Daily Archives: November 20, 2020

A battle for currency supremacy is underway as China doles out millions of digital yuan.

Cryptocurrencies offer innovative payment and security solutions for commerce, supply chains, and manufacturing. They make global payments faster, safer, more efficient, and more transparent. For years, Washington has neglected or misunderstood this most promising U.S. innovation, leaving American start-ups lost in a maze of regulatory uncertainty. Now that blockchain and cryptocurrency solutions have entered the real economy, revolutionizing money and payments, regulatory confusion has set the cryptocurrency community ablaze.Meanwhile, the Chinese are poised to capitalize on US policy mistakes yet again.

The leading American innovators in blockchain solutions are on the verge of leaving the US in frustration.Why?Because Washington has failed to develop a clear regulatory framework that would keep them in the US and ensure American leadership.This is the declaration of the CEO of Ripple, Americas leading cryptocurreny firm, who says the US is losing the tech war to China.

While Americas Constitution supports the flourishing of new technology, the administrative state has killed many important innovations in the cradle. This happens as obsolete agencies look for new things to regulate and join forces with protected industries to stifle competition, the process of regulatory capture described by Nobel economist George Stigler. At least eight US federal regulatory bodies have asserted jurisdiction over new fintech and digital currencies.This is not to say there should be no accountability in financial innovation, but the right policy should focus on achieving the objective in the most efficient, least intrusive way. Policymakers should think intelligently about the function they are trying to perform, not copy-paste paper-based bureaucracy on anything new.

Other countries are not immune to capture, but they are smart enough to not kill the golden goose. They have developed market-friendly frameworks to welcome crypto innovation to their shores, but the talent and scalability of the US market made the risk worthwhile until now.Crypto entrepreneurs hoped that after their billions of dollars in investments and development of innovative products that Washington would wake up, but no. Meanwhile China has advanced to garner increasing share of US and global financial markets.

The coming year will make or break cryptocurrency in the US. It depends on whether Congress and the Executive Branch can resolve their conflicting views of financial innovation, stop the grab bag of regulatory enforcement, and build a coherent policy framework. Bad actors have always found ways to exploit new developments, but that is not an excuse to deny consumers the fruits of new technologies. Law enforcement exists to prevent and punish crime, not to stop enterprise. Indeed, digital currency can reduce certain financial crimes.

Sadly, the current administration, purporting to promote the interests of Main Street investors, has been at war with itself on cryptocurrency. Outgoing Securities and Exchange Commission (SEC) Chairman Jay Clayton treated cryptocurrencies and other fintech startups like flies, swatting innovators with more than 50 enforcements. This contrasts with SEC Commissioner Hester Peirce who sees crypto as the next great technology. Again, the issue is not that poor conduct should not be addressed; its a question of priorities. For years, the SEC has done busy work while the Chinese government has exploited Americas stock exchanges and US technology.

As a new report from Congress bipartisan U.S. China Commission (USCC) notes, 217 Chinese companies are listed on US exchanges with a total market capitalization of $2.2 trillion, including 13 Chinese state-owned enterprises. According to the USCC, these companies endanger US national security through censorship and surveillance, evade American standards of transparency, and jeopardize the wealth of American investors. The SEC has not been able to perform oversight on the audits of these companies because of systematic blocking by the Chinese government. Meanwhile the number and size of these Chinese companies traded in the US has ballooned. Failing to deal with the real threats to Americas financial system, the SEC has directed its energy to homegrown startups.

The US lost the race on Bitcoin, and China now controls 65 percent of the computing power to mine the currency. The next battle is underway as the Chinese government has piloted a program to distribute digital yuan, a digital currency backed by Chinas central bank.It is only a matter of time before Chinas digital currency is offered to billions across the globe coupled with Chinese payment solutions copied from U.S. innovators.The US wont be able to block the proliferation of digital yuan. It can only win by making a better solution and getting to market first.

The SECs Clayton will step down at the end of the year, providing an opportunity confirm a Chair who will recognize the value that cryptocurrencies and blockchain technology, will step up stop Chinas abuse of Americas exchanges, and put American consumers first. Americans, not the Chinese government, should be first in line for American technological innovation. The new SEC Chair will be critical to ensuring whether the U.S. dollar retains its position as the worlds reserve currency.US policymakers should promote crypto, not crush it. Otherwise and once again, China will pick up the technology that the US discards.

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The SEC Swats Cryptocurrency Flies While The Chinese Government Takes The Farm. - Forbes

On November 10, six members of the U.S. House of Representatives wrote to Acting Comptroller of the Currency Brian Brooks raising concerns about the OCCs recent unilateral actions to regulate cryptocurrencies. In the letter, the members question the OCCs regulatory priorities. For example, the members highlight that, through recent actions, such as its advance notice of proposed rulemaking on digital activities (covered by InfoBytes here), the OCC has sought to serve those already-banked with better payments options while potentially overlooking opportunities for assisting the unbanked and underbanked to participate in the economy and the banking system. Additionally, the members note that the OCCs interpretive decisions, which authorize financial institutions to hold cryptocurrency and stablecoins for customers (covered by InfoBytes here and here), may have broad implications for the future of banking and are best made in collaboration with your fellow regulators and with Congress to ensure we avoid potential harms to institutional safety and soundness and equity and inclusion. In closing, the members ask the OCC to answer a number of questions, including (i) whether stablecoin reserves will be segregated from calculating the capital requirements of large banks; (ii) what consumer protections the agency will impose on stablecoin providers; and (iii) whether the OCC has collaborated with other federal regulators on their recent decisions.

Link:
Representatives question the OCC's cryptocurrency and stablecoin efforts - Lexology

Trying to come to grips with the nascent technology of cryptocurrency, with all its concomitant risks and potential, governments around the world have taken very different approaches toward cryptocurrency taxation and penalties for crypto tax evasion. It is not easy to strike the right balance. Yet it is also imperative to develop cryptocurrency taxation systems that are fair, continue to encourage innovation, close the loopholes on tax cheats and offer companies as well as investors clarity so that they can carry out financial planning and make informed investment and business decisions.

Clear and consistent regulation is needed for dealing with virtual assets, because in order to work with them companies need to understand the framework and the rulebook they are working under, Douglas Borthwick, chief marketing officer of digital assets trading platform INX, told Forkast.News. Without a clear-cut tax policy in place, Borthwick added, investors can hardly be expected to have faith in the value of both their own assets and those underlying the industry at large.

Recognizing that there are many issues, gaps and unanswered questions in the emerging field of cryptocurrency taxation, the Organisation for Economic Co-operation and Development (OECD) has published Taxing Virtual Currencies: An Overview of Tax Treatments and Emerging Tax Policy Issues in advance of its 2020 Global Blockchain Policy Forum taking place this week.

Today, the OECD blockchain forum will offer a special Deep Dive panel discussion titled, Crypto-tax Ensure a robust and transparent tax policy framework. The panels speakers will include a vice president of Coinbase, a U.S. Department of Treasury senior counsel and other tax law and policy experts.

The OECDs cryptocurrency tax report, which was presented to G20 finance ministers and central bank governors last month, analyzes how 50 jurisdictions treat crypto-assets. The report also surveys emerging issues such as the rise of DeFi (decentralized finance) and central bank-backed digital currencies (CBDCs), which has been rapidly gaining traction around the world this year with China, France, Australia, Cambodia and many other countries all now racing to develop their own.

One of the key findings of the OECD crypto tax report is the importance of a coherent policy toward cryptocurrency as well as the implications of crypto tax evasion, which until now are issues that have largely been neglected in favor of cryptos macroeconomic and anti-money laundering considerations.

The very nature of cryptocurrency is also what complicates its taxation. Crypto in its purest form is decentralized and anonymous, Borthwick said. While these qualities define its potential, they also engender possibilities for exploitation. The challenge facing tax authorities across the board, Borthwick said, is to see where they can use cryptos best attributes, while limiting its worst.

The most common way that countries have attempted to achieve this is by taxing all income from mining and cryptocurrency exchanges as capital gains, according to the OECD report. Few countries make a distinction between business and personal activity. Virtual currencies, according to the OECD, also form part of a taxpayers assets and are taxable under wealth and inheritance taxes.

See related post: How IRS treats crypto staking: tax issues every crypto investor should know

In its recommendations to policymakers, the OECD report emphasizes the need for providing clear guidance and legislative frameworks for the tax treatment of crypto-assets and virtual currencies, and allowing frequent updates as is necessary to keep up with such a fast-moving, innovative field. Accordingly, appropriate guidance is urged with regards to other blockchain innovations for which existing tax treatments may not be appropriate.

The OECD report also highlights the need to improve compliance and suggests simplifying rules of valuation as one way to do so.

Overall, the OECD recommends that the direction of cryptocurrency tax policy should correspond with that of other policies in related sectors, such as environmental impact. The report points out that cryptocurrency mining can be very energy-intensive. Tax policy should also align with the worldwide shift toward electronic payment systems as a replacement for cash, a trend that has accelerated during the Covid-19 pandemic.

Considerable scope remains to improve guidance on tax treatments, particularly in the emerging areas of stablecoins, proof-of-stake consensus mechanisms, and decentralized finance, Grace Perez-Navarro, deputy director of the OECD Centre for Tax Policy and Administration, told Forkast.News. The OECDs Taxing Virtual Currencies report considers these issues and stresses that clearer guidance would provide certainty for taxpayers and facilitate compliance.

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OECD shines light on the future of cryptocurrency taxation - Forkast News

The popular cross-border African payments app, Chipper Cash, has raised $30 million in a Series B round led by Ribbit Capital and Amazon CEO personal VC fund, Bezos Expeditions.

According to Chipper Cash CEO, Ham Serunjogi, the raise will help the startup expand its products and geographic scope. On the product side, this entails offering more:

Well always be a P2P financial transfer platform at the core. But weve had demand from our users to offer other value services like purchasing cryptocurrency assets and making investments in stocks.

~ Ham Serunjogi, CEO, Chipper Cash

SEE ALSO:You Can Now Buy & Sell Bitcoin Across Africa On Chipper Cash

Currently, users can buy bitcoin on Chipper Cash using any of the following currencies:

The startup, which was founded in 2018, has recently been on a run to raise and expand its growing portfolio of services.

Here are the latest stats about Chipper Cash:

According to Serunjogi, the startup alos plans to launch a stocks product with Nigeria being the first market to allow Nigerians buy fractional stocks such as Tesla, Apple and Amazon stocks, through the app before expanding to other countries.

An API payment solutions is also under development for businesses looking to collect payments for sale of goods.

RECOMMENDED READING:[WATCH] How to Buy Bitcoins in Kenya Using MPESA, Chipper Cash, and Bank Transfer on Paxful on Your Mobile Phone

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African Fintech, Chipper Cash, Raises $30 Million to Expand its Cryptocurrency Trading Options - bitcoinke.io