Tag: cryptocurrency

IRS relents

The Treasury Department and Internal Revenue Service (IRS) relented yesterday on a new tax rule and said that businesses “do not have to report the receipt of digital assets the same way as they must report the receipt of cash until Treasury and IRS issue regulations.” Read the press release.

At the beginning of the month, Coin Center’s Jerry Brito warned in a blog post about the onerous tax obligations created by a section of the 2021 Jobs Act for digital asset businesses such as miners and validators that became effective Jan. 1. Any transactions above $10,000 – such as staking – would have required a tax reporting submission to the IRS.

Adding fuel to the fire, Chamber of Digital Commerce followed up with a letter to Congressional leaders expressing the threat to the industry and promoted the need for the Keep Innovation in America Act [H.R. 1414] which would provide a legislative fix and was introduced early last year by House Financial Services (HFS) Chair Patrick McHenry (R, NC) and co-sponsored by Rep. Ritchie Torres (D, NY) among a bipartisan group of Members. See the letter.

But, in spite of the good news, Coin Center’s Brito was dumbfounded by the Treasury and IRS press release saying in a tweet thread, “Glad to see the IRS has belatedly listened to us and recognized the impossibility of complying with 6050I using crypto, but its statement on the matter is baffling. They state that the new crypto reporting obligations in the Infrastructure Investment and Jobs Act ‘requires the Treasury Department to issue regulations before it goes into effect.’ There is nothing in that law that says this and we are unaware of any legal reasoning that would have this be the case. For the time being it seems like they will not be enforcing the law, which is a practical win and I’m sure that is welcomed by many confused taxpayers. Still, the IRS has not explained how it’s capable of doing this.” Read more.

what you should know: Yesterday’s news would seem to put new momentum behind H.R. 1414. Or, maybe the IRS and Treasury can figure it out on their own? Expect HFS to make some noise (today?) reminding Treasury it needs Congress to make changes on the rule.

global growth – natsec, China

On Thursday, the Senate Banking Committee will hold a hearing titled, “National Security Challenges: Outpacing China in Emerging Technology.” See more. Given Chair Sherrod Brown’s (D, OH) apparent reticence to discuss digital assets in such a light, don’t expect them to make the agenda.

Nevertheless, China’s HashKey Group, which positions itself as the “Asia’s digital assets leader” and owns a crypto exchange and trading platform in Hong Kong, announced new funding yesterday. The company said that a new Series A funding round of $100 million would support its efforts in the Hong Kong market and claimed the company now held a market capitalization of $1.2 billion. Continue reading “Treasury And IRS Relent On Tax; Digital Assets Getting Global Boost”

tomorrow could be big

Tomorrow is potentially a big day for digital assets.

Oral arguments will begin on Coinbase’s attempt to have the court dismiss the Securities and Exchange Commission’s suit against the company originally filed last June. Coinbase’s dismissal request was in August.

In a tweet thread at the time, Coinbase Chief Legal Officer Paul Grewal said, “Our core argument is simple — we do not offer ‘investment contracts’ as that term has been construed by decades of Supreme Court and other binding precedent.” Read that one.

The Wall Street Journal previewed the court drama within a glowing profile of Coinbase CEO Brian Armstrong over the weekend. Read the profile.

In discussing the prospects for dismissal, former SEC enforcement lawyer Lisa Bragança tells the WSJ, “The case is very unlikely to be dismissed… Coinbase is saying that the types of coins it lists on its platform are not securities, and that is going to be very hard for them to prove.”

But… doesn’t the SEC have to prove the “coins” are securities?

Coinbase chief financial officer Alesia Haas adds, “We are preparing the company for a variety of scenarios… We are investing in the future.”

more tips

4 possible outcomes for Coinbase’s Motion to Dismiss hearing tomorrow – MetaLawMan (James Murphy) on X

what you should know: A dismissal would be an enormous setback for the SEC – if it happened – and poke a significant hole in its mantra that cryptocurrencies are securities. Arguably, the implications for digital assets in the United States would be much bigger than approval of Bitcoin spot market ETFs. This would be a step forward in bringing digital assets underneath the umbrella of the U.S. financial system. Continue reading “Coinbase Attempts To Get SEC Suit Dismissed; Senators Wyden, Lummis Question SEC”

Bitcoin ETF approved

The drama is over.

Bitcoin spot market exchange traded funds (ETFs) now exist so that if investors want to easily invest in Bitcoin through their favorite 401k or brokerage account, they can. Securities and Exchange Commission (SEC) Chair Gary Gensler (D) made the announcement shortly after the stock market closed saying grudgingly in a lengthy statement, “I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares.” Read it.

The Commission’s vote on the ETF applications was 3-2 with Chair Gensler voting with the two Republican commissioners.  See the “Jan. 10” vote here.

what you should know: If you will miss this storyline, the drama will continue when other digital assets such as Ether or XRP and their ETFs come up for review by the Commission.

Bitcoin ETF approved – reaction

Shortly after Gensler, Republican SEC Commissioner Hester Peirce expressed a sigh of relief in a statement of her own: “Today marks the end of an unnecessary, but consequential, saga. More than ten years after the filing of the first spot bitcoin exchange-traded product (‘ETP’) application, the Commission finally has approved multiple applications by exchanges to allow the listing and trading of spot bitcoin ETPs. This saga likely would have spanned well beyond a decade were it not for the DC Circuit-ex-machina.[link] You need not be a seasoned securities lawyer to spot the difference in treatment of bitcoin-related ETP applications compared to the many other ETP applications that have been routinely filed and approved over the past decade.” Read more.

Senator Cynthia Lummis (R, WY) said in a statement, “The SEC’s decision to comply with the Grayscale court ruling and approve the pending Bitcoin spot ETFs to be listed on registered national securities exchanges is a historic decision for the crypto asset community. It will provide millions of Americans with easier access to crypto assets and allow them to benefit from professional managers and more competitive fees.”

House Financial Services Committee Chair Patrick McHenry (R, NC) and French Hill (R, AR), Chairman of the HFS Digital Assets, Financial Technology and Inclusion Subcommittee said in a statement, “While legislation to provide clarity and certainty for digital assets remains necessary, the steps taken today are a significant improvement over the SEC’s track record of regulation by enforcement. We are pleased that investors and our markets will finally be afforded greater access to this generational technology. We remain committed to enhancing consumer protection in the digital asset markets through comprehensive market structure and payment stablecoin legislation.”

Rep. Wiley Nickel (D, NC) said in a statement, “While I’m pleased with Chairman Gensler’s decision, it’s clear that his regulation by enforcement battle is losing in the courts and in public opinion. Congress has a role to play in pushing back against the SEC’s untenable approach on digital assets.”

Rep. Mike Flood (R, NE) said, “As I stated in my September letter to the SEC, the DC Court of Appeals spoke with clarity on this issue: the SEC’s initial denial of Grayscale’s application was ‘unlawful.’ I am glad that in the end common-sense and the rule of law won out, and retail investors across the country will get greater choice as a result.”

Rep. John Rose (R, TN) said, “It is clear that the American people have a desire to invest in this new technology, and our laws and regulations should reflect and welcome that desire – not shun it like SEC Chair Gary Gensler has done for too long. I look forward to continuing our work on the House Financial Services Committee welcoming similar digital asset innovation, like passing the FIT for 21^st Century Act, which will provide much-needed regulatory stability for digital assets.”

more tips:

Financial Services Committee Republicans Demand Briefing from SEC by January 17 on Compromised X Account, Unauthorized Bitcoin ETF Post – house.gov

Continue reading “BItcoin Spot Market ETFs Approved – Finally; SRO Details Compliance For Finance Pros”

SEC gaffe

“I knew it was too good to be true,” said Rep. Ritchie Torres (D, NY).

Torres was referring to yesterday’s market moving gaffe by the SEC’s X account at 4:11 p.m. ET which mistakenly tweeted (best viewed on mobile) that long-awaited Bitcoin spot market ETFs had been approved for listing.

SEC Chair Gary Gensler quickly published a tweet 15 minutes later on his personal X account saying, “The SEC twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products.”

Gensler’s tweet was too late for some poor traders. CoinDesk reported that the price of Bitcoin shot up – and then down – $3,000 and “wiped out over $50 million of leveraged derivatives trading positions within an hour.’

what you should know: It shouldn’t take long for the Republican-controlled House Financial Services Committee to announce a hearing on the matter – or at least a spicy Congressional letter.

SEC gaffe – reaction

In addition to Rep. Torres, Congress weighed in quickly yesterday afternoon:

“Just like the SEC would demand accountability from a public company if they made such a colossal market-moving mistake, Congress needs answers on what just happened. This is unacceptable.” – Senator Bill Hagerty (R, TN) on X regarding SEC fake tweet

“Fraudulent announcements, like the one that was made on the SEC’s social media, can manipulate markets. We need transparency on what happened.” Senator Cynthia Lummis (R, WY) on X

“Chair [Gary Gensler], Does this mean we can blame more of the [SEC]’s horrible rulemaking and so-called regulation by enforcement on a ‘compromised account? #askingforafriend – Sincerely, Chairman of the House Financial Services Oversight and Investigations Subcommittee” – Rep. Bill Huizenga (R, MI) on X

what you should know: The wait for approval of Bitcoin spot market ETF applications by the SEC continues. Continue reading “Errant SEC Tweet Roils Bitcoin Markets; Blockchain Association Responds To Senator Warren”

CFTC on DeFi

Commissioner Christy Goldsmith Romero (D) of the Commodity Futures Trading Commission held her Technology Advisory Committee (TAC) meeting yesterday. Goldsmith Romero is the Committee’s sponsor and the agenda reflected her alignment with Democratic leadership currently when it comes to tech and markets – professing a strong interest in consumer protections versus innovation.

In an opening statement yesterday, Commissioner Goldsmith Romero said, “From the time that I arrived at the CFTC, I have talked about the importance of promoting innovation that is responsible, and studying emerging issues around digital assets to prevent harmful unintended consequences, particularly to retail customers, market integrity and financial stability.” Read more.

CFTC on DeFi – report

TAC’s Subcommittee on Digital Assets and Blockchain Technology co-chairs Carole House, a former National Security Council director, and Cornell law professor Dan Awrey published a study yesterday on Decentralized Finance -or DeFi.

• • Download the report here.
  • Video of the presentation of the report here.
  • Read Commissioner Goldsmith Romero’s statement about the report.

House presented 10 “Issues for policymakers” from the new DeFi report beginning with “Determining whether and how DeFi fall within the existing regulatory perimeter.” See the slide on X. Continue reading “DeFi For Policymakers Explored At CFTC Advisory Meeting; SEC Chair Gensler Warns On Crypto”

Trump and crypto regulation

Politico’s Jasper Goodman explores what the effect on crypto legislation might be if Donald Trump is elected President in November. Goodman finds that – according to Republicans – “a second Trump administration would be a boon for crypto.” Given that digital assets legislation has been led by House Republicans lately, the argument makes sense. Read more.

But, Brad Garlinghouse, CEO of Ripple, would likely disagree with Republicans about the Trump “boon.” His company became embroiled in a lawsuit by the SEC that it has since won while former Chair Jay Clayton, a Republican, held sway in the waning days of the Trump Administration. Garlinghouse called Clayton a “hypocrite” on X over this CNBC interview in October.

what you should know: If a Republican takes over the White House, today’s noisy Republican congressional caucus will be much more deferential to a Republican SEC Chair as it was during the Trump Administration. The opportunity for sudden changes by a Republican SEC Chair are far from assured. However, if SEC Commissioner Hester Peirce (R), who has consistently supported innovation, were to become Chair, all bets are off.

Bitcoin ETF countdown

This may be the week!

The endless lead-up to the expected approval of Bitcoin spot market exchange traded funds (ETF) will hopefully draw to a conclusion this week with approval of up to seven applications. Georgetown University finance professor James Angel believes the Securities and Exchange Commission (SEC) has shot itself in the foot if it wanted to slow the crypto industry. He tells Capitol Account, “The SEC is unleashing the marketing might of the entire Wall Street – all at once. We are going to see the mother of all marketing battles. We’re going to see a lot of direct and indirect advertising.” Read more. (h/t @mud2monarch) Continue reading “Crypto And A Trump Administration; Bitcoin Spot ETF Countdown”

important dates – January 10

Approval of a swarm of Bitcoin spot ETF (exchange-traded fund) applications including financial industry giant BlackRock is expected in early January.

Bloomberg analyst James Seyffart, who has been breathlessly covering the Bitcoin spot ETF application process for months, said on X (Dec. 21), “…we still think this is happening by January 10. Some issuers may be left behind. (…) But base case i’m expecting approvals January 8-10…”

To that end, Fox Business reporter Eleanor Terrett reported on X (Dec. 24), “Confirming the date for final amendments to all S-1s by Friday the 29th. The [the Securities and Exchange Commission (SEC)] has told issuers that applications that are fully finished and filed by Friday will be considered in the first wave. Anyone who is not will not be considered. In addition, the filings cannot mention in-kind creation or they will be rejected.”

what you should know: Approvals seem inevitable given anecdotes ranging from the Grayscale decision in August to BlackRock’s entrance into the Bitcoin spot ETF application process in June. Nevertheless, will SEC Chair Gary Gensler pull a rabbit out of his regulator ‘hat’ and delay the approvals?

important dates – January 14

Senator Elizabeth Warren (D, MA) wants answers by January 14 on former government officials who are working for industry organizations Blockchain Association (letter) and Coin Center (letter) as well as Coinbase (letter). She claims egregious examples of revolving door politics at work in the digital assets industry. All of this as she tries to build support for her Digital Asset Anti-Money Laundering Act (S.2669) while terrorist financing via crypto concerns pulse on both sides of the aisle. Continue reading “Big Dates Loom For Digital Assets And Washington; SBF Trial Is Cancelled”