Blockchain Bites: Crypto Tax Switcheroo, Stablecoin Confusion, the Post-Capitalist Plunge
Fintech giant Plaid has quietly added support for two DeFi applications, the IRS wants to know about your crypto holdings and data shows the total value of stablecoins has surpassed the $20 billion milestone.
Plaid <3 DeFi
Visa-owned fintech company Plaid, which connects traditional bank accounts to thousands of digital platforms has quietly added support for Dharma’s DeFi wallet and Teller Finance, a DeFi startup bringing unsecured lending to the Ethereum blockchain. CoinDesk’s Ian Allison got the scoop that Plaid’s head of UK, Keith Grose, is a believer in decentralized and open applications, even if it’s a cynical attempt for fintech to manage its own disruption. “I think it’s still a long way before DeFi becomes part of the main route for finance, but it’s a really exciting corner and one that personally I’m passionate about,” Grose told Allison. “We’re only scratching the surface…”
The U.S. Internal Revenue Service (IRS) is reportedly repositioning a question about crypto transactions that will make it harder for taxpayers to avoid declaring their holdings. According to a Wall Street Journal report Friday, the IRS is updating the 1040 income tax form for 2020 to require that all returnees check a box if they have transacted any crypto assets over the year – placing the question at the top of the document, rather than buried further down, the WSJ says. A law expert told the WSJ that the question would make it easier for the IRS to win cases if the taxpayer checks the “no” box and is later found to have held crypto. Half a world away, four Knesset members are seeking to ease Israel’s 25% capital gains tax on cryptocurrencies through draft legislation.
A new bipartisan-backed bill aims to clarify investment contract assets or digital tokens sold as part of a securities offering are separate and distinct commodities, not securities, CoinDesk’s Sandali Handagama reports. Introduced by Chairman of the National Republican Congressional Committee Rep. Tom Emmer (R-Minn.), the legislation would amend existing securities laws to exclude tokens from the definition of a security. Chief Policy Officer for the Chamber of Digital Commerce Amy Davine Kim, said tokens – issued by companies that register with the SEC – are the object of an investment contract and not necessarily a security. Rep. Michael Conaway (R-Texas), who joined Emmer in introducing the legislation, proposed a separate bill Thursday that could bring digital currency exchanges under a single federal framework.
China & crypto
Ant Group has launched a cross-border trading blockchain platform, called “Trusple.” The Antchain-based trading platform will make it easier for small and medium-sized enterprises (SMEs) to sell their wares to clients overseas, by automating payments and order placements. Ant has partnered with the likes of Standard Chartered, Deutsche Bank and BNP Paribas to help “optimize” the process. Ant, a sister to Alibaba Group, is looking to raise a record $35 billion in a dual public listing. Meanwhile, Chinese state media have broadcasted a coordinated campaign declaring that “cryptocurrency has undoubtedly become the top performing investment” this year. CoinDesk’s Wolfie Zhou said while many are responding to the bullish signal others are concerned about the potential agenda behind the rare coordinated effort.
Andreessen Horowitz’s (a16z) late-stage venture fund has received a green light from the U.S. Federal Trade Commission (FTC) for a transaction involving Coinbase. The VC giant’s $2 billion fund, Andreessen Horowitz LSV Fund I, L.P, received antitrust clearance from the FTC in a filing dated Sept. 22 involving “Coinbase Global, Inc,” Coinbase’s parent. CoinDesk’s Danny Nelson and Zack Steward report it is unclear whether the approval is for the fund’s previously disclosed purchase of shares in the cryptocurrency exchange or for a new purchase. Though, given Coinbase’s $8 billion valuation would represent nearly half of a16z’s $16.6 billion assets under management, it’s extremely unlikely the clearance is for an outright purchase.
Earlier this week stablecoin issuers received a reassuring message from some of the top U.S. financial regulators: parking your fiat reserves in banks is a-okay.
On Monday, the Comptroller of the Currency (OCC), under the U.S. Department of the Treasury, issued official guidance declaring that national banks and federal savings associations can hold reserve funds for stablecoin issuers. It was a signal for these issuers to continue what they already have been doing for years.
Indeed, the dollar-backed stablecoin market nearly quadrupled in size over the past year – from around $5 billion in September 2019 to around $20 billion currently – with much of that wealth backed by reserves held in bank accounts. Much of this growth has been driven by international demand for dollars as well as the increasingly sophisticated financial tools being built on top of public blockchain technology. Since its inception, however, the stablecoin market has existed amid regulatory ambiguity.
The new ruling, the first federal guidance issued regarding stablecoins, adds legitimacy to the booming market sector and paves the way for more banks to enter the ecosystem, say industry commentators. Still, it’s unclear whether the mandate will have any short-term significance.
“If you don’t have guidance from the banking regulator about how banks can participate in those schemes – or arrangements, rather – that would limit growth. It paves the way for growth,” Jeremy Allaire, CEO of Circle said over Zoom. “But it doesn’t change the way Circle operates today.”
Allaire isn’t alone in his thinking. “The letter indicates a positive sentiment coming from a top government agency,” Kristen Smith, founder of the Blockchain Association, a D.C. crypto advocacy group, said. “Will it have any major practical changes for the way fiat-backed stablecoins operate? Probably not.”
The total value of stablecoins has now surpassed $20 billion, reflecting the growing demand of investors looking to hedge their risks in both crypto and traditional markets amid the coronavirus pandemic. Data from Coin Metrics show that the total value of assets for all stablecoins breached the $20 billion mark Thursday, only a little more than four months after the number broke a $10-billion record in May. Stablecoins are digital tokens, the values of which are pegged to fiat currencies like U.S. dollars.
Three Arrows Capital completed the largest single issuance of new wrapped bitcoin tokens by any merchant, minting 2,316 WBTC through BitGo Thursday afternoon. The Singapore-based firm’s mint represents nearly 3% of the current wrapped bitcoin supply, just over 81,000 at last check. One week ago, Alameda Research set the previous record for most tokens issued in a single mint with 1,999 WBTC issued. Since January, the total supply of wrapped bitcoin has grown by over 13,000% from less than 600 WBTC, according to data from Dune Analytics, CoinDesk’s Zack Voell reports.
Privacy tech company Aleo has launched a data privacy-oriented blockchain and developer kit to make writing zero-knowledge proofs in web applications easy and scalable. CoinDesk’s Ben Powers reports the startup is releasing its first round of software tools to let developers write private applications for the web using a new programming language called Leo, as well as integrate these tools into pre-existing browsers’ functions. Aleo leverages zero-knowledge proofs (ZKPs), a cryptographic technique that allows two parties on the internet, such as an app and a user, to verify information with each other without sharing the underlying data related to this information.
Jonathan Beller is Professor of Media Studies at Pratt Institute and member of the Economic Space Agency (ECSA) think-tank. His forthcoming book The World Computer: Derivative Conditions of Racial Capitalism will be published by Duke UP in 2021. This essay is part of the Internet 2030 series exploring the future of the digital economy. The essay excerpted below is part of CoinDesk’s ongoing Internet 2030 series exploring the future of digital technologies and cultures.
Now, in 2030, there is a global movement to redesign the convergence of communications and monetary media as post-capitalist economic media.
The internet of the past has been clearly grasped as an extension of capitalism that turned everyone to workers in the social factory, who are paid in company scrip, while the real value was hoarded by shareholders. The “background monetization” of our words, images, locations, faces and metabolic processes was recognized as a key impediment to general emancipation and as a blockade against solving world historical problems including climate change.
Indeed, some claimed (rightly from our perspective), that the economic logic of the internet in 2020 also prevented the possibility of adequately addressing the egregious forms of profitable oppression that come under various headings including “racism” and “sexism,” endemic to what was essentially racial capitalism.
No longer, it had been decided by a growing number of Earthlings by 2030, will companies and governments strip us of our expressive power, our powers to create cultures, worlds and value(s). No longer will they devalue our lives in accord with their agendas.
We will no longer alienate our “content” as property for someone else’s platform, we will no longer provide labor for someone else’s capital, we will no longer be a pawn in centralized sovereign governance that couldn’t care less about us. We refuse the psychopathology and megalomania that comes from having to assert ourselves by actively denying the real conditions of existence, conditions that inexorably convert our expression into murder.
In short, as one manifesto put it, “We will no longer serve as batteries for someone else’s matrix.”
CoinDesk’s “Internet 2030” series examines the future of the medium and what role blockchain and crypto will play in it with content and conversations on the future of the decentralized web. If you are interested in submitting an op-ed for the series, please reach out directly to firstname.lastname@example.org.
CoinDesk reporters Nikhilesh De, Anna Baydakova and Danny Nelson have released the first episode of their new podcast, Borderless. The series explores the most important events happening in and out of crypto affecting the industry, through a global lens. In the first episode they dive into the FinCEN files, a collection of thousands of documents that show, banks, not crypto, are the main conduit for alleged financial crimes.