the digital asset question
With the IRS’ tax deadline this coming Monday, yesterday’s issue of the IRS Newswire newsletter (see it) reminded taxpayers that they need to report crypto as well as any other digital asset transactions on their tax return. The newsletter says, “The Internal Revenue Service reminds taxpayers they must answer the digital asset question and report all digital asset related income when they file their 2023 federal income tax return. Taxpayers should also keep these reporting guidelines in mind for 2024.”
If you haven’t heard about “the question,” it is labeled “Digital Assets” and is located 8 lines from the top of tax filing form, Form 1040. See it (PDF).
The question reads, “At any time during 2023, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” “Yes” or “no” are your choices for response.
Read the IRS digital assets info page.
what you should know: Rep. Brad Sherman (D, CA) must love the IRS’ special attention to digital assets in Form 1040. Sherman has been critical of Treasury in the past regarding not moving fast enough to tax the “crypto bros” especially as it relates to the gray area of the crypto “wash sale” rule. At a June 2023 House Financial Services hearing with Treasury, Sherman told Secretary Yellen, “The SEC has proved they’re not afraid of the crypto bros. I know you’re not afraid of the crypto bros. I hope the IRS is not afraid of them. When are we going to see these regulations so that if you make a profit on selling your crypto you at least have to pay taxes on it?”
stablecoins – legislative vehicle
Late yesterday afternoon, Punchbowl News’ Brendan Pedersen reported that House Financial Services (HFS) Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA) are in discussions with Senate Majority Leader Chuck Schumer (D, NY) about the HFS stablecoin bill. According to Pedersen, “The lawmakers also discussed whether the FAA Reauthorization could be a potential vehicle for bipartisan legislation – a strategy that would be fairly unprecedented in financial services policy.” Read the tweet.
what you should know: The strategy having no precedent in financial services policy seems very “digital assets”. Also, Sen. Kirsten Gillibrand’s (D, NY) influence with her fellow New Yorker, Sen. Schumer, seems likely. Gillibrand has previously indicated that she’s been working on a stablecoin bill with Senator Cynthia Lummis (R, WY), but perhaps all legislative roads lead back to HFS’ “Clarity for Payment Stablecoins Act”?
Finally, late yesterday, Politico’s Eleanor Mueller reported that not only was the FAA Reauthorization in play in regards to stablecoin legislation, but so was cannibis banking.
stablecoins – and treasuries
Seemingly coming to the defense of stablecoin issuer Tether and its ties to illicit finance, CEO Howard Lutnick of U.S.-based Cantor Fitzgerald told an audience at this week’s Chainalysis conference in New York City that stablecoins – such as Tether and Circle’s USDC – are having a positive impact on the source of American power –the U.S. dollar.
Furthermore, Lutnick said that stablecoins have boosted demand for U.S. Treasuries which are used to back stablecoins. According to CoinDesk, Lutnick said, “[Stablecoins are] ‘fundamental for the U.S. economy, driving demand for U.S. Treasury notes and do not pose a systemic risk to the world.'”
Cantor Fitzgerald provides custody services for at least part of Tether’s stablecoin treasury.
more tips:
-
- Primary and Secondary Markets for Stablecoins (Feb. 2024) – FederalReserve.gov
what you should know: Lutnick as a witness at the next House Financial Services Digital Assets Subcommittee hearing, anyone?
toxic topic
David Tennent of Capitol CNCT shared results with blockchain tipsheet of a new CNCT “capitol pulse” poll of Capitol Hill staffers. Published on April 5, the poll asked, “What is your opinion of Cryptocurrency?”
The results weren’t pretty for crypto proponents as Tennent reports, “49% of Staffers who voted have a generally negative opinion of cryptocurrency.”
More staffer reaction to “cryptocurrency” from CNCT’s capitol pulse was broken out as follows :
Generally Positive
-
- 30% GOP Staff / 10% DEM Staff
- 67% of Independents
Generally Negative
-
- 71% DEM Staff / 33% GOP Staff
- 55% Over 30 / 47% Under 30
- 63% Policy Staff
Neutral
-
- 37% GOP Staff / 19% DEM Staff
- 70% Comms Staff
what you should know: The CNCT poll is not representative of every staffer on Capitol Hill, but it does bring to life a cross-section that sees crypto as pretty toxic.
FinCEN awards Coinbase
Coinbase chief legal officer Paul Grewal announced that his cryptocurrency platform company has received an award for “making substantial contributions though your Bank Secrecy Act (BSA) reporting” from the U.S. Treasury Financial Crimes Enforcement Network (FinCEN).
Grewal published the letter on X and commented, “We received this letter from FinCEN congratulating [Coinbase] on our substantial contributions to one of seven significant criminal cases to receive the FinCEN Director’s Law Enforcement Award. We appreciate this recognition of our commitment to weeding out bad actors in whatever form and whereever they operate.” See the letter.
what you should know: This appears to be a powerful affirmation for Coinbase by one part of the U.S. government which operates outside of the political sphere today. How it helps Coinbase in its defense against the complaint brought by the Securities and Exchange Commission (SEC) remains to be seen. But, it can’t hurt.
bipartisan ransomware bill
House Financial Services (HFS) Chair Patrick McHenry (R, NC) and Rep. Brittany Pettersen (D, CO) announced a reintroduction of their “Ransomware and Financial Stability Act” (See H.R.5936 in the 117th Congress.).
Chair McHenry says in a statement that the bill “will help deter, deny, and track down cyber criminals who threaten the financial infrastructure that makes everyday economic activity possible. Our legislation sets commonsense guardrails to guide how critical institutions respond to ransomware attacks—helping protect both consumers and the financial institutions they rely on…” Read the press release.
The bill is the likely centerpiece of next Tuesday’s HFS National Security, Illicit Finance, and International Financial Institutions Subcommittee hearing, “Held for Ransom: How Ransomware Endangers Our Financial System.” See that one.
what you should know: The McHenry/Pettersen bill is “just in time” to address the comments by Deputy Treasury Wally Adeyemo tying crypto to ransomware attacks (see his CNBC interview on Tuesday) while Adeyemo seeks more control (“tools”) over digital assets for his department.
mining survey revisited
Politico’s Amanda Skibell reviews bitcoin mining in the U.S. and revisits the recent attempt at an “emergency” survey by the Energy Information Administration within the Department of Energy that got kiboshed by the crypto mining industry and courts. Skibell writes, “The nation’s power providers cannot assess how the rapidly growing crypto industry will affect the electric grid in the future. That could pose a major problem for grid operators as the nation’s demand for energy increases in the coming years.” Read more.
what you should know: As we reported in late February, the mothballing of the survey had to do with the public release of the survey’s results which “was said to be a cause for serious concern by [court] complainants Riot Platforms and Texas Blockchain Council.” Also, the “emergency” and sudden nature of the survey combined with the anti-crypto stance of the Biden Administration led many pro-crypto advocates to believe that the survey was politically motivated.
top HFS Republican
Punchbowl News reported yesterday that Rep. Frank Lucas (R, OK) has jumped into the race for the opening atop the Republican caucus in House Financial Services. Chair Patrick McHenry’s (R, NC) retirement at the end of the 118th Congress will now result in a race between Lucas, Reps. French Hill (AR), Bill Huizenga (MI) and Andy Barr (TN) according to Punchbowl. Read it.
what you should know: Rep. Hill was Vice Chair of HFS in the current Congress in addition to being Chair of the Subcommittee on Digital Assets, Financial Technology and Inclusion. It still seems like it’s Hill’s race to lose – and for pro-crypto advocates who’ve watched Hill and McHenry guide digital assets legislation through a turbulent Congress, he’s likely their choice, too. An unexpected nod one way or another by former President Donald Trump, the Republican candidate for President, could always sway things.
still more tips
Circle launches USDC smart contract support for BlackRock BUIDL holders – The Block
Welcome to crypto archipelago – Financial Times
The SEC investigated NBA Top Shot developer Dapper Labs, but decided to close case in September – Fortune