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| What you need to know today in crypto and beyond August 3, 2021 Sponsored by Welcome to The Node.
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Today's must-reads Top Shelf BLOCKED: HSBC is blocking U.K. customers from using credit cards to make payments to crypto exchange Binance “wherever possible,” the banking giant said Tuesday. The decision follows the U.K. Financial Conducts Authority’s June announcement that Binance was not allowed to conduct any regulated activities in the country.
ACQUIRED: One of the world’s largest makers of ATMs is moving into the bitcoin business. NCR Corporation has agreed to acquire cryptocurrency software provider and ATM-network firm LibertyX, which capabilities it plans to integrate and make available to banks, retailers and restaurants through its digital wallet and mobile applications.
COOKIE CRUMBLE: Riccardo Spagni, the former maintainer for privacy coin Monero, was arrested in Nashville, Tenn. on July 20 and will be extradited to South Africa for allegedly stealing from the cookie jar. Spagni, known as “Fluffypony,” is accused of stealing approximately $100,000 from his former employer, Cape Cookies, by generating false invoices from fictional entities and routing payment to his personal bank accounts between 2009-2011, long before his work with Monero began.
DON’T HODL? Hodl Hodl, a noncustodial bitcoin marketplace, said it has to force-liquidate some users’ contracts to prevent the loss of funds, pointing at a possible security issue, the team wrote in a blog post on Monday. The company promised to publish a report as soon as the issues are investigated and fixed.
–Helene Braun
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Overheard on CoinDesk TV Sound Bite “The biggest concern is clarity on the definition of a broker.”
A message from CoinDesk A Paradigm Shift in Mining The dynamic crypto mining industry has been even more active following China's crackdown. The global hashrate has largely shifted to North America, making the U.S. a key mining hub where institutions now take central stage.
In this sponsored webinar on Aug. 10, Foundry CEO Mike Coyler explains how this new demographic of miners has special requirements, which the company has been catering to through its rapidly growing Foundry USA Pool and other services. Register for free.
What others are writing... Off-Chain Signals How language in the infrastructure bill could roil the crypto markets (CNBC) What new crypto tax rules would mean for average investors and miners (Marketwatch) Polish police IT guy caught mining bitcoin in secret (Protos)
–H.B.
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Putting the news in perspective The Takeaway ‘Cautiously Optimistic': Crypto Brings Lobbying Muscle to Infrastructure Debate Bitcoin does not have a CEO but it does have lawyers. Currently, cryptocurrency lobbyists and activists are fighting on Capitol Hill to further update the language of the U.S. Senate’s bipartisan infrastructure bill that contains, buried in its 2,000+ pages, a sentence that could derail the entire crypto industry.
To pay off a portion of the $1 trillion spending package – a keystone policy for President Biden’s administration to upgrade American transportation and energy sectors – Senate Republicans have agreed to levy a $28 billion tax on the crypto industry.
But the bill also contains a poison seed. Crypto advocates are working tirelessly to protect the public blockchain industry from political actors that seemingly misunderstand the very industry they’re looking to oversee. And so far, it seems like they’re winning.
“What's scary about this is the process is so compact,” Kristin Smith, executive director of the Blockchain Association, said. “When you get language like this, and one of those broad packages when you're only four pages of a 2,700 page bill, you're scrambling with all of those other interest groups to get the attention of lawmakers.”
In the past week, public interest groups like the Blockchain Association, Coin Center and the newly formed policy team at Coinbase have sent memos, taken meetings and leveraged their insider connections to try to reshape the wording of a quick-moving piece of legislation. A process that’s only made harder by growing concerns around the coronavirus.
Calling the bill “one of the top two policy threats” ever seen by the U.S. crypto industry, Smith said she’s been impressed by the progress made already. Over the weekend, Senate officials softened the language in the bill, turning what could have been cataclysmic into something merely concerning.
Now at stake are a few words in what is rapidly becoming a language game. As Coin Center’s Neeraj Agrawal put it: “We’re trying to change like two words in that.”
The proposed “spend-for” in the infrastructure bill would come from expanding the reporting requirements for crypto brokers (think intermediaries like Coinbase and Robinhood) to help prevent tax avoidance.
In so doing, the bill also recklessly broadens the definition of a “broker” to conceivably apply to any economic actor working in crypto. This would apply to anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” on behalf of another person. That means miners, stakers, software developers might be forced to collect identifying information about anyone with whom they interact.
“We've had some people say, ‘Oh, that's not what we're intending.’ But the problem is the language as written can capture all of those things,” Smith said. “We really need to try to get it changed to match their intent.”
“If you get laws on the books that don't match well with how technology works in practice, you don't necessarily get the outcomes that you would like, whether it's from a public policy standpoint, a political standpoint, or a legal standpoint,” Nelson Rosario, a partner at Smolinski Rosario Law, said.
Few of the policy experts I spoke with are opposed to requiring major cryptocurrency exchanges to report more detailed information to the Internal Revenue Service (IRS). In fact, the largest U.S. exchange, Coinbase, sought clarity on the form in question (1099) as long ago as 2017.
For an industry that has sometimes disagreed on the need for government lobbying capability, the process to amend the bill has seemed remarkably in lockstep. It’s no stretch to say crypto has little political standing on Capitol hill but its voice is being heard.
The Electronic Frontier Foundation put out a statement broadly condemning the privacy concerns of such an understanding of “broker,” while Sens. Pat Toomey and Ron Wyden (not known for his crypto advocacy) have also made statements calling for adjustments.
Although “cautiously optimistic,” Smith notes, “we're not out of the woods yet.”
–D.K.
Crypto State 2021: Middle East Even though many countries in the Middle East restrict or outright ban activities related to blockchain technology, the region is having its crypto moment. From Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel, interest is picking up in the region as crypto companies work closely with regulators in the Middle East and North Africa (MENA) to gain some clarity about oversight of digital currencies.
Join us as we jet-set through the Middle East on our #CryptoState2021 virtual tour and explore how different markets are thinking about crypto, their roadblocks and challenges, and crypto’s impact on the region. Register for the Crypto State: Middle East virtual tour on Aug. 11.
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