US Tax Authorities Discusses Taxing Digital Currencies; Each Standard Method Has Trade-Offs

  • Tax regulators across the U.S. are debating on the trade-offs in taxing digital assets, Bloomberg Law states.
  • Erika Nijenhuis, a senior counsel at the department’s tax policy office, said at a virtual conference on Thursday.

The world’s largest economy is looking for ways to increase revenues, including taxation of digital assets and cryptocurrencies. During a virtual interview at the OECD’s 2020 Global Blockchain Policy Forum, senior counsel at the Treasury Department, Erika Nijenhuis, stated the U.S is developing domestic reporting rules on taxing cryptocurrencies.

In their quest to find the best models, the tax regulators are debating different tradeoffs that proposed tax models offer, including the risk factor approach and the direct reporting of tax from crypto transactions.

The authorities are looking for a balance that will be efficient in collecting the tax proceeds. This ranges from checking the burden placed on the crypto-taxable parties such as crypto money transmitters and exchanges and how to enhance compliance across these firms. Nijenhuis said,

“There are trade-offs among all of them, and we are hard at work thinking about all of those issues.”

“None of those are easy questions.”

The U.S. Internal Revenue Service (IRS) has been at the forefront of taxing crypto assets in calling for clarity on taxing these assets.

Earlier in the month, David W. Klasing, a boutique Californian tax firm, reported that the IRS looked into Coinbase accounts to catch offenders who do not comply with the platform’s reporting tax standards.

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Author: Lujan Odera

Fidelity Digital Assets Addresses Common Criticisms And Misconceptions On Bitcoin (BTC)

  • Fidelity Digital Assets responds to common criticisms and misconceptions about BTC.
  • “Bitcoin chose scarcity and decentralization over its payment features.”
  • The top cryptocurrency will not be replaced easily.

Cryptocurrency critics calling out about the market being in a bubble and oncoming failure for most of these tokens. As the top cryptocurrency, Bitcoin (BTC) has faced multiple criticisms, including its high volatility, environmental concerns, failure as a means of payment, and use in illicit activities. Fidelity Digital Assets, a subsidiary of Fidelity Investments, released responses on six of BTC’s common misconceptions and criticisms.

First, Bitcoin has been criticized as a store of value due to its volatility. The report, compiled by Fidelity’s Director of Research, Ria Bhutoria, however, states Bitcoin’s volatility “is a trade-off it makes for perfect supply inelasticity and an intervention-free market.”

As BTC gets to the mainstream economy, Ria believes the volatility will continue to slow down, as seen in previous years. Moreover, day-to-day volatility is expected to go down with “increasing spot and derivative market liquidity and the development of products that allow investors to express interest” in the cryptocurrency.

The argument about Bitcoin failing in its role as a payment system is also disputed in the blog post. The author argues that the blockchain makes a deliberate trade-off to offer users decentralization and settlement immutability. According to Bhutoria, Bitcoin offers a more efficient payment system in some instances, such as international payments. In contrast, incumbent digital payment systems such as VISA, MasterCard are more suitable for day-to-day payments. The statement reads,

“Given its high settlement assurances, Bitcoin optimizes its limited capacity for settling transactions that aren’t well-served by traditional rails.”

The post also responded to the argument that Bitcoin mining wastes energy, making it environmentally unfriendly. Bhutoria argues that Bitcoin mining “is powered by renewable energy or energy that would otherwise be wasted.” While it is undeniable that Bitcoin uses vast amounts of energy, the post states that the crypto benefits make the energy consumed “a valid and important use of resources.”

The biggest criticisms from regulators, authorities, and governments have been that Bitcoin is used in enhancing illicit activities (when in reality it should be compared to corrupt banks). Cases such as the Silk Road saga has further escalated the narrative that BTC pushes further illicit activities. However, the post responds to these criticisms stating,

“Bitcoin, like cash or the internet, is neutral and has properties that may be valuable to good actors and bad actors.”

Additionally, the share of Bitcoins used in illicit activities compared to the non-illicit trades is very small.

The post also targets BTC’s comments being replaced by a competitor in the future and crushing qualms on criticisms on the coin being backed by nothing.

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Author: Lujan Odera

Pakistan Regulators Look to Build Friendly Framework for Digital Assets

Pakistan seems to realize the potential of digital assets in the financial future as the country seems geared up for formulating a new framework to regulate cryptocurrencies such as bitcoin. This is highly bullish since Pakistan was among the very few countries that in mid-2018 blanket banned digital assets in any form. It wasn’t until April of 2019 that regulators started to change their minds.

The Securities and Exchange Commission of Pakistan (SECP), on November 6th, released a consultation paper about regulating digital assets. The paper mentioned that the finance ministry is looking to make new laws as they look at the regulatory frameworks set by other countries.

SECP believe digital assets is a “start of a new era of digital finance.” The consultation paper further noted that to propel this new digital finance era, a new set of frameworks would be required to drive its adoption.

“Digital assets also known as Virtual Assets, and Crypto Assets are the start of a new era of Digital Finance, and demand innovative regulatory measures and approaches by the regulators across the world.

This could only be possible by initiation of a new era that re-invents regulatory regime/measures as they are known to the regulators globally today.”

It is also important to note that many developed countries in the West are currently discussing launching a Central Bank-issued Digital Currency (CBDC); however, the consultation paper makes no mention of any such plans by Pakistani financial watchdog. At present, they are only focusing on regulating private digital assets such as bitcoin.

The paper made a note of two types of tokens, namely security tokens and utility tokens, where the regulatory body sees a security token as an important tool that might help in fractionalizing real-world assets and digitize them.

The paper mentions that they have 2 choices as regulators; restrict digital assets due to current rules or take a ‘let-things-happen’ approach. Which they mention that they are heavily leaning towards the do-no-harm approach.

The paper also welcomed feedback from the stakeholders of the decentralized space in developing the new framework.

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Author: James W

Fidelity On A Hiring Spree to ‘Capitalize On Increased Market Demand’ For Digital Assets

Amidst the ongoing market frenzy, Fidelity Digital Assets is looking to hire more than twenty engineers to help them expand its capabilities and “capitalize on increased market demand,” basically to build the “future of finance.”

One of the largest asset managers in the world with $3.3 trillion in assets under management, Fidelity investments first started researching digital assets and blockchain in 2014, and then in 2018, they launched Fidelity Digital Assets. FDA was the companies,

“First step towards a long‐term vision to create a full‐service platform for storing, trading, and supporting digital assets.”

In the past two years, the digital assets market has grown “exponentially,” with more institutions adopting them as part of their portfolios.

So, in this changing landscape, Fidelity wants to improve its bitcoin custody and build new products to support the growing ecosystem. Peter Farland, Chief Technology Officer at Fidelity Digital Assets, said,

“Ultimately, we imagine a future where all types of assets are issued natively on blockchains or represented in a tokenized format.”

The company is hiring engineers with development experience with Bitcoin, Ethereum, and other digital assets for Merrimack, NH, and Boston, MA locations in the US.

The idea is to create secure, interoperable, and scalable products to offer safe and simple investment in Bitcoin and increase digital assets’ overall adoption.

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Author: AnTy

Fidelity Digital Asset Services to Custody Crypto Investments for High Net Worth Individuals In Asia

  • Digital Assets Custodian FDAS Expands Into Asia
  • Targeting High Net Worth Crypto Investors With A New Partnership

Fidelity Digital Assets Service, one of the largest financial corporations dealing in Bitcoin, announced a partnership with Stack Funds, a Singapore-based fintech startup, to provide digital assets custody to its customers across Asia, Bloomberg reported on Thursday.

The partnership targets to offer a secure and accessible crypto custodial service to the high net worth individuals and families across Asia aiming to fill the high demand for such services in the region.

Speaking on the partnership, Christopher Tyrer, head at Fidelity Digital Assets Service in Europe said,

“There is a critical need for platforms which have a deep understanding of what local and regional investors are looking for” that “has historically been lacking in the digital asset space.”

Stack Fund is a leading provider of cryptocurrency and digital assets index funds in Asia. The firm aims to capture more market share across the region with the latest partnership with Fidelity. Customers’ assets and funds will be audited monthly and also receive unique protection programs such as insurance coverage and offer weekly contributions and redemptions.

Following its launch in 2018, Fidelity Investments crypto wing, FDAS, the firm has grown as one of the largest traditional finance custodians of digital assets. The latest move to Asia aims to offer risk mitigation and attract high net worth individuals and families to digital assets, Michael Collett, Stack’s co-founder said.

Collett aims at turning the tide of Bitcoin adoption, which he explains has not been on the explosive tide despite the skyrocketing prices currently. He further said,

“This year has been tough as far as getting people into Bitcoin because it didn’t cover itself with glory in the market downturn. [But] “since the dark-dark days of March we’ve had inquiries pick up again.”

Over the past months, however, a number of institutions and high net worth individuals have entered the crypto space. MicroStrategy’s CEO, Michael Saylor recently announced he personally held over $253 million in Bitcoin announcing the firm wants to buy more Bitcoin. Notwithstanding, PayPal, a global payments firm announced the addition of crypto purchases – opening a gateway to digital assets to over 300 million customers.

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Author: Lujan Odera

Total Value Locked in Harvest Finance Surpasses $1 Billion, Up 366,200% Since September

Decentralized platform Harvest Finance that provides users a way to farm assets for the highest yields now has more than a billion dollars in total value locked (TVL), as per DeFi Pulse.

A few days back, Wrapped Bitcoin (WBTC) captured third place by overtaking popular DeFi projects Aave, Compound, and Curve Finance.

The relatively new project Harvest Finance has jumped to sixth place, pushing above Curve Finance and Synthetix. It has fallen two places as just last night; it was in the fourth spot.

This climbing up the ranks happened thanks to the growing TVL, which increased over 630% in just this month. On Sept. 1st, the TVL was a mere $273k.

While enthusiasm in the DeFi sector has waned, the mania cooled down in September after running hot to its peak in August; Harvest Finance took this time to jump out of nowhere and make it big.

The project has about 630k ETH, 27.42 BTC, and just over 66 DAI locked in it.

However, unlike the growth of the funds locked in this protocol, its token FARM is currently down nearly 23% while trading at $231.56.

Audited by third parties, a process supported by 10% of the token supply, the project had a “vault migration” just this week and introduced a new TUSD pool.

With yield farming becoming hard for smaller farmers due to high gas costs and bugs in unaudited smart contacts resulting in theft, Harvest advertises itself as bringing “BreadToThePeople” by doing it all for the users.

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Author: AnTy

French Finance Minister Criticizes Crypto But Praises The “Transparency” of Blockchain

French Finance minister accepts blockchain technology’s brilliance but dismisses cryptocurrency assets as a facilitator of illicit activities and terrorist financing.

Earlier in the year, the French Economy, Finance and Recovery minister, Bruno Le Maire, suggested that European Union member states, need to come up with rules and regulations that can be used in the zone to govern cryptocurrencies and global stablecoins such as Facebook-led digital coin, Libra. Speaking on a national TV broadcast on October 18, Le Maire further articulated his stance claiming cryptocurrencies need more surveillance to combat terrorist financing.

“We must strengthen our surveillance systems in the face of terrorist financing. For example, cryptocurrencies must be more supervised.”

However, former breakdance champion turned crypto and Web3 enthusiast, Cyril Paglino, offered a response on Twitter disagreeing with the minister. Responding to the interview video by Le Maire, Paglino states the “terrorist financing” claim is old rhetoric that needs to be done away with as cash offers more incentive to fund terrorist activities.

“This 10-year-old myth about cryptocurrencies needs to stop spreading,” Paglino wrote on Twitter. “Transactions on a blockchain are secure and traceable. No interest in a terrorist. Unlike cash, which circulates to it without any control.”

While agreeing with Cyril on the public and transparent nature of blockchain technologies, Le Maire questions the role of cryptocurrencies in facilitating illicit activities, including fraudulent transactions on drugs, weapons, and money laundering.

The French Finance minister has been a big critic of Facebook’s Libra stablecoin, highlighting the token as a danger to state control across the globe. According to Le Maire, political and monetary sovereignty is at risk; hence regulating the launch and use of global stablecoins like Libra.

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Author: Lujan Odera

Russian Central Bank to Curb Total Digital Assets An ‘Unqualified’ Investor Can Acquire

The Bank of Russia seeks to regulate the total amount of digital assets that individual investors can buy. The central bank has published a draft of regulatory proposals highlighting how they will regulate the nation’s digital assets space.

The Russian central bank is now proposing a bill that will limit the number of digital assets held by non-qualified individual investors annually.

As per the proposal, the Bank of Russia states that non-qualified investors will not be permitted to acquire digital assets above 600,000 rubles or about $7,800. However, qualified investors will not have to adhere to this limit.

According to the regulator, the new limit will help in the recently approved crypto law’s operationalization, specifically on the digital financial assets.

To be deemed as a qualified investor, one must meet 1 of the following five criteria:

  • Hold an economics degree.
  • Own securities totaling more than $74,400
  • A net worth of 6 million rubles (~$74,400)
  • Have over two years of experience working for a financial organization
  • Trade significant amounts of securities regularly.

According to the publication, the curbing will apply to both digital financial assets and various digital rights. The statement reads:

“Individuals representing unqualified investors will have a limit on the amount of digital financial assets for annual purchase at a total of 600 thousand rubles.

The limit for the acquisition of digital rights for unqualified investors who hold both digital financial assets and other digital rights is set at 600 thousand rubles for digital financial assets and 600 thousand rubles for other digital rights.”

The Russian central bank is asking for feedback and opinions about the proposal from the public. Those willing to provide their input have until Oct. 27. The restriction is set to be enforced from Jan.1, 2021.

The Russian central bank also released a distinct proposal touching on how those willing to issue digital assets should register.

Notably, the new restrictions will apply to digital assets, which will be offered when the new digital assets law is enforced. Lawyer Mikhail Uspensky, who spoke to CoinDesk, stated, “Such tokens don’t exist yet, so the document is written for the future. The law will only come into force in January [2021], and cryptocurrencies are not mentioned in it at all.”

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Author: Joseph Kibe

Europe Based Exchange, Bitpanda, Launches the First ‘Real’ Cryptocurrency Index For Investors

  • Europe-based cryptocurrency virtual asset trading platform Bitpanda is launching its own crypto assets index.
  • The Bitpanda Crypto Index (BCI) will include top cryptocurrencies aiming to make it simpler for investors and traders to trade complex crypto products.

In a press release statement emailed to the BEG desk, Bitpanda confirmed it would launch ‘the world’s first real crypto index’ on October 6th. The index aims at making the purchase and selling of crypto assets easy, allowing traders to buy multiple cryptocurrencies with a single click.

According to the statement, the BCI is centered on traders and investors who aim to enter professional crypto trading without the hustle. Users can buy a selected list of cryptocurrencies in three main indices – the BCI Top 5 (BCI5), BCI Top 10 (BCI10), and the BCI Top 25 (BCI25) index. The portfolio then rebalances automatically every month based on the market liquidity and the price and market capitalization. The statement reads,

“The Index automatically adjusts the weightings of assets in portfolios over time, so users never feel like they’re missing out on “the next big thing.”

Over the past year, cryptocurrency trading has once again taken a front foot in traders’ minds across the world. Despite this increasing appetite, there is a lack of suitable financial products for users to invest as a whole, rather than individual assets. This reduces the overall volatility while keeping the portfolio diversified and balanced.

Eric Demuth, Co-Founder and CEO of Bitpanda, praised the BCI regulated product will index initiative stating the index “brings the world one step closer to the mass adoption of cryptocurrencies.” Eric further said,

“Apart from making crypto investments super easy, our Indices will help you build a diversified portfolio of assets by tracking the market as a whole. Think of it as a more grown-up, guess-free version of crypto investing.”

The index launch follows a $52 million Series A funding raised by Bitpanda in 2020 led by Valar Ventures. This is the largest European funding round in 2020, yet with a plan to scale its market base and increase its trading platform. The raise will further allow the Vienna-based exchange to start offering stock exchange markets to its customers.

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Author: Lujan Odera

DeFi Protocol Synthetix Upgrading to L2 Scaling to Alleviate Gas Costs for Small SNX Stakers

Popular on-chain synthetic assets protocol, Synthetix is in the first phase of its transition to Optimistic Ethereum, a layer two scalability solution for the second-largest network that continues to grapple with congestion and sky-high fees thanks to all the DeFi craze.

Synthetix founder Kain Warwick is “unreasonably excited” about this development who recently hinted at what’s to come by saying those priced out of staking the digital asset will get “unpriced out” soon.

SNX is the 39th largest cryptocurrency with a market cap of $472 million currently trading in green at $4.70. The DeFi protocol also has about $600 million in crypto deposits.

Get those SNX Working

The first phase involves an incentivized testnet that trial SNX staking on Optimistic Ethereum, aimed at SNX stakers with smaller balancers who may have priced out of participating in staking due to high gas prices.

78.54% of SNX is already collateralized to mint synths.

Optimistic Ethereum is the only “generalized” Layer 2solution for Ethereum, meaning it doesn’t require any specific functionality to be built to support the existing L1 protocols.

“This is a huge milestone for Synthetix, Optimistic Ethereum, and indeed the entire Ethereum space,” reads Synthetix’s official announcement. “Launching SNX staking on OE is a crucial step towards full scalability for the burgeoning DeFi ecosystem, truly allowing anyone around the world access to open financial infrastructure without the friction of high gas costs.”

In this incentivized testnet, the eligible SNX stakers, addresses holding between 1 and 2500 SNX that have staked at least once historically, will get a snapshot of their SNX balance on Optimistic Ethereum’s L2 testnet.

It can then be used to stake, mint, and burn sUSD and also to claim rewards for their participation, which are claimable on the mainnet launch L2.

In other news, SNX is getting listed on crypto exchange Bitfinex on Sept. 26 at 10:00 AM UTC.

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Author: AnTy