New Bill Calls for the Treasury Department to Submit a Report on Foreign Crypto Usage and Mining

New Bill Calls for the Treasury Department to Submit a Report on Foreign Crypto Usage and Mining

With this report on virtual currencies and global competitiveness, the idea is to strengthen U.S.’s role globally, and crypto can play a critical role in that.

US Senators want the Treasury Department to closely examine cryptocurrency mining and share the findings with Congress.

This week, a bill was introduced by Senators Maggie Hassan (D-NH) and Joni Ernst (R-IA) that requires the Secretary of the Treasury to submit a report on virtual currencies and global competitiveness to Congress.

The report on virtual currency wants the department to cover an assessment on how foreign countries use and mine virtual currencies, including identifying their largest state and private industry users and miners.

Policies foreign countries have adopted to encourage crypto’s use, and mining and how they could be strengthened or undermined by allowing this within their borders are also included.

The bill further asked the Department to identify the types and dollar value of virtual currency mined for each fiscal year from 2016 through 2022 within the US, China, and globally, along with any other countries the Secretary of the Treasury determines are relevant.

Furthermore, the report wants to identify vulnerabilities related to supply disruptions and technology availability of the global microelectronic supply chain and opportunities in regard to crypto mining operations.

With this report, the idea is to increase the global competitiveness of the US, and according to Hassan, crypto is critical in that.

“In order to strengthen U.S. competitiveness, our government must get a better handle on the role that cryptocurrency is playing in the global economy and how it is being leveraged by other countries.”

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Author: AnTy

US Treasury Set to Ease Crypto Concerns by Clarifying What A ‘Broker’ Covers

The US Treasury Department is set to clarify what exactly entails “broker” for the purpose of reporting to the Internal Revenue Service after the crypto tax provision of the controversial $1 trillion bipartisan infrastructure bill was passed in its original form that overreaches to cover miners, developers, stakers, and validators to report information on clients to the IRS.

The tax provision is estimated to raise $28 billion over a decade.

The Treasury will clarify that only cryptocurrency companies it considers brokers will need to comply with the proposed IRS reporting requirements. Developers, miners, and hardware and software providers won’t be covered, so long as they don’t act as brokers, reported Bloomberg citing an unnamed Treasury official.

Instead of granting blanket exemptions, Treasury’s guidance would rather focus on how the firms identify themselves. Whether their activities qualify as a broker under the tax code, the official added.

The guidance that could address some concerns of the crypto industry is expected to be made public as soon as next week.

As we reported, two amendments and then a compromise was discussed to remove these parties from reporting only for a lone senator Richard Shelby to end all the development. The original overreaching bill has now made its way to the House, where the crypto community will again work on having a clear definition of a ‘broker.’

The new reporting rules, however, even if signed into law, won’t go into effect until 2023.

During the Senate voting on these amendments, even Treasury Secretary Janet Yellen expressed her support for them. Yellen said in a statement,

“I am grateful to Senators Warner, Portman, Sinema, Toomey, and Lummis for working together on this amendment to provide clarity on important provisions in the bipartisan infrastructure deal that will make meaningful progress on tax evasion in the cryptocurrency market. I am also thankful to Chair Wyden for his leadership and engagement on these important issues.”

Yellen’s support for the amendment came despite her attempt to have more regulatory control over the $2 trillion cryptocurrency industry.

Last month, she summoned the OCC, FDIC, and the President’s Working Group (PWG) on Financial Markets to assess the potential benefits of stablecoins while mitigating their risks.

Earlier this year, she said she is “not a fan” of crypto as many are used “mainly for illicit financing” and that they need to “curtail their use, and make sure that anti-money laundering doesn’t occur through those channels.”

Now, the Treasury seems to be taking steps towards easing some of the crypto industry’s concerns.

The Treasury official told Bloomberg that some of these concerns were valid but that much of the lobbying limited the Treasury Department’s authority to collect legitimate tax information. But the department isn’t looking to go after businesses who don’t have transaction data, the official added.

It will give more clarity as to how the Treasury would apply the definition of a broker to entities that transfer crypto assets on behalf of another person.

These latest efforts by the agencies are also part of a broader push by the Treasury to crack down on crypto tax evaders, as IRS Commissioner Chuck Rettig has said that it is a key contributor to the growing gap between what’s owed in taxes and what the IRS actually collects.

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Author: AnTy

Texas Banking Department says Chartered Banks are Allowed to Provide Virtual Currency Custody Services

Texas Banking Department says Chartered Banks are Allowed to Provide Virtual Currency Custody Services

“Texas leads the way,” said Texas Blockchain Council as it noted that the Texas Department of Banking has issued a notice saying that chartered banks in the state may provide customers with virtual currency custody services, as long as they have adequate protocols in place to effectively manage risks.

The notice called “Authority of Texas State-Chartered Banks to Provide Virtual Currency Custody Services to Customers” was published on June 10.

In the notice, the department said that while custody and safekeeping of cryptos will differ from more traditional assets, it believes that “the authority to provide these services with respect to virtual currencies already exists pursuant to “Texas Finance Code.”

It is up to the bank which custody services it chooses to offer based on its expertise, risk appetite, and business model. They can either store copies of the customer’s private keys or take direct control of the bank. Basically, the banks will have to determine which storage option best fits the circumstances.

In a non-fiduciary capacity, the bank acts as a bailee, taking possession of the customer’s asset for safekeeping while legal title to that asset remains with the customer, but the bank owes its customer the duty to use proper care to keep the asset safely and to return it unharmed upon request.

As for offering custody services in a fiduciary capacity, the bank has the authority to manage virtual currency assets as it would any other type of asset held in such capacity.

However, banks are required to conduct due diligence and when offering new crypto services and implement controls; of technical, physical, and administrative nature, to measure and monitor relevant risks associated with custody of digital assets.

Establishing a relationship with a service provider with expertise in handling virtual currency is also recommended as part of due diligence, as per the notice.

The banks offering crypto services are further required to have adequate coverage with their insurance carrier.

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Author: AnTy

US Department of Education Is Exploring Blockchain-Based Solutions to Store Student Records

The U.S Department of Education is exploring blockchain technology, intending to “rethink” how distributed ledger technologies can be incorporated into the education system.

In current global pandemic times, various U.S. government departments are exploring blockchain technology to finding solutions regarding transparency, safe record-keeping, and decentralized information sharing. The U.S. Department of Education (Office of Educational Technology) became the latest department to join the bandwagon funding the “Education Blockchain Initiative (EBI).”

EBI is designed to help identify and evaluate ways that blockchain technology can improve data flow among educational institutions and employers while empowering individuals to translate educational outcomes into economic opportunities.

The project, launched by the American Council on Education (ACE), aims to find blockchain-based solutions to enhance the network and communication between and among students, learning institutions, and employers.

According to a statement from ACE, the EBI aims at identifying and evaluating new ways blockchain can improve the flow of data to institutions, students, and employers. Projects launched through the EBI will restore data control to the learner, “empowering them to control their identity and leverage the skills learned,” the statement further reads.

ACE is an organization that lobbies and creates “inclusive, dynamic, and resilient” public policy across postsecondary education centers to better the students. In line with finding blockchain solutions, the organization launched the ‘Blockchain Innovation Challenge’ in 2020 to overhaul the education and employment systems in the U.S.

Louis Soares, chief learning and innovation officer of ACE, stated the challenge would help the undeserving and minority students affected by the current COVID-19 pandemic. The solutions being created will also enhance student enrollment, improve the transfer of credits, and communicate between institutions and employers. Soares said in a statement,

“This includes finding new approaches to credentialing (and hiring) that leverage the potential of emerging technologies to improve communication among education and training organizations.”

Phase 1 winners of Blockchain Innovation Challenge announced

To pace up developments in the education space, the Blockchain Innovation Challenge is making awards totaling $900,000 in two phases. The awards target teams and projects that “put forward bold ideas to reorient the education and employment ecosystem” to improve information transfer across students, institutions, and employers.

On Feb 11, four Phase 1 winners were announced, including teams from Nebraska, Texas, Arizona, and Utah.

One of the winning projects, “Student 1”, collaborating with the Nebraska Department of Education and Nebraska Department of Health and Human Services, created learner records for a third of all Nebraska students involved with multiple behavioral, judicial, or state educational services.

Other winners include Texas Woman’s University, which is partnering with the University of Texas- Arlington to build a “shared credentialing platform” that enhances sharing educational records across institutions and training facilities.

A similar project, UnBlockEd, led by the University of Arizona and Georgia Institute of Technology, Fluree, and the John N. Gardner Institute, is developing an open and decentralized transfer exchange that will enhance credit transfer articulation for students transferring schools.

Powered by Fluree is the Lifelong Learner project, also sponsored by the Utah Department of Education. The project is developing a digital wallet to allow teachers to store and share information, including their credibility scores, licenses, and exemplars of practice with human resource departments and other management systems.

Still a long road ahead

While these blockchain developments move ahead to provide innovative solutions in the education industry, practical integration to real-life situations remains challenging. Brian Platz, co-CEO of Fluree, mentioned in a statement.

He explained that blockchain developments suffer from the supply-demand rhetoric across the education space. He noted that building a data-sharing platform and digital credentials is currently not in demand as employers rarely ask for them.

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Author: Lujan Odera

FinCEN Opens Job Positions for Crypto Policy Advisers Ahead of Proposed Wallet Regulation

The Financial Crimes Enforcement Network (FinCEN), a top policy enforcement arm of the Treasury Department, has been rumored to be in the process of developing crypto regulations for a while.

These rumors have now been given new life as the regulator recently posted two job listings for crypto advisers.

Qualified Applicants Only

Published last week, the listings showed openings for Strategic Policy officers. These professionals will primarily assist the agency in developing policy responses to cryptocurrencies. They will also issue advisories to liaise with financial institutions and engage in crypto policy collaborations with private and public sectors.

The details of the job listings show that FinCEN wants to improve its crypto policy acumen. Both positions will receive top clearance, and they are full-time positions. Candidates are to have experience in strategizing, drafting, and researching crypto policy.

These requirements show that FinCEN is looking to get more than just washed-down regulatory policies that will do no good for the crypto space.

Talks of policy developments from the FinCEN have swirled throughout the year. In February, Treasury Secretary Steve Mnuchin alluded that the agency was working on drafting regulations for cryptocurrencies across the countries.

Many Talks, Little Action

Speaking to Congress on the President’s $4.8 trillion budget proposal, the Treasury Secretary explained that the budget was also set to address effective cryptocurrency monitoring and enforcement against criminals. He said in part:

“We’re about to roll out some significant new requirements at FinCEN [Financial Crimes Enforcement Network]. We want to make sure that technology moves forward but on the other hand, we want to make sure that cryptocurrencies aren’t used for the equivalent of old Swiss secret number bank accounts.”

The Treasury Secretary revealed that his department would collaborate with several other regulators, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

So far, there hasn’t been much in terms of regulatory oversight from the agency. In September, it issued an announcement stating that it would seek public comments on forthcoming proposals that would strengthen rules on monitoring and reporting financial institutions’ requirements.

The announcement claimed that the proposals would address terrorist financing, money laundering, and others, suggesting that crypto-related firs would also be in the regulator’s crosshairs.

Last week, Coinbase CEO Brian Armstrong revealed on Twitter that the FinCEN was most likely looking to rush through crypto regulations with the current administration on its way out. Mnuchin is set to be replaced by Janet Yellen at Treasury, and according to Armstrong, the current administration will be looking to make one last mark.

The CEO accused the FinCEN of trying to track self-hosted wallets. This move could essentially break down a significant anonymity barrier on which the crypto industry stands.

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Author: Jimmy Aki

DoJ Challenges Visa’s Proposed $5.3B Acquisition of Plaid in a North California Court

The U.S Department of Justice (DoJ) has challenged Visa’s acquisition of financial data aggregation firm, Plaid. According to the filing on Nov 5, Visa’s move to initiate a transaction process for purchasing Plaid at $5.3 billion is a monopolistic approach. It deprives the American people of cheaper and better debit-focused innovations. The filing reads,

“By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”

It goes on to term Visa as a ‘monopolist in online business transactions’ given that it enjoys a market share of around 70% in the online debit transactions industry. The DoJ claims that Visa will be violating Section 7 of the Clayton Act and Section 2 of the Sherman Act as per the filing made in a North California based federal court. Both Visa and Plaid are defendants in this case, whereas the DoJ is the complainant.

While Plaid’s focus area is not the distribution of debit cards, this Fintech startup proposes a significant value in today’s world where data is the new gold. In fact, the firm received a strategic investment from both Visa and Master card back in 2019. This platform is designed to harmonize interaction between different databases held by financial service providers, including banks. Apparently, the firm was on its way to disrupt Visa’s fort in the online debit service before the ‘monopoly’ swung in to acquire them.

Per the DoJ filing, Visa’s senior executives, including the firm’s CEO, have previously hinted at the move to acquire Plaid as a strategy to neutralize competition. This strategic decision was particularly triggered by information that Plaid had plans to launch a parallel competition to Visa’s money movement business by the end of 2021.

At the time, Visa’s downside risk estimation for the next four years stood at $300-500 million, should Plaid have been acquired by a rival. This prompted them to act swiftly with the CEO noting that ‘Visa seeks to buy Plaid as an “insurance policy” to neutralize a “threat to our important US debit business.’ A statement that appears to have rattled the DoJ is now a focal point in its filing against Visa and Plaid.

Nonetheless, Visa has indicated through a spokesperson who shared with the Wall Street Journal that they intend to defend the Plaid transaction,

“Visa intends to defend the transaction vigorously … Visa’s business faces intense competition from a variety of players — but Plaid is not one of them.”

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Author: Edwin Munyui

NYDFS Directing Banks & Crypto Companies to Address Risks of Climate Change

The New York Department of Financial Services (NYDFS) sent out a letter to banks, firms, and cryptocurrency businesses to pay attention to the financial risks associated with climate change, incorporate them into their business strategies, and develop ways to disclose and mitigate those risks.

This letter followed the same guidelines issued by the agency for the state’s insurance providers last month.

NYDFS is the only US member of the Network for Greening the Financial System, an international group of central banks and regulatory agencies that is focused on climate-related financial risks.

The letter noted that the US gross domestic product (GDP) sees damage of 1.2% with each rise of one-degree Celsius in global temperatures. As such, those communities that are hit harder by climate change can then lead to an increase in default rates, reduced lending activity, devaluations of assets, and losses.

As for the cryptocurrency businesses, it pointed out how studies suggest the environmental impact of mining digital currencies like Bitcoin can be substantial — annual consumption of energy is equivalent to Venezuela’s electricity usage, and carbon footprint is to that of New Zealand’s.

“The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies,” said Linda Lacewell, NYDFS Superintendent, in the letter.

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The agency wants digital currency firms to consider being more transparent about the location and equipment they use in Bitcoin mining, which is energy-intensive.

“DFS is developing a strategy for integrating climate-related risks into its supervisory mandate,” the letter concluded.

Ripple CEO Brad Garlinghouse called this step from NYDFS “pivotal” and said instead of exacerbating the problem; Bitcoin needs to use more energy-efficient assets as it gains the attention and support of big and mainstream companies.

“XRP was built specifically to use negligible amts of energy,” chimed in Ripple CTO David Schwartz.

“The less it costs to start and run a node, the less decentralized a system will be if you think people being able to use it trustlessly going forward is important to decentralization,” added Schwartz on XRP being hard to audit “because it’s too expensive and nobody cares.”

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Author: AnTy

Chainalysis And Integra FEC Win $625k Grants From IRS To Track Monero (XMR) Transactions

Announced this last Wednesday, The U.S. Department of Treasury has awarded two grants to blockchain tracking and monitoring firms, Chainalysis and Integra FEC. Both firms received $625,000 in grants in a bid to develop privacy-focused blockchain transactions such as Monero and Layer-2 protocols.

In early September, the Internal Revenue Service (IRS) called out firms and companies building blockchain tracking and monitoring tools to submit proposals on cracking privacy blockchains – especially Monero (XMR). The taxation authority incentivized companies to apply with a $625,000 grant promised to the winning contracts.

In less than three weeks, the IRS has made its decision selecting blockchain analysis firm, Chainalysis, and data forensics analysis firm, Integra FEC. Both the companies will receive a total of $1.25 million, shared equally, with authority looking for solutions to trace and monitor the privacy coin.

An IRS spokesperson confirmed a total of 22 companies in the blockchain space applied for the grants, with the two firms winning the bids. The winning teams will receive an initial payment of $500,000 to develop the privacy-based monitoring and tracking tool, and the rest of the amount will be released once the prototype of the tool is released and inspected.

The New York-headquartered blockchain analysis firm is a relatively known company in the crypto space. Chainalysis recently announced a partnership with the Wyoming state financial regulator to monitor public blockchain transactions and cryptocurrency mixers.

Integra FEC is a Texas-based data forensics firm that is relatively unknown in the crypto space despite partnering with the U.S. securities regulator, SEC. The firm built a consultation service, “Other Scientific and Technical Consulting Services,” for the SEC.

Also Read: Gemini Rolls Out Zcash (ZEC) Shielded-Address Withdrawals For Transaction Privacy

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Author: Lujan Odera

Homeland Security Calls On Freelancers to Design A Digital Wallet Interface; $25k to Finalists

  • The Science and Technology Directorate (S&T) division of the US Department of Homeland Security has allocated up to $25,000 in prizes as an incentive for designing a digital wallet user interface.
  • Prospective applicants will be required to create a user interface compatible with DHS projects in the blockchain niche.
  • Notably, the DHS has been quite active in this area and previously supported innovations focusing on the decentralization of identity records.

According to the technical director of S&T’s Silicon Valley Innovation Program (SVIP), Anil John, participants who get to the final stage are expected to demonstrate ‘ease of use and visual consistency, while supporting interoperability, security, and privacy.’ Digital wallets that stand out might ultimately increase the value proposition of the DHS blockchain projects once integrated.

John highlighted that one DHS client is already leveraging blockchain to build a decentralized credential network for the issuance of digital green cards. Despite its active involvement in funding blockchain projects, this is the first time the DHS is taking a design challenge to the public, according to S&T’s program manager, Kathleen Kenyon.

She was keen to highlight that they are trying to get that ‘freelance designer’ given that their foothold in this space is less significant than corporate contacts; this was the main reason for a low budget digital wallet crowdsource. As for the prizes, three finalists will be allocated $5,000 each while the winner gets an extra $10,000. Applications are still open, with the first stage finalists announced on October 27 via an online SVIP event. Overall winners will be announced later in the year.

This incentive by the DHS is not the first of its kind; just recently, the IRS issued a bounty of up to $625,000 to developers who will crack Monero’s anonymity and the lightning network. In similar efforts to boost compliance and oversight, the U.S Financial Crimes Enforcement Network (FinCEN) has floated an Advanced Notice of Proposed Rulemaking (ANPR) targeting the amendment of AML policies.

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Author: Edwin Munyui

OFAC Blacklists Three Russians’ Crypto Addresses Linked to 2016 US Presidential Election

The Treasury Department of Foreign Assets Control, OFAC in short, announced sanctions for three Russian hackers involved in meddling in the 2016 Presidential elections. The statement further added cryptocurrency addresses attached to the Russian Troll group, Internet Research Agency, were also sanctioned.

The sanctions stretch to several crypto addresses, including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Zcash (ZEC), and Bitcoin SV (BSV). As of the publishing of the sanctions, “all property and interests in property of these targets that are subject to U.S. jurisdictions are blocked,” the statement adds. U.S. citizens are also prohibited from engaging in transactions with the listed persons.

The three sanctioned persons – Artem Lifshits, Anton Andreyev, and Darya Aslanova – are listed for controlling the crypto wallet accounts and dealing with the IRA. The statement reads,

“Russian nationals Artem Lifshits, Anton Andreyev, and Darya Aslanova, as employees of the IRA, supported the IRA’s cryptocurrency accounts. The IRA uses cryptocurrency to fund activities in furtherance of their ongoing malign influence operations around the world.”

OFAC first listed IRA operations using cryptocurrency in 2018, accusing the firm of participating in meddling in the 2016 U.S. Presidential election.

Russia is not the only nation the U.S. agency is focusing on. In November 2019, BEG reported OFAC was accelerating its efforts to sanction cryptocurrency addresses from two Iran nationals in relation to ransomware attacks within the country.

The list of Russian cryptocurrency addresses that have been blacklisted by the U.S. Treasury Department.

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Author: Lujan Odera