Tag Archives: cryptocurrency

U.S. Department Of Treasury Made Framework For Digital Assets

The U.S. Department of Treasury announced they have outlined an interagency approach to address the risks and harness the potential benefits of digital assets and their underlying technology, including through international engagement to adapt, update, and enhance the adoption of global principles and standards for how digital assets are used and transacted.

This was done in response to an executive order from President Biden titled: “Ensuring Responsible Development of Digital Assets”. In short, the Department of Treasury has developed regulations regarding digital assets.

Technology-driven financial innovation is frequently cross-border and can impact households, businesses, and governments across the world. International cooperation among public authorities, the private sector, and other stakeholders is therefore critical to maintaining high regulatory standards and a level playing field, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border payments, including through the continued monetization of public payment systems…

Objectives Of The Framework include:

Protect consumers, investors, and businesses in the United States and globally by promoting technology and regulatory standards that reflect U.S. values;

Protect U.S. and global financial stability and mitigate systemic risk;

Mitigate illicit finance and national security risks posed by misuse of digital assets and counter and response to efforts by foreign adversaries to drive standards and promote their protocols;

Reinforce U.S. leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets by advancing technology and regulatory standards that align with U.S. values;

Promote access to safe and affordable financial services; and

Support technological advances that promote responsive development and use of digital assets by advancing research and relationships that increase shared learning.

What does this all mean? For further information, you can read the Fact Sheet on the U.S. Department of the Treasury’s website. It’s a bit long, and not very easy to understand.

CoinDesk reported that the U.S. Treasury Department’s fact sheet states the framework’s policy objectives also include reducing the potential use of crypto for illicit finance promoting access to financial services, supporting technological advancement and “reinforc[ing] U.S. leadership in the global finance system.”

The Register reported that the framework suggests wide engagement with allies and international institutions to create mutually agreeable arrangements. In the field of crypto – or “digital assets” …that means working with G7, G20, OECD, International Monetary Fund, World Bank, and others.

One thing to keep in mind is that the Department of Treasury included this: “Such international work should continue to address the full spectrum of issues and challenges raised by digital assets, including financial stability; consumer and investor protection, and business risks; and money laundering, terrorist financing, proliferation financing, sanctions evasion, and other illicit activities.” In other words, one should be extremely careful with their cryptocurrency if they want to avoid having to face sanctions for using it in nefarious ways.

Don’t Run Your Government On Cryptocurrency

On February 2, 2022, Mayor Francis Suarez tweeted: “I’m so excited to announce that the @CityofMiami has received it’s first-ever disbursement from @mineCityCoins totaling $5.25M. This is a historic moment for our city to collaborate with an innovative project that creates resources for our city through innovation not taxation.”

Quartz reported (on May 16, 2022) that MiamiCoin’s creator, an organization called CityCoins, has been no less enthusiastic, portraying the coin as a financial experiment that will empower citizens with a “community-driven revenue stream” while spurring new digital city services.”

According to Quartz, CityCoins announced a similar cryptocurrency for New York in November 2021, and plans to release a coin for Austin, Texas soon. Other cities have launched their own crypto ventures: Fort Worth, Texas, for example, will soon be running bitcoin mining rigs in city hall.

How did cryptocurrency work out for Miami? Quartz explains: Over the last nine months, however, MiamiCoin has lost nearly all of its value, falling about 95% from its September peak to just $0.0032 as of May 13. Its rapid descent has burned investors on the way down, muting the dreams of Miami’s city leaders, and possibly raising red flags for regulators now investigating cryptocurrency transactions.

On April 19, 2022, Mayor Francis Suarez tweeted: “As President of the @usmayors,we’re leaning into this next era of American innovation. Today’s eGov Summit Crypto Panel at @eMergeAmericas welcomes everyone to learn the fundamentals of crypto and the impact this technology will have on democracy!”

Houston Chronicle reported that The Electric Reliability Council of Texas (ERCOT), which manages the state’s electrical grid, is projecting that the explosion in cryptocurrency and other “large load” operators could bring as many as 16 gigawatts of new electricity demand by 2026. That’s about a quarter of the grid’s current capacity and enough to power 3 million homes on a summer day.

Will that work? According to Houston Chronicle – For a state that failed so spectacularly to secure the power supply during last year’s winter blackouts, piling on more demand will be a critical new test, especially in the face of climate change. Last week alone, unseasonably high temperatures drove electricity demand to midsummer levels. Late Friday, the state asked Texans to conserve power after six natural gas-fired power plants tripped offline.

The Atlantic reported about the recent “Crypto Crash”. From the article: …As fear and interest rates spike, investors are selling off their positions and billions of dollars of value are being erased from the industry. By one estimate, more than $200 billion of stock-market wealth has been destroyed within crypto alone, in just a matter of days…

In my opinion, if that much crypto wealth can be so quickly erased, there is absolutely no valid reason for state (or federal) governments to decide to make cryptocurrency into the thing that is going to – supposedly – fund everything. All of it could be gone in the blink of an eye, depending on the market.

Australian Watchdog Group Sues Meta Over Fake Crypto Ads on Facebook

The Australian Competition & Consumer Commission (ACCC) has sued Meta over its misleading conduct for publishing scam celebrity crypto ads on Facebook. The lawsuit includes Ireland Limited (which is also part of Meta).

The ACCC alleges that Meta “engaged in false, misleading or deceptive conduct by publishing scam advertisements featuring prominent Australian public figures.” It also alleges that that Meta aided and abetted or was knowingly concerned in false or misleading conduct and representations by advertisers.

The ACCC alleges that the ads, which promoted investment in cryptocurrency or money-making schemes, were likely to mislead Facebook users into believing the advertised schemes were associated with well-known people features in the ads, such as businessman Dick Smith, TV presenter David Koch, and former NSW Premier Mike Baird. The schemes were in fact scams, and the people featured in the ads had never approved or endorsed them.

According to the ACCC: “The ads contained links that took Facebook users to a fake media article that included quotes attributed to the public figure in the ad endorsing a cryptocurrency or money-making scheme. Users were then invited to sign up and were subsequently called by scammers who used high pressure tactics, such as repeated phone calls, to convince users to deposit funds into the fake schemes.”

Reuters reported a quote from ACCC Chair Rod Sims, who said: “The essence of our case is that Meta is responsible for these ads that it publishes on its platform. It is alleged that Meta was aware… scam ads were being displayed on Facebook but did not take sufficient steps to address the issue.”

The Guardian reported: The scam has likely raked in millions from unsuspecting people. One 77-year-old grandmother lost $80,000 in the investment, while the ACCC has said another person lost $650,000 through the scam.

The Sydney Morning Herald posted a response from a Meta company spokesman, who said the company did not want ads seeking to scam people out of money or mislead people on Facebook.

Personally, I do not believe the statement the Meta spokesperson gave. Meta is a huge company, and if it truly wanted to protect users from being harmed by fake crypto ads, it should have immediately acted to remove them. Meta left those ads up.

DOJ Seized $3.6 Billion in Stolen Cryptocurrency

The U.S. Department of Justice (DOJ) has arrested two individuals for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange. According to the DOJ, the cryptocurrency that was seized is presently valued at $4.5 billion. Law enforcement has seized over $3.6 billion in cryptocurrency linked to the Bitfinex hack.

“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” said Deputy Attorney General Lisa O. Monaco. “In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions. Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”

The Wall Street Journal reported that the two people were both arrested without incident Tuesday morning in Manhattan. They have promoted themselves on social media as entrepreneurs with deep knowledge of tech and a love of travel.

According to The Wall Street Journal, at the couple’s appearance in Manhattan court, U.S. Magistrate Judge Debra Freeman set bond at $5 million for Mr. Lichtenstein and $3 million for Ms. Morgan, requiring that their parent’s homes be posted as security. The judge also ordered that they not have devices with internet access and prohibited them from conducting cryptocurrency transactions.

The two are facing charges related to conspiracy to commit money laundering and conspiracy to defraud the U.S. They were not charged with the hack of Bitfinex.

IBM explains that the blockchain has an immutable record of transactions. No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. Transactions are recorded only once, eliminating the duplication of efforts that’s typical of traditional business records.

In short, the couple who allegedly attempted to launder a large amount of cryptocurrency left a trail of transactions that the Department of Justice used to discover the scheme. I’ve seen people on social media suggest that the blockchain is private and untraceable. However, the DOJ was very able to find the information they needed.

U.S. Department of Justice Unveiled Civil Cyber-Fraud Initiatives

The U.S. Deputy Attorney of the Justice Department, Lisa Monaco, unveiled two new enforcement initiatives aimed at targeting cryptocurrencies and government contractors who fail to report cyber breaches, Reuters reported. The U.S. Department of Justice website calls it the Civil Cyber-Fraud Initiative.

The initiative will combine the Justice Department’s expertise in civil fraud enforcement, government procurement and cybersecurity to combat new and emerging cyber threats to the security of sensitive information and critical systems.

Reuters reported that Deputy Attorney of the Justice Department, Lisa Monaco, gave a virtual speech at the Aspen Cyber Summit, about the new initiative. It includes a mix of anti-money laundering and cybersecurity experts. In addition, the initiative will focus on cryptocurrency.

“Cryptocurrency exchanges want to be the banks of the future, well we need to make sure that folks can have confidence when they’re using these systems and we need to be poised to root out abuse,” Monaco said. “The point is to protect consumers.”

According to Reuters, Deputy Attorney of the Justice Department, Lisa Monaco, also announced the use of a cyber fraud initiative, which will “use civil enforcement tools to pursue companies, those who are government contractors, who receive federal funds, when they fail to follow recommended cybersecurity standards.”

Personally, I think the Civil Cyber-Fraud Initiative could be a good thing. It sounds like it will enact enforcement against companies that are aware a breach occurred – but don’t tell their customers about it. Cryptocurrency is relatively new, and should have some regulation attached to in order to prevent fraud.

Some things the Cyber-Fraud Initiative includes:

  •  Use of False Claims Act to pursue cybersecurity related fraud by government contractors and grant recipients.
  •  A False Claims Act is the government’s primary civil tool to redress false claims for federal funds and property involving government programs and operations.
  •  A whistleblower provision, which allows private parties to assist the government in identifying and pursuing fraudulent conduct and to share in any recovery and protects whistleblowers who bring these violations and failures from retaliation.

China Declares All Cryptocurrency Activities Illegal

The People’s Bank of China has declared all digital currency activities illegal, and has vowed to crack down on the market, CNBC reported. According to CNBC, the People’s Bank of China said services offering trading, order matching, token issuance, and derivatives for virtual currencies are strictly prohibited. Overseas crypto exchanges providing services in mainland China are also illegal.

It appears that this decision affected the price of cryptocurrency, which resulted in the stocks for at least some types of cryptocurrency falling. CNBC pointed out that this comes after Beijing announced a crackdown on crypto mining earlier this year, which caused a slump in bitcoin’s processing power.

The Wall Street Journal reported that the People’s Bank of China declared all cryptocurrency-related transactions illegal to prevent the risks surrounding crypto trading and to maintain national security and social stability. According to the Wall Street Journal, the People’s Bank of China said that cryptocurrencies are issued by non monetary authorities, use encryption technologies and exist in digital form, and shouldn’t be circulated and used in the market as currencies.

I’m no expert on cryptocurrency, but it is my understanding that one of the reasons why some people like cryptocurrency is because they think the transactions are anonymous. However, the Federal Trade Commission (FTC) points out that “depending on the cryptocurrency, the information added to the blockchain can include details like the transaction amount and the sender’s and recipient’s wallet addresses”. To me, that sounds like China could potentially discover which of their people are buying or selling cryptocurrency.

I understand that a country can make rules or laws that people who live in that country are required to comply with. I’m having difficulty understanding why China’s decision to call all digital currency illegal also requires people who live in other countries to comply with China’s new rules.

Senators File an Amendment About Cryptocurrency and “Brokers”

The U.S. Senate is facing backlash from the cryptocurrency industry over a portion of the Infrastructure bill that would require crypto brokers to report customer information to the Internal Revenue Service (IRS), CNBC reported.

The bill broadens the definition of a “broker” to include anyone who is “responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” The definition does not exclude miners, software developers, stakers and other individuals in the crypto economy who don’t have customers.

The language does not effect centralized exchanges like Coinbase, or other public companies where consumers can buy cryptocurrencies like Robinhood, Square, and PayPal. These companies have clearly identified customers and work with them on reporting requirements due to the IRS.

Politico reported that a bipartisan group of lawmakers want to narrow down who would be subject to new tax reporting requirements that are intended to improve tax compliance among those trading digital currencies. There is an amendment that is supported by one Democrat and two Republicans Senators, all of whom are on the Senate Finance Committee.

The Blockchain Association posted what amounts to an open letter titled: “More Than 100 Crypto Ecosystem Stakeholders Support Wyden-Lummis-Toomey Amendment in Infrastructure Bill”. Those who signed this open letter support the bipartisan amendment. From the letter:

“The Wyden-Lummis-Toomey Amendment addresses significant concern raised by the bill as currently drafted by removing the obligation to report from those participants who don’t have – and shouldn’t have – access to customer information. It does so without affecting the reporting obligations placed on brokers and traders of digital assets”.

According to Politico, the Biden administration feels that the cryptocurrency industry is “using scare tactics to water down the requirements” in the bill. CNBC reported including the requirement for crypto companies to report customer information to the IRS is part of how the Infrastructure bill will be paid for.