Bitcoin Regulations News

Iran Considers New System of Annual Registration for Crypto Miners

As part of ongoing maneuvers to legitimize the industry, Iran’s cabinet is looking into a proposal to register cryptocurrency miners on a year-to-year basis.

The proposal

According to documents reported by Coindesk on Sept. 19, a draft proposal to register crypto mining operations is currently on its way to official approval in Tehran. The proposed licenses would require information on employment, rent agreements and other business activities. 

The requirements seem designed to allow the Iranian government to curtail unsavory activities related to cryptocurrency trade while continuing to profit from an industry thriving in a country facing international sanctions and daunting inflation — economic factors that have resulted in a rise in national misery.

Status of crypto in Iran

Recent months have seen a great deal of hubbub surrounding the Iranian government’s attitude towards cryptocurrency within its borders. 

In June, Iran’s Ministry of Energy said that they would be cutting off power to mining operations using the country’s subsidized energy grid until special pricing went into effect. A month later, that special pricing was finalized, with miners expected to pay $0.07 per kilowatt-hour, compared to $0.05 for most citizens. 

Subsequently, at the end of July, Iran authorized mining as an industrial activity. And while the Iranian cabinet rejected the use of cryptocurrencies in transactions at the beginning of August, Iran’s National Tax Administration did agree to exempt repatriated crypto mining earnings from taxation last week.

Source Cointelegraph

New IMF Blog Considers Pros and Cons of Adoption of Stablecoins

The International Monetary Fund (IMF) has released a blog in which it outlines both potential benefits and risks associated with the adoption of new digital payment methods, including stablecoins.

In its recently published blog entitled “The Rise of Digital Money,” the IMF set forth pros and cons of the wide adoption of stablecoins — digital currencies pegged to a physical asset or fiat currency and designed to minimize price volatility. While the agency said that stablecoins could bring significant benefits to customers and society, it pointed out a range of purported risks related to their usage.

The benefits, risks and regulatory issues

In the IMF’s analysis, banks could lose their role as intermediaries, as the public would switch to stablecoin providers. However, banks will purportedly not disappear because they will likely try to compete by developing their own innovations. The blog further states that new monopolies represented by tech giants could evolve. As such, tech companies could use their networks to sidestep rivals and monetize data.

Among other implications, the IMF named policymakers’ need to reinforce consumer protection and financial stability and the possibility of losing of “seigniorage.” In countries subject to inflationary changes, stablecoins in foreign currency could replace local currencies, the blog reads, which could subsequently undermine monetary policy and financial development.

According to the IMF, stablecoins could also boost illicit activities, including money laundering and terrorist financing. “New technologies offer opportunities to improve monitoring, however supervisors will need to adapt to the more fragmented and geographically diverse value chain of stablecoins,” the blog writes.

At the same time, the IMF suggested that stablecoins could enable seamless payments of blockchain-based assets, reduce transaction costs, and increase transaction speed, further adding:

“But the strongest attraction comes from the networks that promise to make transacting as easy as using social media. […] Stablecoins offer the potential for better integration into our digital lives and are designed by firms that thrive on user-centric design.”

The IMF’s plans regarding digital money

In July, the IMF argued that network effects could spark the blaze for the mass adoption of new digital money. The IMF revealed then that it aimed to create a conceptual framework for categorizing new digital money such as Facebook’s Libra and stablecoins and to think through implications for central bank policy.

Earlier in September, head of the IMF Christine Lagarde said central banks and financial bodies should protect consumers but be open to innovations such as cryptocurrencies.

Source Cointelegraph

Zuckerberg Dines With US Democrats Concerned Over Facebook’s Libra

Facebook’s Mark Zuckerberg had dinner with a handful of United States lawmakers, where he was met with intense scrutiny of Facebook’s proposed Libra stablecoin project.

Zuckerberg grilled by Democratic lawmakers

According to an article by the Washington Post, on Sept. 19, the Democratic Senator Mark R. Warner said that during a Sept. 18 dinner with Democratic lawmakers, Zuckerberg heard “consistent concerns about privacy, concerns around vile content and how it came to be dealt with.” 

The U.S. senator added that members asked specific questions about Facebook’s plans to launch Libra stablecoin, a cryptocurrency that has seen plenty of scrutiny in recent months from policymakers around the world. Warner added:

“One of the things I’m very worried about is, when the Facebook representative testified before the Senate, before my committee, he said, ‘You know, if we can’t get American regulatory approval, we won’t launch,’ […] We hear lots of indication Facebook may choose to launch in other nations first. … So somebody is not telling the truth.”

Warner seemed convinced that Zuckerberg heard the concerns from the US policymakers, however, he added:

“I still don’t have 100 percent clarity on whether they feel like they can launch short of U.S. regulatory approval.”

Sen. Richard Blumenthal, who was also present during last night’s dinner, said that he welcomed “the strong, constructive interest shown by Mr. Zuckerberg,” adding:

“We talked about some of the most pressing challenges facing the tech industry, including its repeated failures to [protect] election security and consumer privacy. I focused on the challenges of privacy safeguards.”

Zuckerberg aims to win over US Policymakers

Cointelegraph reported earlier that Zuckerberg is in Washington for meetings with policymakers to discuss internet regulatory matters such as privacy, competition and its handling of political content. These meetings come after months of intense scrutiny of Facebook’s planned Libra stablecoin project from United States lawmakers and regulators.

Facebook facing resistance from European lawmakers

This month, French Finance Minister Bruno Le Maire said that France will not authorize the development of Libra on European soil, followed by the recent news that German Finance Minister Olaf Scholz stated that policymakers cannot accept parallel currencies such as Facebook’s proposed Libra stablecoin.

Source Cointelegraph

BTC Won’t be on Major Exchanges Until More Regulated

United States Securities and Exchange Commission (SEC) Chairman Jay Clayton said that for Bitcoin (BTC) to be traded on a major exchange it needs stronger regulation.

Consider the Nasdaq

CNBC reported on Sept. 19 that Clayton made his remarks earlier today at the Delivering Alpha conference, where he also warned investors to be wary until Bitcoin is regulated and traded on a major exchange. Clayton said:

“If [investors] think there’s the same rigor around that price discovery as there is on the Nasdaq or New York Stock Exchange… They are sorely mistaken. […] We have to get to a place where we can be confident that trading is better regulated.”

Bitcoin not traded on major exchanges

The author of the report points out that, while Chicago Mercantile Exchange’s Bitcoin Future contracts are indeed traded on a major exchange, Bitcoin in and of itself is not. According to the article, attempts to bring Bitcoin to the mainstream include attempts to launch Exchange Traded Funds (ETFs) which have been so far rejected by regulators over concerns spurred by its volatility and fraud in the space.

In the last failed attempt to obtain the approval of a Bitcoin ETF — as Cointelegraph reported yesterday — the Chicago Board Options Exchange’s BZX Equity Exchange withdrew its proposal before the U.S SEC for a VanEck/SolidX Bitcoin ETF.

Source Cointelegraph

Opposition Party Boasts Pro-Crypto Policy in Contrast to Gov’t

South Korea’s main opposition party, the Liberty Korea Party (LKP), is poised to unveil its policy for cryptocurrencies and crypto exchanges.

As Cointelegraph Korea reported on Sept. 19, the LKP’s stance appears to be more radical and pro-innovation than that of the current government, notably in its support for the authorization of tokenized securities. 

Authorizing security token offerings and asset tokenization

The LKP is scheduled to hold a “People’s Report Meeting” at the National Assembly building in Seoul, on Sept. 22, where the party will unveil its final “2020 Economic Transformation” plan. 

The LKP’s Kim Gwang-Lim — a sitting member of the National Assembly’s Strategy and Finance Committee — has revealed that the report was finalized following three months’ work by senior LKP members together with 90 civilian experts from diverse fields.

This public-private consultation has culminated in a policy to boost Korea’s cryptocurrency industry as part of a Fourth Industrial Revolution “Digital Finance Korea” initiative. 

The policy directly opposes the incumbent government’s pro-blockchain, anti-cryptocurrency stance and puts forward the pro-innovation agenda of authorizing blockchain-based securities token issuance and asset tokenization.

As Cointelegraph Korea notes, such a stance aligns with positions currently under consideration in the United States and Japan, where lawmakers are looking to accelerate the institutionalization of the asset class by bringing it under an existing securities regulatory framework.

The KLP’s proposal goes yet further in arguing that cryptocurrency exchanges could function as a competitive counterpart to the legacy Korea Exchange, by offering 24/7 liquidity for alternative investment financial products such as security tokens. 

Opposition and government positions could eventually align

Cointelegraph Korea reports that the KLP seeks to mitigate current regulatory uncertainty and act on the advice of private-sector experts, who have argued that the cryptocurrency industry should be legalized under the premise of investor protection. 

Given the speed of the new sector’s development, legal experts have meanwhile advised that the “government should flexibly discipline or prepare only minimum laws and systems according to existing laws such as capital market laws rather than legislate hastily.”

As regards domestic crypto exchanges, the KLP is advocating a policy that would strengthen international cooperation systems to mitigate risks such as money laundering.

Noting the recent announcement from Korea’s Financial Services Commission that it plans to bring crypto exchanges under its direct regulation, some observers have argued that opposition and government positions may ultimately converge.

Source Cointelegraph

Germany Unveils New Plan to Block Private ‘Parallel Currencies’: Libra

Germany’s government has approved a blockchain strategy that aims to prevent stablecoins from becoming alternative currencies and threatening state sovereignty.

Reuters reported on Sept. 18 that Chancellor Angela Merkel’s cabinet passed the strategy earlier today, in an apparent bid to mitigate the risks posed by the forthcoming Libra cryptocurrency from social media giant Facebook.

We will not leave currency issuance “to private companies”

Reuters cites Finance Minister Olaf Scholz as saying that while the government wishes to further strengthen Germany as a leading technology location and foster blockchain innovation as a core building block of the future Internet, the state remains cautious about prospective  blockchain currency issuance from the private sector:

“We must protect consumers and state sovereignty. A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies,” he said.

The newly-approved strategy will see Germany liaising closely with European and international allies to prevent digital stablecoins from becoming alternative currencies, as well as intensifying its dialogue with the Bundesbank to explore the potential benefits and risks of digital central bank money.

Germany and France cement their anti-Libra stance

As Reuters reports, the strategy document further revealed that the German government aims to put forward new legislation in 2019 that would permit the introduction of blockchain-based electronic bonds.

The president of Germany’s financial watchdog Bafin, Felix Hufeld, had told reporters last week that the agency was in “intensive discussions with Libra.” He voiced his concern that matters of critical economic relevance were only sketchily thought through by Libra’s developers:

“We have asked questions, we have received responses. Very specific questions, less detailed answers.”

Yesterday, Minister Scholz said that Germany would clearly have to reject a parallel currency like Libra, echoing comments from German parliamentarian Thomas Heilmann as well as the staunch anti-Libra stance adopted by France.

Vowing to block Libra’s approval on European soil, French Finance Minister Bruno Le Maire has argued that Europe should consider its own “public digital currency” that would challenge the coin.

Source Cointelegraph

Bitcoin Ban Means Massive Brain Drain for India, Crypto Industry Warns

India is seeing the first signs of an anticipated brain drain, as the government mulls stark legislation that would criminalize domestic cryptocurrency investments.

A Sept. 16 Economic Times report has taken the measure of industry sentiment on the ground, as a proposed blanket ban — currently still in the form of draft legislation — awaits its formal review process by lawmakers. 

“The first large democracy” to ban crypto

As the Economic Times notes, the draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019 has proposed a 10-year prison sentence for anyone who “mines, generates, holds, sells, transfers, disposes of, issues or deals in cryptocurrencies.”

The severity of the proposed penalty and the extreme position reflected in the document — whether or not and in what form it eventually becomes national law — is already prompting local crypto businesses to take pre-emptive measures to protect themselves. 

Rahul Jain — an employee at formerly domestic exchange Bitbns — told the Economic Times:

“As a startup from India, we always wanted to serve from India, but this recent complication has made it difficult for domestic crypto exchanges to operate their businesses in India. So, we are now an Estonia-based company, and any Indian law to criminalize crypto will not impact us.”

Nischal Shetty, CEO and founder of well-known Indian exchange WazirX has meanwhile argued that the proposed bill is poised to erode the wealth of over 5 million Indians who own “crypto assets worth thousands of crores.” 

The executive said that the arbitrary decision to criminalize crypto-asset investment would destabilize existing businesses that have been operating legitimately and make the country an unfortunate pioneer in its role as “the first large democracy to ban an innovative technology such as crypto.”

Missing out on a $10 trillion industry

While local opinions differ as to whether or how the bill will evolve into a definitive statutory shape, the Economic Times’ sources were unanimous in viewing the summer’s developments as a retrograde move for the country. Shetty noted that:

“As a country largely reliant on the services sector, India will lose its edge as a technological power if the ban on crypto is enforced. Shunning this industry will mean massive job losses and a brain drain […] Crypto is predicted to be a $10 trillion industry in the next five years, and if we are to achieve our Prime Minister’s goal being a $5 trillion economy, then crypto is integral to that vision.”

As reported this August, Sidharth Sogani — CEO of crypto and blockchain research firm Crebaco Global Inc —- has forecast that India will lose around $12.9 billion worth of market if cryptocurrency is eventually banned in the country.

Source Cointelegraph

Libra Does Not Threaten Sovereignty of Nations, Says Calibra CEO

CEO of Calibra, Facebook’s digital wallet for its proposed Libra stablecoin, has attempted to debunk the notion of Libra’s threat to the global financial system.

Not new money but a better payment network

Amid the ongoing meeting between Libra founders and 26 global central banks in Basel, Calibra CEO David Marcus has stepped up to protect the position of the Libra Association on Twitter on Sept. 16.

In a Twitter thread titled “About monetary sovereignty of Nations vs. Libra,” Marcus wrote:

“Recently there’s been a lot of talk about how Libra could threaten the sovereignty of Nations when it comes to money. I wanted to take the opportunity to debunk that notion.”

Calibra CEO urged that Libra cryptocurrency project does not intend to form a new currency but rather build a “better payment network and system running on top of existing currencies” to deliver meaningful value to users over the globe. He emphasized that there is no new money creation, which will “strictly remain the province of sovereign Nations.”

Libra wants strong regulatory oversight

Stating that Libra will be backed 1:1 by a basket of strong currencies, Marcus stressed that the Libra Association is willing to have a strong regulatory oversight to prevent the company from deviating from its full 1:1 backing commitment.

The executive concluded that Libra will continue to engage with central banks, regulators and policymakers to ensure that they address their concerns through Libra’s design and operations.

BIS chief says regulators should “coordinate” on cross-border cryptos 

Marcus’ statement comes amid a meeting that is supposed to be the first major encounter between Libra’s founders and global policymakers. 

On Sept. 16, the Bank for International Settlements (BIS) hosted a meeting with senior officials from global public authorities to discuss regulatory issues of stablecoin projects backed by financial institutions and tech firms, the BIS officially stated in a press release shared with Cointelegraph today.

The conference included presentations by the Libra Association as well as global investment bank JP Morgan and blockchain-powered digital cash system firm Fnality International.

Agustín Carstens, general manager of the BIS, pointed out the importance of global regulatory coordination to understand the details of the project. Carstens said:

“A key part of assessing new initiatives is to understand the details […] When such initiatives cross national borders, it’s important for regulators to coordinate and come to a common understanding.”

Meanwhile, the German government spoke out against projects like Libra on Sept. 13, claiming that it will not authorize the development of stablecoins, following France’s footsteps.

Source Cointelegraph

Central Banks to Meet With Libra Founders in Switzerland on Monday

Officials from the European Central Bank (ECB) and 25 global central banks will meet with Libra to assess the financial stability risks of the project.

Central bank forum to challenge Libra

On Sept. 16, Libra representatives will meet with the Committee on Payments and Market Infrastructure (CPMI), a part of the Bank of International Settlements (BIS), in Switzerland, the Financial Times reports on Sept. 14.

The CPMI, a BIS international standard setter and a member of the Financial Stability Board, consists of 28 member banks, including the Bank of England, Deutsche Bundesbank and the Federal Reserve Bank of New York.

According to the report, the event will be the first major encounter between Libra’s founders and global policymakers since Facebook revealed its plans for the stablecoin project on June 18. 

ECB has its own digital currency plans

Benoit Coeure, an ECB executive who will reportedly chair the meeting in Basel, recently said that the bar of regulatory approval for operating Libra in the European Union will be very high. 

Speaking after a gathering of EU finance ministers in Helsinki on Sept. 13, Coeure stated that it was time for regulators to “step up our thinking on a central bank digital currency,” hinting at the possibility of such an instrument for the ECB, as reported by Reuters.

According to Coeure, the ECB started to work on its little-known digital currency project plan before the launch of Libra. The exec is reportedly expected to provide a report on virtual currencies to G7 finance ministers in October.

At the same gathering in Helsinki, French Finance Minister Bruno Le Maire stated that Europe should consider its own public digital currency to challenge Libra. Reiterating concerns over Libra, Le Maire claimed that he would discuss the potential for a supposed “EuroCoin” with his counterparts on the continent next month.

Previously, the BIS warned that financial services provided by major companies such as Facebook, Google and Amazon could generate new risks for the banking sector. 

On Sept. 13, German parliamentarian Thomas Heilmann stated that the government will block projects like Libra, claiming that the authorities are not planning to allow any market-relevant private stablecoins.

Source Cointelegraph

The IRS Is Blindly Coming After Cryptocurrency Traders — Here’s Why

Over the past month, we have seen the IRS, the tax collecting agency of the United States, send out more than 10,000 warning and action letters to suspected cryptocurrency holders and traders who may have misreported digital assets on their tax returns. Letters like the 6174-A, 6173 and CP2000 have appeared in the mailboxes of cryptocurrency traders throughout the country, and the crypto tax software company that I run has seen an influx of frantic customers coming to us for tax help out of fear of penalties.

The problem here is that the IRS doesn’t have all of the necessary information. In fact, not only does it not have all the information, but the information that it does have on the cryptocurrency holders that it is sending letters to is extremely misleading. This information, which was supplied to the IRS by cryptocurrency exchanges like Coinbase, is causing the agency to blindly and oftentimes inaccurately come after cryptocurrency traders.

Related: Internal Revenue Service Sends New Round of Letters to Crypto Holders 

Allow me to break this down further.

How is cryptocurrency taxed in the U.S.?

In many countries around the world — the U.S. included — cryptocurrencies like Bitcoin are treated as property from a tax perspective, rather than as a currency. Just like other forms of property — stocks, bonds, real-estate — you incur capital gains and capital losses that need to be reported on your tax return whenever you sell, trade or otherwise dispose of your cryptocurrency.

Related: How Crypto Is Taxes in the US: A Taxpayer’s Dilemma 

Pretty straightforward: If you make a bunch of money investing in Bitcoin (BTC), you have a capital gain and a tax liability that needs to be reported. If you lose a bunch of money, you have a capital loss, which will actually save you money on your tax bill — though it still needs to be reported.

It doesn’t come as a huge surprise that many enthusiasts have not been paying taxes on their cryptocurrency activity. Because of this, it actually makes a lot of sense why the IRS has started carrying out these enforcement campaigns. However, the agency is using information that is extremely misleading, and it is leading to problems. This misleading information starts with Form 1099-K.

Breaking down Form 1099-K

Cryptocurrency exchanges like Coinbase, Gemini and others issue 1099-K’s to users who meet certain thresholds of transaction volume on their platforms. The IRS states on its website that the 1099-K is an information return used to report third-party network transactions to improve voluntary tax compliance.

In plain English, the 1099-K is used to report your gross transactions on a third-party network — in this case, a cryptocurrency exchange. This means that all of your transactions, buys, sells, transfers, etc. are summed up and reported on a 1099-K. If you meet certain thresholds — gross payments that exceed $20,000 and more than 200 such transactions — you and the IRS are both sent a copy of this 1099-K from the cryptocurrency exchange. The IRS is using these documents to monitor who is and isn’t paying taxes correctly.

These “gross transaction” reports can quickly get extremely large for high volume cryptocurrency traders. Remember, every transaction you made  is being summed together on this form. I purchased $1,000 worth of Bitcoin, and then traded that Bitcoin in and out for Ether (ETH) five times, and my gross proceeds are now over $6,000 — even though I only ever “put in” $1,000 cash! This is because all “buy” transactions are added together to report gross proceeds, and in this case, I technically had six different buy transactions and six different “sell” transactions — a Bitcoin trade into ETH is considered both a buy of ETH and a sell of BTC. 

You can see how this number can become extremely large for a high volume trader. At CryptoTrader.Tax, we’ve seen 1099-K’s from customers in the millions of dollars range when the trader only ever had a few thousand dollars worth of crypto.

Why this is so problematic

1099-K’s are reporting gross transaction amounts and are being sent to the government. Yet, the numbers reported are completely irrelevant when it comes to tax reporting, as you are only actually taxed on your capital gains and losses.

Again as an example, say you purchased $10,000 worth of Bitcoin in April and then sold it two months later for $9,500. You have a $500 capital loss that would be deducted from your taxable income. However, reported on 1099-K, nothing is said of your net loss; the form only tells the government that you have $19,500 of gross cryptocurrency transactions. 

Ultimately, 1099-K is not a form that should be used for tax reporting purposes, yet the IRS is relying on it for enforcement. Many people often mistake the 1099-K that they receive from cryptocurrency exchanges with the typical 1099-B that they might receive from their stock broker or other investment platform outside of crypto. The 1099-B is the correct form that reports all necessary information required to calculate and accurately report capital gains and losses — including cost basis and fair market value of your investments. It’s very easy to determine your total capital gain and loss with this form, contrary to 1099-K.

The fact that the IRS is relying on 1099-K to issue action letters is problematic. Unfortunately, cryptocurrency exchanges do not have the ability to give you an accurate Form 1099-B.

Related: IRS Expands Penalties: Which Tax Mistakes Are Better Not to Commit 

Why cryptocurrency exchanges can’t provide tax reports like a stock brokerage does

Because cryptocurrency users are constantly transferring crypto into and out of their exchanges, the exchange itself has no way of knowing how, when, where or at what cost (cost basis) you originally acquired your cryptocurrencies. It only sees that they appear in your wallet on their platform. 

The second you transfer crypto into or out of an exchange, that exchange loses the ability to give you an accurate report detailing the cost basis and fair market value of your cryptocurrencies, both of which are mandatory components for tax reporting. In other words, cryptocurrency exchanges do not have the ability to provide you with the necessary information to calculate your capital gains and losses. This also means that they also don’t have the ability to provide you with a 1099-B.

Coinbase itself explains to its users in its FAQs that their generated tax reports won’t be accurate if any of the following scenarios took place:

  • You bought or sold digital assets on another exchange.
  • You sent or received digital assets from a non-Coinbase wallet.
  • You sent or received digital assets from another exchange, including Coinbase Pro.
  • You stored digital assets on an external storage device.
  • You participated in an initial coin offering.
  • You previously used a method other than ”first in, first out“ to determine your gains/losses on digital asset investments

These scenarios affect millions of users.

In conclusion

The information that the IRS is receiving from cryptocurrency exchanges does not reflect your capital gains and losses whatsoever. This is problematic because these capital gains and losses are what you actually pay taxes on, not gross transaction amounts.

So, if you received a warning letter from the IRS, don’t panic. As long as you have been properly filing your cryptocurrency gains and losses on your taxes, you should be fine. The absurdly high numbers that you are seeing on these letters are often times irrelevant. Nonetheless, it is a good idea to consult a tax professional who is familiar with cryptocurrency for further help and clarification — especially if it’s an action letter.

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

David Kemmerer is the co-founder and CEO of CryptoTrader.Tax, a tax reporting platform for cryptocurrency investors.

Source Cointelegraph