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Decentralized platforms may benefit from strict US crypto tax laws

Decentralized platforms may benefit from strict US crypto tax laws

Cryptocurrency transactions in the United States will become subject to third-party tax reporting requirements for the first time, reflecting growing interest driven by rising digital asset valuations. This shift could lead investors to decentralized platforms, analysts say.

Starting in 2025, centralized crypto exchanges (CEXs) and other brokers will start reporting the sales and exchanges of digital assets, including cryptocurrencies, according to the final regulation published by the US Internal Revenue Service (IRS).

The decision aims to help investors “file accurate tax returns with respect to digital asset transactions,” and to address potential noncompliance in digital currency, according to the IRS’ report issued in June 2024.

Some investors may see this as an overreach, which could drive more users to decentralized trading platforms, according to Anndy Lian, author and intergovernmental blockchain expert.

There’s a “real risk of pushing users toward decentralized platforms like Uniswap or PancakeSwap,” Lian told Cointelegraph:

“This shift could lead to a paradoxical situation where the IRS’s desire for tax revenue might drive more users towards environments where tax enforcement is currently unfeasible.”

Showcasing the crypto industry’s backlash, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the rules are unconstitutional since they include decentralized exchanges (DEXs) under the “broker” term, extending data collection requirements to them.

Blockchain analytics could make DeFi transactions traceable by 2027

Crypto transactions on decentralized finance (DeFi) protocols are harder to trace for tax authorities since these platforms aren’t operated by central intermediaries.

However, DeFi protocols will likely become more traceable by 2027, thanks to advanced blockchain analytics, Lian said, adding:

“While decentralized systems currently pose challenges for tax enforcement, advancements in blockchain analytics and potential regulatory developments by 2027 could change this landscape.”

To prevent a potential exodus, Lian said the crypto industry needs specialized tax brackets that account for high volatility and significant retail participation. “Treating crypto gains the same as traditional capital gains may not always be fair,” he said.

The soaring cryptocurrency valuations have invited the attention of other jurisdictions as well.

European retail investors should also brace for taxation following the implementation of the Markets in Crypto-Assets (MiCA) framework, according to Dmitrij Radin, the founder of Zekret and chief technology officer of Fideum, a regulatory and blockchain infrastructure firm focused on institutions.

He told Cointelegraph:

“Retail users will be way more, obligated to provide information, data which will be screened. They will be accounted for. Most Europeans will see taxation.”

MiCA is the world’s first comprehensive regulatory crypto framework, which went into full effect for crypto-asset service providers on Dec. 30.

 

Source: https://cointelegraph.com/news/decentralized-platforms-gain-from-strict-us-crypto-tax-laws

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Investors claim Tether’s $118B reserves may face audit and liquidity risks

Investors claim Tether’s $118B reserves may face audit and liquidity risks

Tether’s lack of third-party audits is raising investor concerns about a potential FTX-like liquidity crisis from the $118 billion stablecoin giant.

Investor concerns are mounting around Tether, the issuer of the world’s largest stablecoin USD₮.

Cyber Capital founder Justin Bons, who shared his concerns about Tether being a potentially bigger scam than FTX, catalyzed the latest wave of concerns.

Bons wrote in a Sept. 14 X post:

“[Tether is] one of the biggest existential threats to crypto as a whole. As we have to trust they hold $118B in collateral without proof! Even after the CFTC fined Tether for lying about their reserves in 2021.”

In 2021, the United States Commodities and Futures Trading Commission (CFTC) fined Tether a $41 million civil monetary penalty for lying about USDT being fully backed by reserves.

Concerns over the stablecoin giant’s influence over the crypto space grew louder recently after data revealed that Tether’s market share surpassed 75% of the entire stablecoin market after a 20% increase over the past two years.

A hypothetical Tether implosion would be banking-driven, unlike the FTX collapse

Part of the concerns are fueled by one of the industry’s most notorious black swan events, the collapse of the FTX exchange, which led to $8.9 billion in lost user funds.

While FTX’s collapse was due to its inability to honor mass customer withdrawals of $6 billion within three days, a hypothetical Tether implosion would be related to its banking partners, according to Sean Lee, the co-founder of IDA Finance.

Lee told Cointelegraph:

“Bear market or not, the possibility of Tether imploding is more about its structural connectivity to its underlying assets and banking rails, not so much market movement.  Otherwise, USDT would’ve suffered during the last bear market, but instead, it was actually [USD Coin] USDC that depegged due to their reliance on Silicon Valley Bank and Signature Bank.”

In May 2022, Tether honored over $16.7 billion worth of USDT customer withdrawals within 10 days without any issues.

In contrast, Washington Mutual Bank could not honor $16.5 billion worth of withdrawals within 10 days, which led to what became known as the biggest banking failure in the US in September 2008.

Others believe that Tether is too big to fail. Notably, Anndy Lian, author and intergovernmental blockchain expert, doesn’t expect Tether to face issues but warned that generally, large centralized entities could pose a risk for the cryptocurrency space:

“Cryptocurrencies were originally designed to operate without central control, promoting transparency, security, and user autonomy. However, Tether, as a centralized stablecoin issuer, holds significant influence over the crypto market due to its widespread use for trading and liquidity.”

Cointelegraph has approached Tether for comment.

Tether’s business structure and transparency raise concerns

On Sept. 8, Tether invested $100 million in Adecoagro, acquiring a 9.8% stake in the Latin American agricultural giant.

This latest investment gave us the first disclosure into Tether’s governance structure, according to Cyber Capital’s Bons, who wrote:

“The board of Tether Holdings only has 2 members; Giancarlo & Ludovicos. This implies that the USDT reserves are still not segregated in 2024 & these two have absolute control!”

IDA Finance’s co-founder, Lee, was also concerned about Tether’s lack of transparency. He wrote:

“Tether is structured as a business and their insistence on not providing the level of detailed transparency that ensures real trust from the community and institutional players is indeed concerning.”

Despite Tether boasting over $118 billion worth of reserves in its second quarter “independent attestations conducted by BDO,” Cyber Capital’s Bons claims that Tether has yet to submit its reserves for a third-party audit:

“However, an ‘Auditor’s Report’ or an ‘Accountant Report’ is not a formal audit at all! Despite the claims, Tether has never submitted its alleged reserves to a real unrestricted, third-party audit!”

 

Source: https://cointelegraph.com/news/tether-transparency-business-structure-118b-ftx-concern

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Ethereum ETF: Investors Wait For May 23 Full of FUD

Ethereum ETF: Investors Wait For May 23 Full of FUD

May 23, 2024 is a key date for Ethereum (ETH) investors across the world. On this day, the U.S. Securities and Exchanges Commission (SEC) will announce its verdict on VanEck’s spot ETH exchange traded funds (ETF) application.

A denial of VanEck’s spot ETH ETF application will likely mean that similar applications from Ark Investment, Grayscale, Franklin Templeton, Invesco Galaxy, and BlackRock will also be rejected later in the year.

An approval from the SEC will likely spark a rally in ETH prices — similar to the ETF-supported Bitcoin (BTC) bull run we saw earlier in 2024.

Key Takeaways

  • VanEck is the first of many spot ETH ETF applicants.
  • The legal status of ETH as a commodity or security continues to be a hot topic of debate.
  • Bitcoin maxi Michael Saylor says altcoins will never get spot ETFs and commodity status.
  • Anndy Lian says ETF rejection could lead to short-term ETH price volatility and decrease in price.
  • Markus Thielen is comfortable holding a short position in ETH.

Pessimism Lingers over SEC Approval for Spot Ethereum ETF

The current mood regarding the launch of spot ETH ETFs in the U.S. is largely pessimistic.

The meeting between the SEC and spot ETH ETF applicants has been “one-sided” so far, insiders told Reuters. According to those who participated in the discussions, the SEC has not discussed “substantive details about the proposed products” nor asked issuers about concerns like they generally do when ETF applications are filed.

Crypto market observers will know that dealing with crypto skeptic SEC chair Gary Gensler is never a straightforward task. Even the recently approved spot BTC ETFs had to endure rejections of over 20 applications from the SEC between 2018 and 2023.

Given the fact that VanEck’s spot ETH ETF application is the first of its kind, CEO Jan van Eck expressed his pessimism at the Paris Blockchain Week crypto event, saying:

“We were the first to file as well for Ethereum in the U.S., and we and Cathy Wood (CEO of Ark Invest), are kind of the first in line for May, I guess, to probably be rejected.”

The Legal Status of ETH Hinders ETF Hopes

Additionally, the legal status of ETH continues to be a hot topic of debate. Despite the initial ETF denials, bitcoin never faced questions on its status as a commodity.

Anndy Lian, a governmental blockchain advisor and expert, told Techopedia:

“BTC has been generally recognized as a commodity by various regulatory bodies, including the CFTC. However, the SEC has not provided a clear stance on ETH’s classification, and recent comments by SEC Chair Gary Gensler have not explicitly categorized ETH as a commodity, which adds to the uncertainty.”

Adding to the fear, uncertainty and doubt was Bitcoin maximalist and co-founder of MicroStrategy, Michael Saylor, who said that it will soon be “very clear” that Ethereum is deemed a security not a commodity when the spot ETH ETF gets rejected in May 2024.

“After that you are going to see that Ethereum, BNB, Solana, Ripple, Cardano – everything down the stack – is just a crypto asset security unregistered. None of them will ever be wrapped by a spot ETF,” Saylor added.

 

“Wen Spot ETH ETF?”

While the growing consensus suggests that VanEck’s application will get rejected on May 23, 2024, industry insiders believe that a spot ETH ETF will eventually be approved later.

We look at the long road to the approval of spot BTC ETF as our reference.

Before its approval in January 2024, the SEC rejected every application placed before it. It was only when crypto fund manager Grayscale won a lawsuit against the SEC that spot BTC ETFs were finally approved in the U.S.

In their petition, Grayscale had argued that the regulation and surveillance that BTC futures ETF traded under were proof that spot BTC ETFs can be traded without fraud and manipulation.

Now market experts believe that the spot ETH ETFs will have to go down the same route to gain SEC approval — litigation.

“The template is likely to be similar to Bitcoin: with futures-based Ethereum ETFs already approved, the SEC (if it denies the approval of spot Ethereum ETFs) is likely to face a legal challenge and eventually lose,” said JPMorgan analysts in a report, as reported by The Block.

What Next for ETH?

Short-term Price Volatility

The market had hoped that positive developments on the spot ETH ETF front would be a major catalyst for ETH prices in 2024.

But now, dashed hopes of ETH ETF approvals coming as early as May 2024 has resulted in bearish ETH price movement (-24%) over the last two months, as of May 10, 2024.

With ETH continuing to underperform large-cap peers such as BTC, Solana (SOL) and BNB in 2024, the second-largest cryptocurrency will have to look for other market catalysts as it plays catch up.

“A rejection could lead to short-term price volatility and possibly a decrease in price as the market adjusts to the news,”  Lian told Techopedia.

Lian added:

“Even if the SEC rejects the spot ETH ETF, Ethereum may not run out of market catalysts. Other potential catalysts for a bull run could include technological advancements, increased adoption, further integration into DeFi, RWA, and the broader crypto market dynamics.”

ETH is the ‘Basket Case of 2024’

Elsewhere, Markus Thielen, founder of 10x Research, called Ethereum the “basket case” of this crypto cycle.

Thielen wrote in an email note to investors that this research firm was “very bullish” on Ethereum earlier in the year, but their view turned bearish when they noticed a sharp decline in Ethereum gas fees that “signaled (near) zero demand for transactions with ETH.”

Thielen also added falling staking yield (2.9% on Lido at the time of writing) and higher on-chain Treasury yields (5.1%) will result in less demand for ETH as “more people realize this.”

“Right now, we would be more comfortable holding a short position in ETH than a long one in BTC as Ethereum’s fundamentals are fragile, which is not yet reflected in ETH prices,” said Thielen.

The Bottom Line

The U.S. SEC under Chair Gensler is known for its hardball approach towards the crypto industry. The securities watchdog has filed multiple lawsuits against prominent crypto companies and personalities including CZ, Binance, Coinbase, Kraken, and Uniswap, over the past year.

Just like Grayscale’s lawsuit, which paved the way for spot BTC ETFs in the US, maybe only a mirrored approach can get spot ETH ETFs across the finish line in 2024.

 

Source: https://www.techopedia.com/ethereum-etf-decision

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j