Tag Archives: cryptocurrency

Crypto To See Tighter Tax Rules Starting In 2026

The Biden administration took a long-delayed step against tax evasion in cryptocurrency markets, though it left some work unfinished amid fierce lobbying by companies like Coinbase, The Wall Street Journal reported.

The Treasury Department adopted a final rule Friday requiring many cryptocurrency platforms to report information about their users’ transactions to the Internal Revenue Service. Officials say the measure should deter tax evasion by making it clear to would-be miscreants that the IRS knows how much they owe.

It will also help law-abiding crypto investors by giving them a simple 1099 form each year, similar to those banks and brokers have long provided customers. In the absence of formal IRS rules, many crypto investors rely on an unregulated cottage industry of expensive, and often imprecise, service providers to estimate tax obligations.

The U.S. Department of The Treasury posted:

As part of the Biden-Harris Administration’s implementation of the bipartisan Infrastructure Investment and Jobs Act (IIJA), the U.S. Department of the Treasury (Treasury), and the Internal Revenue Service Service (IRS) today released final regulations on the IIJA’s reporting requirements with longstanding reporting requirements for traditional financial services.

Owners of digital assets have always owed tax on the sale of exchange of digital assets, and the IIJA did not change that or impose any new taxes on digital assets. It simply created reporting requirements, similar to those that already applied to traditional financial services, to help taxpayers file accurate returns and pay taxes owed under current law.

The final regulations announced today will require brokers to report gross proceeds on the sale of digital assets beginning in 2026 for all sale in 2025. Brokers will be required to also report information on the tax basis for certain digital assets beginning in 2027 for sales in 2026…

The U.S. IRS posted:

The U.S. Department of The Treasury and Internal Revenue Service today issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.

These final regulations reflect consideration of more than 44,000 public comments received last fall on the proposed regulations. They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099 -DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021…

…The final regulations require reporting by brokers who take possession of the digital assets being sold by their customers. These brokers include operators of custodial digital asset trading payments (PDAPs). The majority of digital asset transactions today occur by using the brokers…

In my opinion, these new rules could be the start of the regulation of cryptocurrency. This might be annoying to those have been buying or selling crypto without government oversight.

Biden Blocks Chinese-Backer Crypto Mining Firm From Land Ownership Near Wyoming Missile Base

President Joe Biden issued an order blocking a Chinese-backed cryptocurrency mining firm from owning land near a Wyoming nuclear missile base, calling its proximity to the base a “national security risk” The Associated Press reported.

The order forces the divestment of property operated as a crypto mining facility near the Frances E. Warren Air Force Base. MineOne Partners Ltd., a firm partly backed by Chinese nationals, and its affiliates are also required to remove certain equipment on the site.

This comes as the U.S. is slated on Tuesday to issue major new tariffs on electric vehicles, semiconductors, solar equipment and medical supplies imported from China, according to a U.S. official and another person familiar with the plan.

The Monday divestment order was made in coordination with the U.S. Committee on Foreign Investment in the United States – a little-known but powerful government committee tasked with investigating corporate deals for national security concerns that holds power to force companies to change ownership structures or divest completely from the U.S.

The U.S. Department of the Treasury posted a press release titled: “Statement on the President’s Decision Prohibiting theAcquisition by MineOne Cloud Computing Investment I L.P. of Real Estate and the Operation of a Cryptocurrency Mining facility, in Close Proximity to Frances E. Warren Air Force Base”

Today President Biden issued an order prohibiting the purchase and requiring the divestment of certain real estate operated as a cryptocurrency mining facility located within one mile of Frances E. Warren Air Force Base (F.E. Warren AFB), as well as the requiring the removal of certain improvements and equipment at the property by MineOne Partners Limited, which is ultimately majority owned by nationals of the People’s Republic of China; MineOne Cloud Computing Investment I L.P.; MineOne Data Center LLC; and MineOne Wyoming Data Center LLC (collectively MineOne), as well as their affiliates.

MineOne acquired the property in June 2022 and then made improvements to allow for use of the property for specialized cryptocurrency mining operations within one mile of F.E. Warren AFB in Cheyenne, Wyoming, a strategic missile base and home to Minuteman III intercontinental ballistic missiles. The Committee on Foreign Investment in the United States (CFIUS or the Committee) reviews and investigated this transaction pursuant to authorities provided by Congress in the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) to cover real estate transactions in close proximity to certain sensitive U.S. facilities, including F.E. Warren AFB.

“Today’s divestment order underscores President Biden’s steadfast commitment to protecting the United States’ national security. It also highlights the critical gatekeeper role that CFIUS serves to ensure that foreign investment does not undermine our national security, particularly as it related to the transactions that present risk to sensitive U.S. military installations a well as those specialized equipment and technologies,” said Secretary of the Treasure Janet L. Yellen.

ABC News reported MineOne purchased the land that is within one mile of the Air Force base in Cheyenne in 2022 and according to CFIUS, the purchase was not reported to the committee as required until after the panel received a public tip.

CFIUS directed the sale of the property within 120 days, and that within 90 days the company remove all structures and equipment on the site.

In my opinion, the person who tipped off the U.S. government about the Chinese backed cryptocurrency mining facility did the right thing. 

BTC-e Operator Pleads Guilty To Money Laundering Conspiracy

A Russian national pleaded guilty today to conspiracy to commit money laundering related to his role in operating cryptocurrency exchange BTC-e from 2011 to 2017, the U.S. Department of Justice reported. 

According to court documents, Alexander Vinnick, 44, was one of the operators of BTC-e, which was one of the world’s largest virtual currency exchanges. From its inception in or around 2011 until it was shut down by law enforcement in or around July 2017 contemporaneous with Vinnik’s arrest, BTC-e processed over $9 billion-worth of transaction and served over one million users worldwide, including numerous customers in the United States.

“Today’s result shows how the Justice Department, working with international partner, reaches across the globe to combat cryptocrime,” said Deputy Attorney General Lisa Monaco. “This guilty plea reflects the Department’s ongoing commitment to use all tools to fight money laundering, police crypto markets, and recover restitution for victims.”

Despite doing substantial business in the United States, BTC-e was not registered as a money services business with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), as federal law requires.

BTC-e had no anti-money laundering (AML) and/or know-your-customer” (KYC) processes and policies in place, as federal law also requires. BTC-e collected virtually no customer data at all, which made the exchange attractive to those who desired to conceal criminal proceeds from law enforcement.

Coindesk reported Alexander Vinnik, one of the operators behind the BTC-e crypto exchange, pleaded guilty to a charge of conspiring to commit money laundering on Friday, the U.S. Department of Justice announced.

Vinnik was an operator of BTC-e between 2011 and 2017, the DOJ said, and the exchange processed more than 1 million users transacting over $9 billion in crypto during that time.

BTC-e was linked to the hack of now-defunct crypto exchange Mt. Gox after it was used to launder some 300,000 (BTC) from Mt. Gox. BTC-e was shut down in July 2017, at the same time Vinnik was first arrested.

Bitcoin Insider reported Alexander Vinnik, a Russian national who operated the crypto exchange BTC-e, pled guilty to charges of money laundering conspiracy in the US on May 3, according to a Bloomberg report.

BTC-e was one of the world’s largest crypto exchanges between 2011 and 2017. According to the prosecutors, it processed transactions worth $9 billion and had a customer base of over 1 million worldwide.

Prosecutor claim the BTC-e did not have a vetting system and allowed criminals to convert illicit cash into cryptocurrencies like Bitcoin anonymously. The prosecutors stated that the exchange was found to have handled Bitcoin traced to a Russian military intelligence hacking unit that was responsible for releasing Democrats’ emails during the 2016 U.S. elections in an attempt to sway votes.

In my opinion, those who engage in cryptocurrency scams such as the one Vinnick was involved in should have known that the Department of Justice was looking into what was happening at BTC-e.

FTX Sues Founder Bankman-Fried’s Parents

Bankrupt crypto exchange FTX on Monday sued the parents of founder Sam Bankman-Fried, saying that Stanford professors Joseph Bankman and Barbara Fried used the company to enrich themselves at the expense of FTX’s customers, Reuters reported.

FTX, now being led by turnaround specialist John Ray, said that company founder Sam Bankman-Fried ran FTX as a “family business” and misappropriated billions in customer funds for the benefit of a small circle of insiders, including his parents.

According to Reuters, Sam Bankman-Fried has pleaded guilty to charges that he defrauded FTX customers by using their funds to prop up his own risky investments. He is currently jailed ahead of a trial scheduled to begin Oct. 3. Other former FTX executives have pleaded guilty to criminal charges.

Bankman and Fried’s attorneys, Sean Hecker and Michael Tremonte, said in a joint statement that FTX’s claims were “completely false” and the the new lawsuit was a waste of funds that could be returned to FTX customers.

FTX’s lawsuit alleges that Bankman and Fried accepted a $10-million cash gift and $16.4-million luxury property in the Bahamas from FTX, even as the company teetered on the brink of collapse. Bankman and Fried also pushed FTX to make tens of millions of dollars in charitable contributions, including to Stanford University, FTX said.

Fortune reported that in a late court filing on Monday, the bankruptcy estate of FTX sued the parents of Sam Bankman-Fried, seeking to recover millions of dollars that it alleges were fraudulently transferred and misappropriated.

In the 63-page lawsuit, the estate alleges that FTX was a self-described “family business” despite its appearance as a sophisticated cryptocurrency exchange that was “fueled by fraud.” Allan Joseph Bankman, Bankman-Fried’s father, is a top tax law professor at Stanford Law School, and the lawsuit alleges that he played a key role in “perpetuating this culture of misrepresentations and gross management” and in covering up allegations that would have exposed the fraud, Fortune reported.

According to Fortune, the lawsuit also alleges that Bankman-Fried’s parents “siphoned millions of dollars” from the crypto empire for “their own personal benefit,” with the estate now seeking to claw back the funds as part of its bankruptcy process.

The Block reported that bankrupt cryptocurrency exchange FTX has sued Joseph Bankman, and Barbara Fried, the parents of its founder Sam Bankman-Fried, aiming to recover millions of dollars in “fraudulently transferred and misappropriated funds.”

According to The Block, a Monday court filing showed that debtors of FTX and Alameda Research filed a complaint to recover damages caused by fraudulent transfers, breaches of fiduciary duties and other alleged misconduct.

“As Bankman-Fried’s parents, Bankman and Fried exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars, and knowingly at the expense of the debtors in these Chapter 11 Cases and their creditors,” the filing said.

In my opinion, it seems very odd that the parents of Sam Bankman-Fried allegedly made what appears to be problematic decisions regarding the amount of money they received from FTX. One would assume that Bankman, who is a top tax law professor, would know better.

Coinbase Introduces The Stand With Crypto Alliance

Coinbase has introduced the Stand With Crypto Alliance. It starts with a “TL;DR” (posted yesterday) that said: Today marks the launch of the Stand with Crypto Alliance, an advocacy organization focused on mobilizing the crypto community to directly engage in the legislative process. Join the Alliance to help secure the future of crypto in America by helping drive clear, sensible regulation.”

From the Coinbase blog:

With more than 50 million Americans holding a digital asset, crypto is bigger than Coinbase. Today, with the launch of the Stand with Crypto Alliance, the crypto community will be unleashed as a core constituency in the legislative process.

In particular, the Stand with Crypto Alliance will leverage the underlying technology of the blockchain to help organize the community into a powerful voice advocating for policies that will update our financial system and support economic empowerment. The Alliance is the nation’s first ever independent and unchain advocacy organization, powered by and for crypto supporters.

Building on recent historic, bipartisan legislative momentum in Congress, the Stand with Crypto Alliance is crypto’s first true grassroots movement that will be organized onchain. By providing a launch pad, the Alliance is mobilizing the full force of the decentralized crypto community to tell lawmakers: Recess is over. America’s crypto constituency is strong – and will be holding them accountable this fall when Congress votes on common-sense legislation to protect consumers and their right to crypto…

The Block reported that crypto advocated have ramped up efforts over the past few months to get legislation passed that would improve regulation of the crypto industry in the country. Some have criticized regulators, like the Securities and Exchange Commission, for what they call a regulation by enforcement approach.

Two bills are teed up to be voted on in the full House, including one bill that would direct regulators to create a clear path for how a digital asset can transition from being a security to a commodity. The other would create a comprehensive framework to regulate payment stablecoins. Both passed certain House committees last month.

CNN reported that the Stand with Crypto Alliance’s primary mission is to mobilize support for legislation that would create a US regulatory framework for digital assets – something of a sore subject in the feud between crypto advocates and US regulators, who have fundamental disagreements about how the industry should operate.

According to CNN, a central sticking point is the question of how crypto tokens should be regulated. The Securities and Exchange Commission, Wall Street’s top cop, contends that most crypto products are investment contracts and therefore fall under its jurisdiction – an argument the crypto industry is fighting.

CNN also reported that crypto adoption has been growing, though it remains far from the mainstream and still lacks obvious use cases for most people. The promise of crypto, broadly, is a world in which financial transactions can be executed instantly, free of charge. Advocates envision blockchain, the infrastructure on which crypto is built, as the future of all global finance.

In my opinion, it seems unlikely that the U.S. Securities and Exchange Commission will accept the Stand with Crypto Alliance. CNN reported that in June, the SEC escalated its enforcement campaign when it sued both Coinbase and Binance, the world’s top two crypto exchanges, saying the companies are illegally selling securities on unregistered exchanges.

U.S. Judge Sends FTX’s Sam Bankman-Fried To Jail

Sam Bankman-Fried, the disgraced wunderkind whose cryptocurrency exchange platform FTX imploded last November, will go from house arrest at his parents’ home to jail, a judge has ordered ahead of his trial on fraud charges, Rolling Stone reported.

In a Friday hearing, Judge Lewis Kaplan of Federal District Court in Manhattan formally revoked Bankman-Fried’s bail, ending his residence with his family in Palo Alto, California, as he prepares a legal defense for a blockbuster case centered on the ruins of a company once valued at $32 billion. The 31-year-old, admired as a brilliant crypto kingpin until his downfall, had been extradited from the Bahamas, where FTX was headquartered, in December. He originally posted a bond of $250 million to be released into his parents’ custody.

Sam Bankman-Fried headed to jail on Friday after a judge sided with a request by federal prosecutors to revoke the FTX founder’s bail over alleged witness tampering, CNBC reported. Bankman-Fried was remanded to custody directly from a court hearing in New York and sent to Brooklyn’s Metropolitan Detention Center, Bureau of Prisons records show.

Judge Lewis Kaplan denied Bankman-Fried’s request for delayed detention pending on appeal. Unless the appeal is successful, he is expected to remain in custody until his criminal trial, which is due to begin on Oct. 2.

“My conclusion is there is probable cause to believe the defendant tried to tamper with witnesses at least twice,” said Judge Kaplan during his ruling.

According to CNBC, the government had requested that Bankman-Fried be remanded to a jail in Putnam, New York, where he’d have access to a laptop with internet access for defense preparation, as opposed to sending him to the Metropolitan Detention Center, the facility closest to the courthouse with limited internet access for prisoners.

CNN reported that prosecutors sought to revoke bail after what they described as a series of violations by Bankman-Fried, including contacting potential witnesses against him, using a virtual private network to subvert monitoring and speaking with a reporter about former FTX executive Caroline Ellison.

Ellison, who is also Bankman-Fried’s ex-girlfriend, is one of several former business partners who has taken an appeal deal and plans to testify against him.

According to CNN, Judge Kaplan on Friday sided with the prosecutors’ claim that Bankman-Fried was “covering his tracks” when he allegedly leaked Ellison’s personal documents to the New York Times by allowing a reporter to review them in-person. Kaplan added that leaking an ex-girlfriend’s intimate writings would only be done “to hurt, discredit and frighten the subject of the material.”

Since his arrest in December, he has repeatedly broken with standard legal advice when it comes to speaking to the media. CNN reported that he has blogged, tweeted, and appeared on live interviews to broadcast his version of FTX’s downfall. In his telling, he admits to making mistakes as CEO but says he never knowingly committed fraud.

I suppose the lesson of what happened to Sam Bankman-Fried is one that other CEOs of crypto companies should pay attention to. Some mistakes, whether done with intent or carelessness, can send a crypto CEO to jail.

New York’s Attorney General Seeks Broader Authority To Police Crypto

New York Attorney General Letitia James is proposing new legislation that would give her office more authority to regulate the increasingly tumultuous cryptocurrency industry, The Wall Street Journal reported.

The bill would give the attorney general’s office broader enforcement authority over crypto firms that have operations in the state, while codifying the New York State Department of Financial Services’ authority to license participants in the sector and oversee the state’s digital asset licensing regime.

The bill, called the Crypto Regulation, Protection, Transparency and Oversight Act, or CRYPTO, will be submitted by Ms. James’s office to the New York State Senate and Assembly for consideration during the 2023 legislative session, which runs through June 8.

The New York attorney general, an elected official, is seeking jurisdiction to enforce crypto firms’ violations of the law, issue subpoenas and impose civil penalties of $10,000 per violation for each individual or $100,000 per violation from each crypto firm, according to a statement from the attorney general’s office. The attorney general is also seeking to shut down businesses that are engaging in alleged fraud and illegality, The Wall Street Journal reported.

The website of New York Attorney General Letitia James posted: “Attorney General James Proposes Nation-Leading Regulations on Cryptocurrency Industry”. Here are some parts of the press release:

New York Attorney General Letitia James today announced landmark legislation to tighten regulations on the cryptocurrency industry to protect investors, consumers, and the broader economy. The multi-billion dollar industry lacks robust regulations making it prone to dramatic market fluctuations, and has been used to hide and facilitate criminal conduct and fraud.

Attorney General James’s program bill, which proposes the strongest and most comprehensive set of regulations on cryptocurrency in the nation, would increase transparency, eliminate conflicts of interest, and impost commonsense measures to protect investors, consistent with regulations imposed on other financial services…

Here is an overview of the CRYPTO bill:

Stop Conflicts of Interest

Preventing common ownership of crypto issuers, marketplaces, brokers, and investment advisers and preventing any participant from engaging in more than one of those activities;

  • Preventing crypto brokers and marketplaces from trading for their own accounts;
  • Prohibiting marketplaces and investment advisers from keeping custody of customer funds;
  • Prohibiting brokers from borrowing or lending customer assets; and
  • Prohibiting referrals from marketplaces to investment services for compensation

Require Public Reporting of Financial Statements

  • Undergo mandatory independent auditing and publish audited financial statements;
  • Provide investor with material information about issuers, including risks and conflict-of-interest disclosures;
  • Require cryptocurrency promoters to register and report their interest in any issuer whose crypto assets they promote

Require Public Reporting of Financial Statements

  • Enacting and codifying “know-your-customer” provisions, meaning brokers would have to know essential facts about their customers, and requiring crypto bankers and marketplaces to only conduct business with first that comply to KYC provisions;
  • Banning the use of the term “stablecoin” to describe market digital assets unless they are backed 1:1 with U.S. currency or high-quality liquid assets as defined in federal regulations; and
  • Requiring platforms to reimburse customers who are victims of unauthorized asset transfers resulting from fraud.

It sounds to me like Attorney General Letitia James is wanting to treat crypto companies in a way that is similar to how banks are treated. That said, I think those companies will attempt to push back against this proposed bill.