that banned crypto firms from having bank accounts. Confronted by the ban, they pivoted to setting up a peer-to-peer exchange. 

In March 2020, the Supreme Court of India overruled the central bank circular and, according to the two founders, Giottus has enjoyed record growth in the last six months. 

“We have been growing at a phenomenal rate of 400% YTD and have been clocking a monthly trade volume of $33 million,” Subburaj told CoinDesk via email. 

Vijay doesn’t believe internet censorship can stop web-based services from continuing to grow in India. 

“Censorship doesn’t work with respect to the internet. With VPN and sorts, it just makes it more difficult for you to access something, but it doesn’t prevent someone who wants to access it,” Vijay told CoinDesk. 

Even in Kashmir, where students had to make do with government-imposed low-speed internet for their online classes during the coronavirus pandemic, people found workarounds. According to an Al Jazeera report, two applications (Filo and Wise) created by educators Mubeen Masudi and Imbesat Ahmad helped students access the Internet. 

India’s government seems to understand the Internet is essential for the country’s growth. While authorities sometimes lean toward stringent controls, the government will not completely stamp out digital innovation. This is good news for the crypto industry.

As Neeraj Khandelwal, co-founder of local crypto exchange CoinDCX, told CoinDesk, “If there is no internet, there is no cryptocurrency, there is no blockchain, there is no technology. The internet is the crux.” 

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Bitcoin Options Market Suggests Investors Preparing for All-Time High

5 years 10 months ago

Activity in bitcoin’s options market shows investors are eyeing more gains for the top cryptocurrency, which is now just 2.8% below a record high. 

Bitcoin‘s one-month implied volatility, which is influenced by demand for call (bullish) and put (bearish) options, has risen to 81%, the highest level since May, having begun the month at 58%, according to data source Skew.

The major part of the move (from 60% to 81%) occurred over the past five days. The three- and six-month implied volatility metrics have also jumped to multi-month highs. 

Related: Market Wrap: Bitcoin Pushes Past $19.4K; Deribit Ether Options Volume Spikes

“The recent spike in implied volatility is the result of a decent chunk of call buying,” Vishal Shah, an options trader and founder of derivatives exchange Alpha5, told CoinDesk. “Investors are positioning for a bull market continuation.”

Further, put-call skews, which measure the spread between the cost of puts and calls, are hovering near record lows. In other words, call options have been drawing more robust demand than puts, a sign of investor expectations being skewed to the bullish side. 

A week ago, the skews witnessed a bounce from lifetime lows as some traders bought put options following bitcoin’s sudden pullback from $18,400 to $17,100. 

However, the price dip was short-lived and the cryptocurrency rose above $19,000 on Tuesday. As such, call buying continued, pushing the skews lower once more. 

Related: Square, Human Rights Foundation Back New Bitcoin Open-Source Developer Fund

At press time, the one-month metric is seen at 24%, having reached a low of 27.8% on Nov. 17.

Meanwhile, bitcoin is trading near $19,300, representing a nearly 1% gain on a 24-hour basis, according to the CoinDesk 20. Prices have risen by over $9,000 in the past 6.5 weeks.

On-chain data also favors an extension of the ongoing bull run. For instance, bitcoin’s trade intensity, which measures the number of times each coin deposited on a spot exchange is traded, rose to 7.28 on Tuesday, the highest level since June 7, according to Chainalysis. 

The metric shows demand is still strong, and suggests the market could absorb a potential rise in supply. However, holding sentiment remains strong, as evidenced by the continued decline in the number of coins held on exchanges. 

Some investors, though, may look to take profits if and when the cryptocurrency scales the $20,000 mark.

“We could see massive movements in the bitcoin price over Thanksgiving,” said Peter Smith, co-founder and CEO of Blockchain.com in an emailed statement. “A new all-time-high won’t be a surprise to some who’ve seen it as a ‘not if, but when’ scenario. It’s an inevitability, but the world will take notice, and that’s good for adoption.”

Also read: First Mover: Why Is Bitcoin’s Price Rising? Here Are a Few Possible Answers

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Russian Hospitalized After Bitcoin Mining Farm Sets Apartment on Fire

5 years 10 months ago

A poorly organized cryptocurrency mining farm has caused a fire in an apartment in St. Petersburg, Russia, and injured the operator, according to a 78.ru report citing the Ministry of Emergencies.

The resident of the seven-bedroom apartment had apparently failed to set up sufficient cooling for his equipment, and was hospitalized due to severe burns to his hands, neck and back.

The blaze took four fire engines, 16 firefighters and 40 minutes of work to put out, the report indicates.

Related: China’s Crypto Miners Struggle to Pay Power Bills as Regulators Clamp Down on OTC Desks

This is not the first incident of its kind in Russia. In December of 2019, a mining farm set up in a private car garage in the city of Vologda also caught fire, destroying all the equipment, Cnews reported at the time.

And, in February 2019, a larger fire destroyed seven apartments in a residential building in the town of Artem, in the east of Russia.

Illicit mining is a problem across the country. The federal power grid company Rosseti reported losing about $6.6 million last year because of the mining farms plugged into the electric grid illegally.

In 2018, scientists in a nuclear research institute were arrested and later sentenced for using the institution’s computers to mine bitcoin.

Related: Russian Ministry Moves to Soften Requirements for Crypto Tax Reporting

See also: Russian Hydropower Giant Opens Bitcoin Mining Farm

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South Korea May Delay Implementation of 20% Crypto Tax Till 2022

5 years 10 months ago

South Korea’s National Assembly is pushing for a delay to the introduction of specific taxation for digital assets.

  • According to a report Wednesday by local news source DongA.com, a proposed legal amendment bringing in the tax regime is planned to come into effect from October 2021.
  • However, the National Assembly said more time is needed to build the relevant tax infrastructure after cryptocurrency exchanges said they couldn’t be ready by the deadline.
  • As such, the National Assembly is seeking to delay the start of the taxation period to January 2022.
  • The matter is expected to be decided by the assembly’s Tax Subcommittee as soon as possible.
  • The Ministry of Economy and Finance tabled the proposal in July, seeking to bring in a 20% levy – plus a 2% local income tax – on cryptocurrency trading profits above 2.5 million KRW (around $2,260).

See also: Coinbase Ditches US Customer Tax Form That Set Off False Alarms at IRS

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Australia and Singapore to Trial ‘Paperless’ Trade Using Blockchain Technology

5 years 10 months ago

The Australian Border Force (ABF), the country’s customs and border protection agency, wants to simplify cross-border trade with Singapore using blockchain technology.

Under the Australia-Singapore Digital Economy Agreement (DEA), a blockchain trial was launched this week in an attempt to make it easier for businesses to digitally exchange trade documentation, per an ABF announcement on Wednesday.

In collaboration with Singapore Customs and the Singapore Infocomm Media Development Authority (IMDA), the blockchain trial aims to reduce administration costs and increase trade efficiency. Specifically, it will test digital verification platforms across both the ABF’s intergovernmental ledger and IMDA’s TradeTrust platform for sharing electronic documents, primarily certificates of origin.

Related: Australian Investment Group With Billions in AUM Starts Investing in Bitcoin Futures

“This initiative will incorporate paperless trading and secure digital exchange of trade information as part of the future architecture and design of an Australian Trade Single Window,” said ABF Commissioner Michael Outram.

Businesses and regulators are expected to provide feedback on the process, with participation coming from the Australian Chamber of Commerce and Industry, the Australian Industry Group, as well as financial institutions in Singapore including ANZ bank.

Under the National Blockchain Roadmap led by the Department of Industry, Science, Energy and Resources, the ABF will give feedback on the lessons learned from the trial and present those in a discovery report slated for early 2021.

The DEA, signed in August, sets out a framework for reducing barriers to digital trade, as well as fostering an environment where businesses and consumers can participate in the digitization of both economies.

Related: Aquaculture Firm Completes Australia’s First IPO Raise Using Cryptocurrency

See also: Australian Senator Touts Blockchain Tech for ‘One-Touch’ Government

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Digital Yen Would Make Crypto Markets ‘More Lively,’ Says CEO of Monex Group

5 years 10 months ago

The chief executive of Monex Group, a financial services firm based in Tokyo, believes central bank digital currencies (CBDCs) would be a boon for the cryptocurrency market.

As reported by Reuters on Wednesday, Oki Matsumoto said the introduction of a digital version of the yen by the Bank of Japan (BoJ) would “significantly enhance the interoperability of cryptocurrencies” by smoothing the process of exchanging them into legal tender.

Further, smaller brokers don’t always have bank accounts, he said.

Related: Leading Japanese Financial Firm SBI Holdings Rolls Out Crypto Lending Services

Matsumoto’s company manages a host of retail online brokerages in Japan and overseas and is also the owner of Tokyo-based cryptocurrency exchange Coincheck.

The BoJ has been exploring the implications of CBDCs having set up a task force in July and moving its most senior economist, Kazushige Kamiyama, to lead the department in charge of digital currency research and development. A proof-of-concept trial is likely to take place in 2021, the central bank said recently.

“[A digital yen] would make the cryptocurrency market more lively,” Matsumoto told Reuters.

See also: Leading Japanese Financial Firm SBI Holdings Rolls Out Crypto Lending Services

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BIS Paper Says There’s Potential to Embed Regulation Into Stablecoin Systems

5 years 10 months ago

Regulatory responses to private, “global” stablecoins like Libra need to take into account the potential of the technology in payments, according to economists working at the Bank for International Settlements (BIS)

In a new working paper published Tuesday, Raphael Auer and Jon Frost, as well as Melbourne Law School finance lawyer Douglas Arner, drew a line between centralized and decentralized stablecoins, and said the potential of Libra to quickly be adopted by hundreds of millions of Facebook product users means regulators will need to adapt quickly.

But the need to protect economies, the monetary system and consumers “does not preclude public authorities themselves from embracing innovation.” Global stablecoins offer benefits in cross-border payments in particular, according to the paper, and can challenge existing types of payment in e-commerce.

Related: Binance Discontinues UK Pound Stablecoin Calling It Just an ‘Experiment’

Stablecoins are generally cryptocurrencies that attempt to maintain a value linked to fiat currencies, such as the U.S. dollar, or other assets.

The paper argues that technology in general offers the potential to increase supervision and provides the necessary tools for implementing and enforcing financial regulation. Specifically, stablecoins present the option to implement supervisory requirements and frameworks into the systems that operate them, paving a way for “embedded supervision.”

“Direct automated provision of data as a licensing or registration requirement for digital payment systems and markets provides an important opportunity to better use technology to achieve regulatory and supervisory objectives as well as reduce costs for market participants,” the authors said.

Stablecoins, particularly decentralized ones, also bring the possibility of building “a robust monetary instrument” into blockchain applications, such as for programmable money.

Related: MakerDAO’s DAI Stablecoin Breaks $1B Market Cap

The paper further examined whether alternative methods of payment, such as central bank digital currencies or fast payment systems, would be better suited to for the “functions that stablecoins seek to address,” concluding they may be more effective “in many cases.”

Still, baking frameworks for supervising and monitoring transactions directly into stablecoin systems has the potential to enhance the achievement of regulatory objectives, the authors said.

Ironically, the technology was “initially … targeted with making the role of regulation unnecessary,” they wrote.

See also: Federal Reserve, 6 Other Central Banks Set Out Core Digital Currency Principles

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Coinbase Ditches US Customer Tax Form That Set Off False Alarms at IRS

5 years 10 months ago

Cryptocurrency exchange Coinbase has decided to discontinue sending customers 1099-Ks, the U.S. tax form which led the Internal Revenue Service (IRS) to mistakenly think traders had underreported their gains. 

The exchange will instead use the 1099-MISC form, at least for customers who earn interest on lending and similar products, it said in a Tuesday blog post, The post appeared to suggest that traders who do not meet the criteria for the 1099-MISC will likely not receive any kind of forms from Coinbase to help prepare their returns. When asked for comment, a Coinbase spokesperson simply sent CoinDesk a link to the post.

Coinbase said in the post that it will not issue IRS form 1099-Ks for the 2020 tax year. Used by some crypto exchanges to report transactions for eligible users, the 1099-K form can often be confusing because it reports only the gross proceeds of crypto transactions, without taking the base price into account.

Related: Coinbase Will Suspend All Margin Trading Tomorrow, Citing CFTC Guidance

Hence, the forms can sometimes show all transactions as generating revenue even if some may have actually caused a loss. If you bought a coin for $1 and sold it for 50 cents, your 50 cent loss would appear to be a gain, for example. This in turn may lead to exchanges reporting a significantly inflated tax burden for the user. 

This scenario seems to have played out recently when the IRS sent at least dozens of crypto users notices warning that they had underreported their holdings. Such warning letters had also been sent to crypto users last year. 

In its blog post Coinbase said that it will not issue form 1099-Bs either. The crypto exchange’s post added that 1099-MISC forms will be sent to users who earn “$600 or more in crypto from Coinbase Earn, USDC Rewards, and/or Staking in 2020.” These are income-generating products, similar to bank deposits.

But the post also did not indicate whether in the absence of a form 1099-K, regular crypto sales would be recorded on the 1099-MISC forms as well. Customers who don’t receive any forms from Coinbase and sold or converted crypto in 2020 are still responsible for reporting to the IRS and should consult a tax professional, Coinbase said. 

Related: IRS Again Warns Crypto Investors They Under-Reported Gains

If the 1099-MISC became standard for traders, “a lot more people are gonna get it because the threshold for getting a 1099-MISC is very low” said Shehan Chandrasekera, head of tax strategy at CoinTracker, a portfolio monitoring service. Whereas a 1099-K is strictly for payees receiving more than 200 transactions a year worth over $20,000, the 1099-MISC would capture everyone getting $600 and up. 

While switching to the 1099-MISC is “not a perfect solution” to problems faced in crypto tax reporting, it could help Coinbase improve its compliance status by subjecting more users to reporting requirements, Chandrasekera said.

He pointed out that the switch to a new form doesn’t solve the “cost basis issue,” because the 1099-MISC form also has no place to report the price a cryptocurrency may have been purchased for. Even if there were a place in the form, Coinbase wouldn’t necessarily be able to find the information, therefore making it the user’s responsibility to keep track of the price for which they bought the assets, said Chandrasekera, who is a certified public accountant (CPA).

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Coinbase Will Suspend All Margin Trading Tomorrow, Citing CFTC Guidance

5 years 10 months ago

Crypto exchange Coinbase plans to end all margin trading effective Nov. 25, 2020, due to recent regulations by the Commodity Futures Trading Commission (CFTC).

The San Francisco-based trading platform announced Tuesday that it would prevent customers from placing new margin trades beginning at 2 p.m. PT (22:00 UTC) on Wednesday, while simultaneously canceling any open limit orders. 

Coinbase will end the margin trading feature entirely next month, once existing positions expire. When customers trade on margin, they’re effectively borrowing funds from the exchange or broker to cover the cost of an investment in an asset such as a security or a cryptocurrency. This allows traders to leverage their positions, thus amplifying profits – or losses.   

Related: Coinbase Ditches US Customer Tax Form That Set Off False Alarms at IRS

The exchange pointed to “recent guidance” from the CFTC, referring to the Commission’s March guidance around “actual delivery” of digital assets as the reason for this decision, but didn’t specify which aspect of the guidance led to the move.

That guidance, which has its roots in a 2016 enforcement action against Bitfinex, sought to provide rules around when a customer can be said to have legally taken control of a cryptocurrency, including when the customer acquires the crypto through a margin or leveraged product.

Assets purchased through leverage or a margin contract cannot be liquidated, according to the guidance.

‘Actual delivery’

Coinbase appears to be saying that it is difficult, if not impossible, for it to comply with a CFTC requirement that neither it nor any affiliated entity can have any sort of control over a cryptocurrency once it’s been delivered in accordance with the terms of a margin contract.

Related: BitMEX Founder’s Charges Highlight Risks for DeFi

Under the terms of the CFTC’s guidance, “actual delivery” has occurred when a customer controls the cryptocurrency purchased, including if it was acquired via a margin or leveraged product, and the seller has no control over the cryptocurrency in question.

Coinbase has taken issue with this point in the past. In a comment letter to the CFTC discussing the then-proposed guidance, it wrote that affiliates of the seller should be able to hold the cryptocurrencies. 

“Requiring unfettered ability to transfer digital assets would effectively mean that U.S. entities and regulated entities, or entities using cold storage or other asset protection methods, could not hold digital assets acquired through margined transactions,” then-Chief Legal and Risk Officer Mike Lempres wrote in 2018. 

The final guidance approved in 2020 said that the offeror, seller or affiliated entities cannot have any interest, legal right or control over the commodity.

Essentially, Coinbase would have to register with the CFTC as a commodities exchange if it wants to continue offering leveraged products.

Other exchanges in the U.S., like Kraken, also offer margin trading. A spokesperson did not immediately respond to a request for comment on whether Kraken was also looking at the actual delivery guidance.

“We believe clear, common-sense regulations for margin lending products are needed to protect and provide peace of mind to U.S. customers,” Coinbase’s blog post said. “We look forward to working closely with regulators to achieve this goal.”

UPDATE (Nov. 24, 2020, 22:50 UTC): This article has been updated with additional information.

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Market Wrap: Bitcoin Pushes Past $19.4K; Deribit Ether Options Volume Spikes

5 years 10 months ago

How high can bitcoin’s price go? Analysts say the higher the price, the more investors will plow in. Meanwhile, increasing ether options volume on Deribit is likely making derivatives more expensive.

  • Bitcoin (BTC) trading around $18,987 as of 21:00 UTC (4 p.m. ET). Gaining 3.2% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $18,059-$19,392
  • BTC below its 10-day moving average but above 50-day, a sideways signal for market technicians.

Bitcoin’s price broke above $19,000 Tuesday, hitting as high as $19,392, according to CoinDesk 20 data. Its price lost some steam after but rebounded to $18,987 as of press time. 

Read More: Bitcoin Breaks $19K, New All-Time High Seems Imminent

Related: Square, Human Rights Foundation Back New Bitcoin Open-Source Developer Fund

“We could test an all-time high today,” said Rupert Douglas, head of institutional sales for crypto broker Koine. “We have had such a strong run-up that I’d be looking to take profits.”

Bitcoin’s record price high was $19,738 back on Dec. 18, 2017, according to CoinDesk 20 historical bitcoin data. 

“Bitcoin is fast approaching all-time highs, with final resistance from 2017 within reach,” noted Katie Stockton, a technical analyst for Fairlead Strategies. “There are some signs of exhaustion, but they are not actionable unless a loss of momentum develops.”

At over $1.6 billion as of press time, momentum in the form of USD/BTC volumes on five combined major exchanges is set for another banner day. Tuesday is shaping up to be the second highest in the past month as billion-dollar volume days for the five exchanges are becoming more common.

Related: Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative

Global equities are also having a bullish day, with indexes flashing green in a major way:

Since starting the year uncorrelated with the S&P 500 – which is denoted as “0” in the chart below – bitcoin’s performance has more closely matched stocks after March’s crash when assets dropped amid COVID-19 concerns. The correlation coefficient of the two on a 90-day basis is now around 0.3.

An optimistic economic environment has given both stocks and bitcoin “risk-on” properties as investment assets.

“Bitcoin has now shifted to a risk-on trade along with equities markets,” noted Jason Lau, chief operating officer of San Francisco-based cryptocurrency exchange OKCoin. 

Analysts expect $20,000 per 1 BTC to arrive soon, which could produce some profit-induced selling but also more bullish buying, according to Rich Rosenblum, head of trading at crypto firm GSR. 

“Hitting $20,000 will likely bring some profit-taking,” noted Rosenblum. “Yet, reaching a new all-time high will also bring validation for bitcoin, which may spur more buying once we are firmly above $20,000. Once we reach a new high, every bitcoin investor will be in the money.”

ETH options heating up

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Tuesday, trading around $604 and climbing 1.6% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Ethereum 2.0’s Genesis Day Is Officially Set for Dec. 1

With 198,247 total contracts traded, Monday was the second-biggest day in 2020 for Deribit ether options contracts, according to data aggregator Genesis Volatility. The top day was Sept. 1, when total contracts reached 201,815.

Greg Magadini, chief executive officer of data aggregator Genesis Volatility, says all this action on Deribit, the largest derivatives venue in the crypto ecosystem, means the costs associated with ether options have risen.

“With this rally we are seeing a ton of option buying happening,” Magadini noted. “This is pushing up implied volatility a lot. The overall price of options adjusted for various parameters such as expiration, strike, etc., has increased.”

Other markets

Digital assets on the CoinDesk 20 are all green Tuesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Read More: XRP Price Surges to 2-Year High as Airdrop Frenzy Builds

Commodities:

  • Oil was up 4.6%. Price per barrel of West Texas Intermediate crude: $44.84.
  • Gold was in the red 1.6% and at $1,807 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Tuesday jumping to 0.880 and in the green 2.2%.
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CoinDesk

Leading Japanese Financial Firm SBI Holdings Rolls Out Crypto Lending Services

5 years 10 months ago

A subsidiary of major Japanese financial services firm SBI Holdings has launched ‘crypto lending’ services that will allow users to deposit bitcoin (BTC) and earn interest. 

Announced on Tuesday, the “VC Trade Lending” service will let users deposit their bitcoin with SBI VC Trade and earn interest at a rate of 1% annually, with taxes accounted for. 

  • According to the announcement,  the minimum and maximum amount of bitcoin users can deposit is 0.1 BTC and 5.0 BTC respectively. 
  • The announcement also said the firm will charge no account management fees or membership fees for the service. 
  • While the service is being kicked off with bitcoin, the firm said it plans on expanding it to other cryptocurrencies including XRP and ether (ETH).  
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CoinDesk

Binance Ramps Up Crackdown on US Users, Giving Them 14 Days to Withdraw Funds

5 years 10 months ago

One of the crypto industry’s most popular exchanges is redoubling efforts to sweep U.S. users off its platform.

As reported by Decrypt, Binance is threatening a hard deadline to herd U.S. users off its original exchange platform (not to be confused with Binance US, which is legally open to U.S. residents). Email notices sent to U.S. users give them 14 days to withdraw funds before Binance shutters their accounts for good.

“As we constantly perform periodic sweeps of our existing controls, we noted that you are trying to access Binance while having identified yourself as a U.S. person. Please note that as per our Terms of Use, we are unable to service U.S. persons. Please register for an account over at our partner, Binance US,” the notice reads.

Related: Binance to List Options Contracts for Litecoin

“You have 14 days to close all active positions on your account and withdraw all your funds, failing which your account will be locked. Once your account is locked, you will have to raise a customer service ticket for us to assist you further,” it continues.

The Block noted the bans appear to be based on IP addresses. However, at least one U.S. user who never underwent know-your-customer (KYC) identity verification has not received a notice of account closure from Binance, CoinDesk has learned.

Upon registering for Binance, users have the option to defer KYC measures that would reveal their identities in exchange for lower daily deposit and withdrawal maximums. Additionally, it’s not clear whether Binance cross-checked the physical location users claimed when signing up with their IP addresses.

Binance did not immediately respond to CoinDesk’s request for comment on whether it geoblocks based on IP or KYC information. 

Related: Binance Sues Forbes for Defamation Over ‘Tai Chi’ Document Leak

Binance opened its U.S. exchange at the end of 2019 after U.S. regulators put pressure on the exchange to shut down access to U.S. denizens.  Its team has been attempting to geo-block U.S. users since July of last year, though it has ramped up efforts recently to make a final sweep.

UPDATE (Nov. 24, 23:05 UTC): Modified fifth paragraph to clarify the information came from a single U.S. user, and the sixth paragraph to clarify that Binance’s practices for verifying user locations are unknown, not necessarily nonexistent.

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Yearning for Pickle? Two DeFi Protocols Merge

5 years 10 months ago

The anonymously operated yield farm Pickle Finance has cut a deal to merge with Yearn, the latter’s lead developer, Andre Cronje, posted on Medium Tuesday.

“Pickle and Yearn developers have worked out a structure to allow the two projects to work together in symbiosis. This is done to reduce duplicate work, increase specialization and to leverage shared expertise,” Cronje wrote.

Timing and other details remain to be announced.

Related: DeFi Protocol Pickle Finance Token Loses Almost Half Its Value After $19.7M Hack

Yearn is one of the leading projects in decentralized finance (DeFi), serving its users as a way to automatically optimize yield for a set of cryptocurrencies. Pickle was started as a yield farm whose initial purpose was to help push four key stablecoins back onto their target price, but it has since evolved into something that operates more like Yearn, with its own set of yield optimizing pools.

Pickle Finance was hit by an exploit in which $19.7 million in DAI was lost. This follows a bug in late September where funds got temporarily locked after a bug was found in its smart contracts.

In the Pickle Discord channel, one of its moderators, 0xPenguin, shared Cronje’s post, writing:

“The idea of the merger, and the long-term benefits to everyone – investors, community members and developers – emerged during the process of working with the Yearn team in the investigation of the exploit.”

Related: Market Wrap: Bitcoin Hits $18.8K as Total Crypto Locked in DeFi Passes $14B

When news of the exploit first emerged, another moderator, Larry the Cucumber, wrote, “We will not be issuing any IOU tokens so as to not impede the growth of this protocol going forward.”

However, with the announcement of the merger, 0xPenguin backtracked on that somewhat, writing, “A solution has been found that allows us to announce the issuance of a new token – CORNICHON, to act as a debt instrument to help those who were affected by the exploit.”

How CORNICHON will accrue value has not yet been revealed. The tokens “will be minted against a snapshot of balances at the time of the attack and distributed to victims proportionally. Further measures may then be adopted by Pickle Governance through its regular decision process,” Cronje wrote.

The Yearn merger will also introduce a new token called DILL, which will incentivize users to hold PICKLE tokens longer.

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OKEx to Resume Withdrawals Before Nov. 27, Offers New Compensation Programs

5 years 10 months ago

OKEx, likely trying to forestall a mass exodus of funds when its five-weeks-long freeze on withdrawals lifts this week, on Tuesday said it will offer a mix of compensation and rewards to users who’ve suffered because of the suspension.

Meanwhile, a spokesperson from the Malta-based crypto exchange has confirmed with CoinDesk that the date to resume its cryptocurrency withdrawal service will be sometime before the previously disclosed Nov. 27 Hong Kong Standard Time (GMT+8) date.

  • Data from CryptoQuant shows OKEx has been testing reopening its withdrawal system, as 0.02 BTC was moved out from an OKEx wallet.
  • Ki Young Ju, chief executive officer of CryptoQuant, said in a tweet the reopening of withdrawal service on OKEx could cause pricing volatility because of “bulk withdrawal” requests.
  • OKEx’s latest announcement to compensate users frustrated by the withdrawal suspension seems to be the exchange’s way of trying to keep those who intend to leave the exchange immediately after the service resumes.
  • Users who have made deposits, held tokens or traded during the withdrawal suspension time period will receive 20% of OKEx’s total income from futures and perpetual swap transaction fees over the last seven weeks. This will come in the form of an incentive fund that will be issued as a one-time payment, according to a news release dated Nov. 24.
  • Users will receive the payment based on “their assets and transaction condition,” the release states. OKEx’s native token OKB will be double-weighted as an asset.
  • OKEx will also offer a commission rebate card with a minimum value of 100 tether to users with assets worth more than 10,000 tether before 4:00 p.m. UTC on Nov. 23.
  • Despite the negative news, OKEx remains the No. 1 position for bitcoin futures open interest, currently worth $1.27 billion, according to data source Skew.
  • There has been speculation some of OKEx’s users, who are largely Chinese, could shift to Binance, another exchange started in China.
  • Huobi, a third exchange started in China, recently suffered user losses on rumors alleging one of its senior executives had been arrested.
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CoinDesk

In Her Own Words: Here’s What Janet Yellen Has Said About Bitcoin

5 years 10 months ago

Former Federal Reserve Chairman Janet Yellen could become the next U.S. Treasury Secretary. 

The Wall Street Journal reported Monday that President-elect Joe Biden plans to nominate Yellen in the coming days, positioning the longtime economist to succeed current Secretary Steven Mnuchin if approved by the U.S. Senate. While Yellen hasn’t said a lot about bitcoin, she is clearly familiar with the cryptocurrency and blockchain technology, and spoke about both while she was still in office at the Fed.

Here’s what she said.

Personal views on bitcoin
  • October 2015: “We do not interpret bitcoin’s popularity as having a relationship with the public’s view of the Federal Reserve’s conduct of monetary policy.” 
  • December 2017: “It is not a stable store of value and it doesn’t constitute legal tender. It is a highly speculative asset.”
  • October 2018: “I will just say outright I am not a fan, and let me tell you why. I know there are hundreds of cryptocurrencies and maybe something is coming down the line that is more appealing but I think first of all, very few transactions [that] are actually handled by bitcoin, and many of those do take place on bitcoin are illegal, illicit transactions.”
Bitcoin and regulation
  • February 2014: “The Fed doesn’t have authority to supervise or regulate bitcoin in any way.”
  • October 2015: Yellen said the U.S.’ financial regulators should not “stifle innovation.”
  • December 2017: “… [T]he Fed doesn’t really play any role, any regulatory role with respect to bitcoin other than assuring that banking organizations that we do supervise are attentive that they’re appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering [and] Bank Secrecy Act responsibilities that they have.”
Blockchain
  • September 2016: “[Blockchain] could have very significant implications for the payments system and the conduct of business.”
  • January 2017: “[Blockchain] is a very important, new technology that could have implications for the way in which transactions are handled throughout the financial system.”

Related: Biden to Tap Former Fed Chair Janet Yellen as Treasury Secretary

It’s unclear how Yellen might approach crypto regulations, or if they’ll even be a priority. However, the Office of the Comptroller of the Currency (OCC), Federal Reserve, Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Asset Control (OFAC) all either work closely with the Treasury Department or are bureaus within the department. 

Razvan Suprovici, founder of crypto gifting service Biterica, gifted $20 in bitcoin to Yellen after her 2018 remarks, though at the time she said she hadn’t looked into the gift. If she kept the funds, they would be worth about $60 at press time.

And there was also Bitcoin Sign Guy, who flashed a “buy bitcoin” note behind Yellen while she was testifying before a congressional subcommittee in 2017.

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