Binance Rumored to Be Planning New Office in Beijing in First Presence in China Since 2017

Major crypto exchange Binance may be returning to China, with a planned office to open in Beijing, sources say.

Binance in exile

Binance, which left China in September 2017 in response to the country’s ban on crypto trading, is looking to open a new office in Beijing to accompany one operating in Shanghai, two unnamed sources told Coindesk, Oct. 31. 

As of press time, sources at Binance had not confirmed to Cointelegraph plans to establish a new Beijing office, but did say that there were a number of Binance employees currently operating in the Chinese capital. 

The move follows a series of events indicating warming relations between the company and the country, where it was founded by Changpeng Zhao in 2017 before its move to Malta. Indeed, Binance is one of many companies in the crypto industry that seem to be growing friendlier with China.  

In September of this year, Cointelegraph reported on Binance making its first major investment in China since leaving the country. The company took part in a $200 million round of funding for Chinese crypto and blockchain publication Mars Finance.

Crypto thaw in China?

Crypto markets shook on Oct. 25 following Chinese President Xi Jingping’s announcement of support for blockchain innovation in the country. On Oct. 26, Bitcoin (BTC) reported daily gains of upwards of 36% — over 42% according to some exchanges — in what many saw as a result of Xi’s professed support.

Disclaimer: Cointelegraph will update this story in the event of further comment from Binance.

Source Cointelegraph

Market Mostly Trades Sideways as Bitcoin Price Hovers Around $9,100

Thursday Oct. 31 — Cryptocurrency markets are largely trading sideways with most changes among the top-20 coins not exceeding 1% on the day.

Cryptocurrency market daily overview. Source: Coin360

Bitcoin (BTC) has been trading sideways for the better part of the day and continues to circle around the $9,100 price mark. The coin bounced off a local low of $8,960 earlier today before moving to its current trading price at $9,149, showing a small loss of 0.74% on the day.

BTC daily price chart. Source: Coin360

Bitcoin is fighting hard to hold on to its current trading levels, but traders apparently are starting to wonder whether or not last week’s so-called “Xi pump” to $10,540 was a fluke driven by Chinese President Xi Jinping’s call for China to accelerate the development of blockchain technology.

Bitcoin analyst and guest contributor at Forbes and CNBC, Jacob Canfield, just took to Twitter to point out that the “order books on Coinbase glitched out to be non existent” and that Bitcoin exchange Deribit suffered a BTC flash crash to $7,700. “Investigating what happened, but it is still unclear,” he tweeted. 

Ether (ETH), meanwhile, is currently sitting at $182.5 per coin. The number one altcoin saw a small dip in sync with BTC and is showing a loss of around 0.75% at publishing time. 

Cointelegraph contributor Rakesh Upadhyay recently said that Ether is facing strong resistance at $196.483. If the Ether’s price dips below the 20-day EMA, it may remain range-bound between $161.056 and $196.483 for the next few days. If Ether can pick up momentum above $196.483, it will likely move up to $235.70.

Ether seven-day price chart. Source: Coin360

XRP has been trading relatively flat for the better part of the day. The third-largest coin by market capitalization is currently trading at $0.295 per coin, down 0.47% at press time. The recent news that the daily XRP transactions are going through the roof, nearing an all-time high of 1.70 million, has had little to no effect on the price of XRP.

XRP seven-day price chart. Source: Coin360

Top-20 coins show mixed signals

The top 20 coins are showing both green and red candlesticks, with Bitcoin SV (BSV) and NEO taking the title of worst top-20 performers of the day, with losses of more than 6% on the day. 

Cosmos (ATOM) on the other hand is showing an impressive gain of over 5% in the last 24 hours, followed closely by Chainlink (Link), which is recording 4.6% gains on the day.

The overall cryptocurrency market cap currently sits at $245.2 billion, with Bitcoin making up 67.5% of the total.

Keep track of top crypto markets in real time here

Cointelegraph News

New IRS Tax Guidance Targets Crypto, and US Persons Who Use It

On Oct. 9, 2019, the United States Internal Revenue Service issued Revenue Ruling 2019-24 and a series of frequently asked questions, identifying rules governing U.S. taxation of digital currencies. Taxation in the U.S. is unbelievably complex, but the new IRS guidance takes a step-by-step approach to address some of the most common issues facing holders of digital currency.

The basics are as follows: If you hold digital currency and you sell or exchange it, you are subject to U.S. tax. If you are granted digital currency in the form of salary or as a result of a hard fork, you have taxable income. If you receive digital currency as a result of a gift, there is no immediate tax. 

U.S. taxation of digital currency is limited to U.S. persons. Who is a U.S. person? U.S. citizens, U.S. green card holders and individuals who spend more than 183 days in the country (measured using a formulaic three-year lookback). If that is you, a tax obligation may exist. 

How do you measure your gain or loss from a sale or exchange of currency? It’s the difference between your digital currency cost basis and the fair market value of the property you received in exchange. How do you know what your cost basis is? The FAQs provide detailed guidance, but essentially, the IRS allows two methods for identifying your basis: 

1) You can specifically identify the exact currency sold, traced to the ledger, and use the cost of that specific currency to determine your gain or loss. 

2) Or you can use the “first in, first out” method, meaning your basis is computed based on the cost of the oldest currency acquisition in your wallet, moving forward in time as you continue to sell currencies. 

Related: New IRS Guidance: How to Report Crypto Assets Accurately

What about digital currency provided as compensation for services? That type of distribution is treated as ordinary income, not a capital gain, similar to cash paid in the form of salary and wages.

What about cryptocurrency forks? The Revenue Ruling holds that when a taxpayer does not receive units of a new cryptocurrency as a result of a hard fork, the taxpayer also does not have gross income. That is the good news.

However, when units of new cryptocurrency are distributed (either as a complete currency replacement or split with the new currency being issued but old currency still valid), the Revenue Ruling holds that the taxpayer has accession to wealth and therefore has ordinary income. The amount included in gross income is equal to the fair market value of the new cryptocurrency measured as of the date that the distribution (usually via airdrop) is recorded on the distributed ledger. 

While the IRS materials provide much-needed guidance, there are some concerns about unexpected hard forks. Many times you find out about a hard fork after the fact. Nevertheless, the IRS takes the position that taxpayers must track and account for hard fork transactions. Thus, it places the burden on individuals to watch their wallet and trace activity throughout the year.

Also, there is no “de minimis” exclusion. Meaning, every transaction involving digital currency must be reported. What about a purchase of a cup of coffee with crypto cash? This payment gives rise to a taxable exchange. The value of the coffee you just bought less the basis in your currency you provided must be computed and reported to the IRS as a gain or loss.

Compliance efforts

Letter campaign

When did you have to start complying with these basis rules and coffee purchases? Forever. In July 2019, the IRS announced through a news release that it had begun sending “educational” letters to taxpayers with digital currency transactions that have either potentially failed to report income or did not accurately report their transactions. By the end of August, over 10,000 taxpayers had received these letters. There are three letter versions: Letter 6173, Letter 6174 and Letter 6174‑A.

Letter 6173 informs the taxpayer that the IRS has “information that you have or had one or more accounts containing virtual currency and may not have met your U.S. tax filing and reporting requirements for transactions involving virtual currency.” This letter requires the taxpayer to provide a direct response by taking one of three possible actions: 

1) File delinquent returns, reporting any digital currency transactions. 

2) Amend returns to properly report any digital currency transactions. 

3) Provide a statement that explains why the taxpayer believes it is in full compliance, signed under penalties of perjury.

Letters 6174 and 6174-A inform the taxpayer that the IRS has “information that you have or had one or more accounts containing virtual currency.” Though neither of the two letters requires a direct response from the taxpayer, Letter 6174-A expressly warns the taxpayer that the IRS may pursue further enforcement activity in the future.

The three versions of the letters show that the IRS is mining the information it has in its possession and forming views about which digital currency holders it believes are noncompliant, and to what degree. Although the IRS stated in its announcement that “all three versions of the letters strive to help taxpayers understand their tax and filing obligations and how to correct past errors,” Letter 6173 seems to presume that the taxpayer in question already understands the digital currency reporting requirements and has chosen not to comply with them. Letter 6174-A is a step down from Letter 6173, but it still assumes a higher level of knowledge on the part of the taxpayer than Letter 6174 does.

John Doe summons

The letters followed the IRS’s issuance of a “John Doe” summons to Coinbase, one of the largest platforms for exchanging Bitcoin and other forms of digital currency. Through the John Doe summons, the IRS sought information regarding all Coinbase customers who conducted transactions on the Coinbase platform between 2013 and 2015. Coinbase resisted the summons and sought to narrow its scope.

In late 2017, the U.S. District Court for the Northern District of California ordered Coinbase to produce the taxpayer identification number, name, birthdate, address, records of account activity, and all periodic statements of account or invoices. Ultimately, Coinbase produced documents for approximately 13,000 customers. While it is widely speculated that the IRS identified the initial group of more than 10,000 taxpayers to receive compliance letters using the data provided by the Coinbase subpoena, any taxpayer with dealings in digital currency should anticipate increased IRS scrutiny.

Revised draft Form 1040

Following the issuance of the October Revenue Ruling and FAQs, the IRS also released a draft Form 1040, Schedule 1 — which, if adopted, will require taxpayers to answer whether at any time during the year the taxpayer sold, sent, exchanged or otherwise acquired any financial interest in digital currency. The change in Form 1040 would place taxpayers in the position of having to think about their digital currency holdings and inquire whether there have been taxable events that need to be reported and taxed.

Methods of coming into compliance

In light of increased enforcement and compliance efforts on the part of the IRS, it is especially important for taxpayers who have held digital currency in the years preceding 2019 to seek advice from a competent tax professional to determine if there have been any taxable transactions associated with the acquisition or disposition of digital currencies. If there was a reportable transaction left off an income tax return, the IRS could impose significant penalties and interest charges. The IRS is also reviewing income tax returns to determine if the noncompliance was due to willful conduct. Such review can result in criminal referrals and prosecutions for filing false tax returns.

There is good news in the face of the potential enforcement of noncompliance. Most taxpayers can take advantage of the IRS’s voluntary disclosure policy, which mitigates penalties. And for those taxpayers who received letters directly from the IRS, options for taking affirmative action are outlined in the letter. The bottom line is this: If you have held digital currency at any time, you should contact a qualified tax professional to assist you in evaluating your tax situation.

The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

James N. Mastracchio is a partner resident in New York and Washington, D.C. and heads Eversheds Sutherland’s federal tax controversy and criminal tax practices.

Sarah Paul is a partner at Eversheds Sutherland who practices in the firm’s litigation, federal tax controversy and criminal tax groups. Prior to joining Eversheds Sutherland, Sarah was an assistant United States attorney in the Southern District of New York, where she supervised all of the district’s criminal tax cases.

Katie Sint is an associate in the tax practice of Eversheds Sutherland’s Washington, D.C. office. She counsels clients in an array of federal income tax matters, including domestic and international tax planning, mergers and acquisitions, accounting and controversy.

Source Cointelegraph

Bitcoin and Stocks Break 2019 Inverse Correlation Trend — Chart Data

In many ways, Bitcoin (BTC) and the crypto markets as a whole live somewhat independently from traditional markets. The global crypto space never sleeps, operating at all hours of the day on a global scale.

Traditional market price movements and conditions, however, may still have an impact on Bitcoin. If the economy is healthy, seeing rising prices for traditional market indices such as the S&P 500, it makes sense that people might be more willing to take risks by putting money into Bitcoin, an asset that is still speculative at this point in its history.

Crypto-Twitter has hosted many discussions on Bitcoin’s potential reaction to an overall market recession, which the digital asset has not yet truly seen since its creation in 2009. The jury is still out on how the asset and its surrounding blockchain industry might react to such a scenario.

Comparing daily charts: S&P 500 and Bitcoin

Comparing Bitcoin’s price with the S&P 500 index over the last two years shows some interesting data. 

A major benchmark of traditional finance, the S&P 500, takes the 500 biggest public companies in the United States and averages their stock prices into an index, providing a single price that reflects the overall market performance. 

For the most part, over the course of 2018 and 2019, Bitcoin and the S&P 500 acted surprisingly opposite to each other, with the exception of two instances when the two markets seemingly flowed together.

S&P 500 USD daily chart. Source: Tradingview 

S&P 500 USD daily chart. Source: Tradingview 

BTC USD daily chart. Source: Tradingview

BTC USD daily chart. Source: Tradingview

Several comparisons can be made between the S&P 500 and Bitcoin over the course of 2018 and 2019. 

Starting in 2018, between Jan. 26 and Feb. 8, both prices suffered a steep decline before bouncing in similar fashions. 

Between February and September, the S&P and Bitcoin rode opposite trends. The traditional market index gradually rose to new all-time highs while crypto’s largest asset trended down, dropping more than 40% between March and September 2018.

On Sept. 21, the S&P hovered around all-time high levels while Bitcoin fluctuated near $6,000 support during a time of low volatility. At this point, Bitcoin was nowhere near its yearly high above $17,000, which the digital asset hit in January 2018.

The S&P saw the bottom of a correctional period around Christmas, which was similar to Bitcoin’s market state this time, although Bitcoin saw a big drop earlier — from $6,000 to nearly $3,000 — in November 2018, and did not bounce with exuberance like the S&P.

Instead, BTC bottomed out with consolidation and low volatility until April 2019. 

Bitcoin soars 70% in May 2019 as stocks correct

The S&P was back near its all-time price highs by May 1, 2019. Meanwhile, Bitcoin was in the early stages of its uptrend — a trend that would eventually more than double the digital asset’s price. 

During the month of May, the two market products acted strikingly opposite to each other. The S&P faced a rather bold correction, just over 7% to the downside as Bitcoin rose more than 70% in the same time period.

The inverse correlation between continued into July, with the S&P posting new all-time highs once again around July 26, while Bitcoin was consolidating after its 2019 high near $13,900.

This pattern was also displayed in late July as well, with a sharp Bitcoin bounce while the S&P saw a notable decline. 

On the whole, since August 2019, the S&P stayed in an upward trend, while Bitcoin has seen an overall downward trend until recently, in what may be the start of a potential bullish reversal. 

Is Bitcoin an alternative investment?

Since May 1, 2019, Bitcoin and the S&P 500 have been inversely correlated for the most part, particularly when it comes to sizeable moves. Recently, however, the S&P has hit record levels, coinciding with Bitcoin’s historic 42% daily price gain on Oct. 25 and, therefore, undermining the summer’s inverse correlation patterns.

As Bitcoin is often pitched as a borderless, decentralized and alternative digital asset, it should, in theory, act independently of traditional markets. Buyers of Bitcoin, however, often need cash to pay for Bitcoin, which is ultimately affected by politics and traditional markets, leading to a correlation between the two worlds. 

Not everyone buys Bitcoin as a hedge narrative

Bitcoin as a hedge to government currencies and traditional markets is a hot topic these days, particularly in light of the recent economic unrest in countries like Lebanon. 

Since May 2019, the charts above show Bitcoin as a potential hedge against the S&P 500, which in many ways represents the overall state of traditional financial markets. 

This inverse correlation, however, was not as consistent in 2018. Anthony Pompliano, the co-founder of asset management firm Morgan Creek Digital, has spoken on the topic of Bitcoin as a hedge. In August 2019, Pompliano said

“Central banks bought more than $15 billion of gold in the first 6 months of the year. They are trying to hedge their risk to the U.S. dollar. Wait till they find out about the non-correlated, asymmetric upside profile of Bitcoin. Every central bank will be buying Bitcoin.”

Fundstrat managing partner and Bitcoin permabull, Tom Lee, holds the opposing view, however, arguing that BTC/USD moves with traditional markets. In a Sept. 12, 2019 tweet, Lee said:

“Unpopular opinion, Bitcoin won’t make a new high until S&P 500 makes a new high. BTC has been range bound because macro trendless. Confirmed by our Bitcoin Misery Index falling from 66 (50 now). Since 2009, best years for Bitcoin is when S&P 500 >15%.”  

Comparing charts from the S&P and Bitcoin shows compelling — but certainly not conclusive — evidence for the Bitcoin hedge narrative. It is also important to consider the many other factors that might affect correlation data, such as central bank policy, inflation, etc. 

For example, as Cointelegraph reported earlier this month, the United States Federal Reserve has added $210 billion to the market over the past two months — an amount greater than Bitcoin’s entire market cap of $167 billion — and one that could make deflationary assets such as gold and Bitcoin attractive to investors. 

The views and opinions expressed here are solely those of (@benjaminpirus) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Cointelegraph News

The SEC Files as the CFTC Settles Charges Against Swiss Securities Dealer

The United States Securities and Exchange Commission (SEC) has filed charges against XBT Corp. SARL on the same day that the Commodity Futures Trading Commission (CFTC) settles charges against the same company. 

SEC allegations

In a press release on Oct. 31, the SEC alleged that the Switzerland-based securities dealer, XBT Corp. SARL, operating under the name First Global Credit, offered and sold unregistered security-based swaps to U.S. investors without complying with the registration and exchange requirements governing security-based swaps. 

The SEC went on to say that XBT Corp. SARL used a multitude of marketing methods to entice U.S. individuals into using Bitcoin (BTC) to buy and sell a variety of investment products. Reportedly the company attempted to use different terminology to describe the investments it offered, such as “Bitcoin Asset Linked Notes,” to which regional director of the SEC’s Fort Worth regional office David Peavler commented:

“Federal securities laws impose specific requirements for offering and selling security-based swaps to retail investors in the U.S. These obligations cannot be avoided merely by describing the swap transaction by a different name or funding it with digital currencies.”

The SEC’s complaint further stated that XBT Corp. SARL also failed to transact its security-based swaps on a registered national exchange and also failed to properly register as a security-based swaps dealer.

Without admitting or denying the findings in the SEC’s order, XBT Corp. SARL agreed to a cease-and-desist order and to pay disgorgement of $31,687 and a penalty of $100,000.

CFTC also charges XBT Corp. SARL

The CFTC filed and settled similar charges against XBT Corp. SARL for its failure to register with the Commission as a futures commission merchant.

The CFTC’s complaint requires the company to pay another $100,000 civil monetary penalty and disgorge gains received in connection with its violations and to cease and desist from future violations of the Commodity Exchange Act. CFTC Director of Enforcement James McDonald said:

“This case demonstrates that the CFTC will hold intermediaries accountable if they solicit or accept orders without properly registering with the agency. This case also underscores that the Commission will continue working with our law enforcement and regulatory partners to ensure the integrity of our markets.”

Source Cointelegraph

Crypto Futures Volume Is Now At 50% of Spot Trading Volume

Crypto futures trading volume now reportedly amounts to nearly 50% of the value of spot trading on crypto markets, according to Bloomberg.

13 exchanges analyzed

Citing volume data from 13 major global crypto exchanges, Bloomberg reported on a massive growth of cryptocurrency futures markets Oct. 31.

The analyzed exchanges include institutional digital asset platform Bakkt, the Chicago Mercantile Exchange Group (CME), Binance, Bitfinex, the Huobi Derivative Market (DM), Kraken, FTX, Bitz, Deribit, CoinFlex, Bybit, OKEx and BitMEX.

First ever Bitcoin futures launched in late 2017

Spot trading is simply buying or selling a commodity or, in this case, a crypto asset at the moment of the trade. Prior to the launch of the first Bitcoin (BTC) futures platform back in 2017, spot trading was the principal option available for crypto trades. The Chicago Board Options Exchange (CBOE) launched the first trading of BTC-based futures contracts on Dec. 11, 2017, just a week before the launch of a similar product by the Chicago Mercantile Exchange (CME).

The Bloomberg report follows a new Bitcoin futures volumes record on major digital asset platform Bakkt, which launched its service on Sept. 22. On Oct. 26, Bakkt traded 1,183 Bitcoin futures contracts worth of $11 million after hitting a previous all time record of 441 Bitcoin futures on Oct. 23.

On Oct. 29, OKEx, the world’s 5th-largest crypto exchange by trading volume, announced plans to start trading Tether (USDT) futures.

Cointelegraph News

Tracking Bitcoin Transactions, Explained | Cointelegraph


To begin with, it’s important to ensure that you’re paying sufficient fees.

Over the years, the number of transactions being executed over the Bitcoin network has continued to increase apace. This has meant that miners end up prioritizing transactions with higher fees, including these in their blocks first.

When a crypto transaction is sent with a lower fee, it can take hours, days and potentially weeks for it to be confirmed. Such long delays normally indicate that the transaction is continually being outbid, and miners have little incentive to get it cleared. As a result, it ends up languishing in a mempool, waiting longingly for a block to come along.

Crypto wallets — and some exchanges — have started to help users achieve the best chance of their transaction being verified the first time around. Some monitor network activity and enforce dynamic fees, meaning the charges attached to each transaction fluctuate based on how busy miners are. If you are in a rush, it is also possible to manually add a higher fee to boost your chances of a speedy execution. Conversely, if you’re not a rush, you can save money on fees and accept it might take a little longer for your funds to reach the recipient.

Cointelegraph News

Zilliqa Offers $5M Fund to Oxford DLT Students to Support Diversity

Singapore-based blockchain firm Zilliqa launches blockchain workshops in collaboration with Oxford University to encourage diversity in the industry.

Together with Zilliqa, the Oxford Women in Computer Science Society (OxWoCS), an Oxford society that aims to support women in computer science, will carry out a series of interactive workshops called Blockchain A-Z, according to a press release shared with Cointelegraph on Oct. 31.

Winners to apply for grants to Zilliqa’s $5 million Ecosystem Grant Programme

According to the announcement, Blockchain A-Z will be conducted on-site at the University of Oxford and will be open to all students currently enrolled at the University of Oxford. Limited to 20 students, the workshops will take place between Oct. 31, 2019 and Nov. 21, 2019. The workshops will cover a wide variety of topics associated with blockchain fundamentals, including philosophical foundations, technical topics, industry insights as well as business advising, the firms said.

As part of Demo Day on Nov. 21, the best students will be invited to submit their projects to acquire a grant from Zilliqa’s $5 million Ecosystem Grant Programme for further mentorship.

Decentralization doesn’t work without diversity

In the announcement, OxWoCS President Paula Fiddi outlined OxWoCS’ mission to ensure that female experts are provided with equal opportunities to engage with various fields of the technology industry.

Saiba Kataruka, developer marketing lead at Zilliqa, emphasized that diversity issues continue to be an “endemic problem in the wider tech industry,” adding that blockchain is no different. She stressed that decentralization is a core principle of blockchain technology that cannot be reached without diversity.

“Whether it be the diversity in race, profession, academic background, or gender, having a variety of individuals, each with a unique perspective and broad breadth of experiences to offer, is essential to success. Decentralisation is a core principle of blockchain, and you can’t really have decentralisation without diversity.”

Low level of gender equality in blockchain

According to a 2018 Quartz survey, only 8.5% of 378 global crypto and blockchain firms had a female as a founder or co-founder between 2012 to 2018.

Earlier this year, another research revealed that fewer than 5% of the codes of the top 100 crypto projects on Github were contributed by women.

Source Cointelegraph

Claims Deadline Pushed Back to Spring 2020

The trustee in charge of refunding users who lost money in the implosion of Bitcoin (BTC) exchange Mt. Gox has again extended the submission deadline for claims. 

In a statement released on Oct. 28, Nobuaki Kobayashi said that the high volume of problematic requests for money meant that a five-month extension was inevitable.

New claims deadline March 31, 2020

In a statement released on Oct. 28, Nobuaki Kobayashi said that the high volume of problematic requests for money meant that a five-month extension was inevitable. 

Kobayashi confirmed the plan just one day before the current deadline arrived. That, too, was the result of an extension which the trustee agreed in April. 

“A large amount of rehabilitation claims that the Rehabilitation Trustee fully or partially disapproved remains undetermined for being subject to claim assessment procedures and appeals against a decision on a petition for claim assessment,” he explained.

Kobayashi’s statement concluded:

“In light of the foregoing, the Rehabilitation Trustee filed a motion to seek an extension of the submission deadline of a rehabilitation plan at the Tokyo District Court, and, on October 25, 2019, the Tokyo District Court issued an order to extend the deadline for a rehabilitation plan to March 31, 2020.”

Almost six years since collapse

As Cointelegraph reported, a total of around 24,000 people were implicated in the Mt. Gox debacle. The exchange collapsed in early 2014, with a lengthy legal process still to award any refunds. Around 850,000 BTC (at the time worth $460 million) disappeared from its books. 

The cryptocurrency industry is also keenly eyeing another exchange’s demise this year. Canada’s QuadrigaCX, the founder of which suddenly died in late 2018, still owes around $145 million to its 115,000 creditors.

The founder’s widow handed over $9 million in assets last month.

Cointelegraph News

Canada Pushes to Regulate Crypto Adoption, Forgoing Volatile BTC Past

Recently, Canada’s central bank has been leading working groups with global partners exploring a blockchain future. Their crypto presence has soared with Ernst & Young’s announcement that it is using Toronto to test its public government expenditure blockchain. But what is the cryptocurrency landscape currently like in Canada? 

The history of crypto in Canada may seem as volatile as a token with a small market cap, yet mainstream use and adoption have been on a consistent incline since 2013, when Canadians started pushing mainstream adoption. Now, the Canadian government is leading working groups. What else has the country been up to in the blockchain space?

The first thing that comes to everyone’s mind when it comes to the Great White North is that the founder of Ethereum, Vitalik Buterin, grew up in Canada — but Etherum isn’t all the country has provided to the crypto space. Here are some more notable stories from Canada’s blockchain history.

Timeline of blockchain adoption in Canada

The world’s first Bitcoin ATMs

Canada contributed to Bitcoin’s (BTC) mainstream use early on by opening the world’s first Bitcoin ATM at a coffee shop in Vancouver in 2013. The ATMs were released by Bitcoiniacs and Robocoin. Bitcoin was trading at around $200 at the time and, during the first day, the kiosk performed 81 Bitcoin transactions equaling around 81 BTC.

The ATM is considered a strong driver for attracting new people to cryptocurrency, with around a third of its users new to Bitcoin. In an interview with Cointelegraph back in 2013, Robocoin CEO Jordan Kelley marveled at how easy it was for people to get started with Bitcoin. According to industry monitor CoinATMRadar, there are at least 715 cryptocurrency ATMs in Canada, with 85 in Vancouver and 227 in Toronto. 

Operation Cryptosweep

It is easy to agree that the initial coin offerings (ICOs) craze produced more losers than winners, as many took advantage of the hyped-up funding method to conduct scams. In response, state and provincial securities regulators in the United States and Canada launched probes into potentially fraudulent crypto investment programs as part of the North American Securities Administrators Association’s Operation Cryptosweep in 2018. The initiative is reportedly the largest coordinated investigation held by state and provincial officials targeting suspicious crypto investment products, and has resulted in over 200 investigations of ICOs and crypto-related investment products.

Operation Cryptosweep has issued at least 77 actions against crypto programs, including the infamous BitConnect, which has gone down in history as one of the largest cryptocurrency scams.

Vancouver mayor suggests a ban on Bitcoin ATMs

The mayor of Vancouver, Kennedy Stewart, suggested a complete ban on Bitcoin ATMs in the summer of 2019 due to Anti-Money Laundering (AML) issues associated with the ATMs. The associated police report claims that criminals could purchase a Bitcoin ATM for their own needs for a few thousand dollars, and then deposit their cash into that ATM “as many times as required” to profit from or eliminate the transaction fees.

While many Canadian governing bodies have already taken steps against cryptocurrency, British Columbia’s review into the alleged money laundering activities is ongoing. Canada saw the amount of money laundering claims triple last year to 2,466 claims

Money laundering claims reviewed in Canada

When speaking to Cointelegraph, Andrey Peshkov, the CEO of money transfer app USDX Wallet, dismissed the concerns surrounding money laundering using cryptocurrency in Canada, remarking:

“I do not think that cryptocurrency holders try to laundering money in Canada because they are obligated to pay taxes. Many countries do not require holders to pay taxes from their crypto income making them more attractive to bad actors.”

Related: Head of Crypto Capital Arrested in Connection With Money Laundering

Flexa and Coinsquare integrate physical retail payments for Canada 

However, not all news surrounding Canada recently has been negative.The Winklevoss-backed cryptocurrency payments service Flexa, which allows merchants such as TopGolf to accept cryptocurrency, has seen strong acceptance around the country. 

Related: Where to Spend Bitcoin: A Global Overview From Ljubljana to Zurich

Current estimates show that over 7,500 businesses have signed up on the platform to offer crypto payments to their customers, indicating that business owners in Canada see a need to provide payment solutions in crypto. 

Canada audits QuadrigaCX exchange

A review of Canada in cryptocurrency would not be complete without talking about QuadrigaCX, a defunct Canada-based exchange. The company began grabbing headlines ever since its CEO Gerald Cotten was declared dead in India without ever having revealed the keys to access the company’s cryptocurrency reserves. When these reserves were discovered inaccessible, the business became insolvent, declaring bankruptcy. 

Related: QuadrigaCX Users Lose $190M as Speculations Over Cotten’s Death Swirl

The Canadian company’s bankruptcy trustee was Ernst & Young, a Big Four accounting agency. A bankruptcy trustee oversees the exchange’s insolvency proceedings focusing on auditing from a tax and creditor perspective.

Recently, the widow of QuadrigaCX Founder Gerald Cotten, Jennifer Robertson, paid $9 million in assets to the users of QuadrigaCX through EY. Robertson wrote in a personal statement, “The vast majority of my assets and all of the Estate’s assets are being returned to QCX to benefit the affected users.”

While the widow may not have been aware of her husband’s alleged malfeasance, what happened suggests that Canada is determined to rid cryptocurrency of fraud to protect both investors and holders. According to EY, Robertson’s late husband created fake accounts under several pseudonyms and used them to trade users’ money on the QuadrigaCX platform to show artificial income. The auditor also said that much of the funds were eventually transferred to personal accounts that he controlled. 

High-paying employment in Blockchain Consensus report

The Blockchain Consensus report was released on Oct. 4, 2019 by the Chamber of Digital Commerce Canada, exploring the blockchain ecosystem in Canada. The report takes a closer look at Canada’s blockchain ecosystem, breaking down insight by region and company size. The report also states that government commitment is desperately needed to move this highly innovative technology sector forward by providing legal clarity.

Further, the report includes statistics that highlight the average annual blockchain salary in Canada sitting at more than $98,000 Canadian dollars, making blockchain careers among the highest-paying in the country. The CEO of Shortex, Vladimir Prosvirkin, remarked on this report to Cointelegraph:

“Canada is one of the leading countries adopting blockchain technology on a corporate level. Every second company is invested in blockchain somehow last year. Due to the country’s low energy cost, high internet speeds, and favorable regulations, blockchain and cryptocurrency industries have always prospered here.”

Piloting government spending tracking in Toronto

In an effort to increase transparency, EY started tracking how public funds are spent in the capital city of Toronto. As reported by Cointelegraph on Oct. 16, the system can track the government’s public funds as they move through different state agencies, providing transparency to the public. 

According to EY, data provided by the platform can potentially be used to better inform future decision making on policies. Upon the pilot program’s launch, EY issued a statement, “Blockchain technology can positively impact processes from tax collection to open data to public spending.” A Bitcoin-conscious and highly functioning city like Toronto may benefit from greater transparency in government spending and provide an important use case. 

G-7 working group on stablecoins

On Oct. 13, 2019, the Bank of Canada released results from the G-7 working group on stablecoins that was tasked with “investigating the impact of global stablecoins” as a whole. While much has been written about the strong language in the report, such as “Stablecoins pose a threat to financial security,” it also outlines ways in which governments and digital securities can work together. Participants included the Bank of England, the Bank of Canada, the Bank of France, the European Central Bank, the Bank of Italy, the Bank of Japan and the United States Department of Treasury.

On the eve of the G-7 working group, Anthony Pompliano, co-founder and partner at Morgan Creek Digital, noted that it has taken only a decade from Bitcoin’s creation for the “decentralized digital currency to go from basically the fringes of the internet to now being discussed at the G-7 and other regulatory offices.”

Challenges lie ahead for stablecoins

The report goes on to outline the challenges that stablecoins need to overcome in order for them to remain in compliance. Focusing on private stablecoins, the report highlights that stablecoins, regardless of size, pose some major risks such as regulatory, security, and those relating to financial reporting and misconduct. 

Further, the paper addresses challenges and risks that globally adopted stablecoins like Tether (USDT) pose to monetary policy, financial stability, the international monetary system and fair competition. Jude Regev, the founder of Element Zero, an open-source network that provides branded stablecoins and a fee-free on-chain SmartSwap, noted to Cointelegraph:

“Private stablecoins will need to be more similar to a shield that protects purchasing power and provides security against hacking. When Central Bank’s like Canada issue their own digital currencies and other countries do the same, being able to create stable interoperability between each countries’ fiat onboarding will add the most value to the ecosystem.”

Based on international conversations and the working session led by Canada in conjunction with other countries, it is clear the country sees both value and risk in stablecoins. The working document shows a future where digital currency will utilize banks only as a means for fiat onboarding. The document seems to address two known stablecoin protocols, an algorithmic stablecoin like DAI and asset-backed stablecoins like Tether. 

Toward the future

Canada’s blockchain history is marked by triumph and struggle. The Crypto Canucks are constant drivers and mass adoption is incoming through all the perceived barriers. From the first Bitcoin ATM to considering banning Bitcoin ATMs to leading the international community toward adoption, the Great White North has been at the forefront for both cryptocurrencies’ benefits and risks. 

While adoption continues to increase, inappropriate regulation could potentially hinder some projects in the country. Guidelines may end up forcing private stablecoins to comply with securities laws in big countries or to even become banks, significantly raising the barrier to entry. Alternatively, countries may turn to outlawing private stablecoins altogether for fear of harm coming to their existing banking systems.

Cointelegraph News