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Acting OCC Chief Tells Senate Panel Crypto Custody Charter Is Under Review

5 years 2 months ago

The acting head of the Office of the Comptroller of the Currency told a U.S. Senate committee on Tuesday morning that past crypto-related initiatives at the bank regulator are under review.

Michael Hsu told the Senate Banking Committee the inclusion of some crypto services in the regulator’s national trust charter was not done “in coordination with all stakeholders.” Hsu added, however, that he supported giving charters to financial technology companies. 

“Put simply, denying a charter will not make the problem go away, just as granting a charter will not automatically make a fintech safe, sound and fair,” Hsu said. “I will expect any fintechs that the OCC charters to address the financial needs of consumers and businesses in a fair and equitable manner and support the important goal of promoting the availability of credit.”

Related: Prime Trust Raises $64M to Scale Fintech Infrastructure Biz

CORRECTION (August 3, 23:20 UTC): Hsu is the acting Comptroller of the Currency, not the acting director of the OCC.

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OCC Acting Director Tells Senate Panel Crypto Custody Charter Is Under Review

5 years 2 months ago

The acting director of the Office of the Comptroller of the Currency told a U.S. Senate committee on Tuesday morning that past crypto-related initiatives at the bank regulator are under review.

Michael Hsu told the Senate Banking Committee the inclusion of some crypto services in the regulator’s national trust charter was not done “in coordination with all stakeholders.” Hsu added, however, that he supported giving charters to financial technology companies. 

“Put simply, denying a charter will not make the problem go away, just as granting a charter will not automatically make a fintech safe, sound and fair,” Hsu said. “I will expect any fintechs that the OCC charters to address the financial needs of consumers and businesses in a fair and equitable manner and support the important goal of promoting the availability of credit.”

Related: Prime Trust Raises $64M to Scale Fintech Infrastructure Biz

This story is developing and will be updated.

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Marathon Digital Bitcoin Generation Increased 66% in July

5 years 2 months ago

Marathon Digital Holdings generated 442.2 new bitcoins during July, up from 265.6 in June.

  • It now has total holdings of about 6,226 bitcoins with a market value of $260.7 million.
  • The Las Vegas-based company said it has produced 1,288.3 bitcoins this year through Aug. 1.
  • Marathon reported cash on hand of $91.9 million and total liquidity, defined as cash and bitcoin holdings, of about $352.6 million.
  • The company said it has received 19,401 S19 Pro application-specific integrated circuit (ASIC) mining machines from Bitmain this year, with another 4,287 on the way. Its mining fleet now consists of 19,395 active miners producing 2.09 exahashes/per second, which means the machines can calculate 2.09 quintillion equations per second. One quintillion is a number followed by 18 zeros.
  • On Sunday, the firm announced it had purchased 30,000 S19j Pro miners from Bitmain. Once all the mining machines are deployed, it is expected to increase Marathon’s operations to 133,000 mining machines producing about 13.3 EH/s.

Read more: Marathon Digital Reports 17% Increase in Bitcoin Production for June

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Former CFTC Attorney Ryne Miller Joins FTX.US as General Counsel

5 years 2 months ago

Former U.S. Commodity Futures Trading Commission (CFTC) attorney Ryne Miller has joined FTX.US, the U.S. affiliate of crypto exchange FTX, as its general counsel.

  • FTX.US said Miller’s primary objective will be “to ensure FTX.US remains responsive to, and compliant with, emerging U.S. and global regulatory policies.”
  • While at the CFTC, Miller served as legal counsel to Chairman Gary Gensler, who now chairs the Securities and Exchange Commission (SEC). 
  • “We will be working alongside U.S. regulators to bring regulated digital asset markets to U.S. customers,” said Miller in a statement.
  • Just prior to joining the exchange, Miller worked at the law firm Sullivan and Cromwell LLP where he was a partner and co-head of its Commodities, Futures and Derivatives practice.
  • FTX CEO Sam Bankman-Fried told CoinDesk TV recently that the Hong Kong-based company plans to expand in the U.S. and that many of the obstacles to doing so were regulatory in nature.

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Hive Purchases 4,000 Bitcoin Mining Machines From Canaan

5 years 2 months ago

Cryptocurrency mining company Hive Blockchain has ordered 4,000 bitcoin mining machines from manufacturer Canaan.

  • The order will be completed in two tranches by the end of September, an announcement Tuesday said.
  • The machines have an aggregate hash power of 272 PH/s. PH/s stand for one quadrillion “peta” hashes per second, a measure of how many calculations a mining machine can compute in one second.
  • No price has been disclosed for the order, which follows a similar one between the two firms for 6,400 machines completed earlier this year.
  • Hive Blockchain has data centers in its native Canada as well as in Sweden and Iceland and is traded on Nasdaq, the Toronto Stock Exchange and the Frankfurt Stock Exchange.
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Stronghold Digital Mining Acquires Second Power Plant

5 years 2 months ago

Stronghold Digital Mining, a clean energy–powered cryptocurrency mining company, has purchased a second power plant in Pennsylvania, and the company said it was “currently in negotiations” to acquire a third facility in the state.

The new facility, called the Panther Creek plant, generates a maximum 80 megawatts and will nearly double Stronghold’s total net capacity across its two plants to 165 MW. It sits on a 33-acre site in the northeastern Pennsylvania borough of Nesquehoning

Stronghold says it raised approximately $74 million in lease financing to fund the acquisition of a second facility. Of the $74 million, $40 million came from WhiteHawk Capital Partners, a private credit investment manager. The remaining $34 million is from Arctos Credit, an affiliate of NYDIG.

Related: Marathon Digital Bitcoin Generation Increased 66% in July

Greg Beard, CEO of Stronghold, looks forward to mining bitcoin at “some of the lowest costs in the industry” while also helping the environment. “Coal refuse sites continue to wreak havoc across Pennsylvania,” Beard said in a press release. “We very much welcome the bipartisan political support to continue remediating these vast sites and return the land to the local community.”

In June, Stronghold raised $105 million to open its first plant in Kennerdell, Pa. On July 27, it registered for a $100 million initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC).

The Pennsylvania company converts waste coal, a material left over from coal mining, into power used to mine bitcoin and other cryptocurrencies. The company estimates that for each bitcoin mined, 200 tons of waste coal is eliminated.

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Berlin-Based Staking Startup Certus One Acquired by Jump Trading

5 years 2 months ago

Blockchain engineering firm Certus One has been acquired by Chicago-based quantitative trading company Jump Trading for an undisclosed amount, the companies said Tuesday.

  • Following the acquisition, Hendrik Hofstadt, Certus One’s CEO and co-founder, was appointed director of special projects as part of Jump Trading Group’s digital assets group. 
  • The Certus One staff will join Jump Trading’s staff of 900 employees made up of engineers, quants and traders. 
  • Berlin-based Certus One provides infrastructure for proof-of-stakes blockchains. It was a core developer of Wormhole, a product that allows users to move ETH and SOL tokens between blockchains.
  • In June, Oxygen, a decentralized finance brokerage built on the Solana blockchain, added Jump Trading as a strategic partner. 

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How Controversial Crypto Tax Found Its Way Into US Infrastructure Bill

5 years 2 months ago

A crypto-specific provision that would raise $28 billion for a $1 trillion infrastructure package before the U.S. Congress was so contentious that it briefly held up the entire bill. 

Much of the controversy hinges on a technical detail: the definition of the term “broker.” The provision, which would define a “broker” as any person who provides a service “effectuating transfers of digital assets on behalf of another person,” has been questioned by industry participants due to the possibility that it will include non-custodial companies, such as decentralized exchanges and miners, that would be unable to file broker-specific tax reporting forms.

The crypto provision was one of a handful of issues that held up the entire 2,702-page infrastructure bill, according to an individual familiar with the situation. The Senate hoped to introduce the bill late last week, but it wasn’t published until Sunday night.

Related: State of Crypto: Infrastructure Bill Shows Congress Sees Crypto as Here to Stay

The hold-up appears to be at least partly driven by concerns that removing certain businesses from the bill would change its “scoring.” 

The way the provision is currently worded, non-custodial businesses are part of the scoring, or how the Joint Committee on Taxation (JCT) evaluated the amount of revenue it could bring in. It’s possible that explicitly excluding miners, for example, could change the scoring, meaning the provision would no longer be expected to generate $28 billion. This in turn could impact the rest of the bill, forcing lawmakers to find new ways of funding the overall package. Though the JCT published its overall score for the bill, the way the JCT arrived at the $28 billion figure is currently unknown.

Designating DEXs

The bipartisan infrastructure bill has been a priority for U.S. President Joe Biden. The $1 trillion bill would send funds to public transit (including passenger rail), bridges, roads, energy transmission and electric vehicle infrastructure, water rights, tunnels and more. 

To fund these initiatives, the bill includes more than a dozen “pay-fors,” or provisions that would pay for the $550 billion in new spending. In addition to crypto, the bill looks to generate revenue by extending government-sponsored enterprise fees, sales from the Strategic Petroleum Reserve, reducing Medicare spending on discarded medications, reinstating some Superfund fees and several other areas.

Related: Senator Toomey Calls Text of Current Crypto Tax Proposal ‘Unworkable’

The crypto information reporting requirements for tax purposes, as originally drafted, designated decentralized exchanges (DEXs), and seemed to designate miners, hardware manufacturers, software developers and others as “brokers” required to report transactions, despite the fact that some of these entities don’t have customers with know-your-customer information.

To be clear: The provision did not suggest a new tax. The contentious issue was the expanded broker definition, which seemingly went beyond what would normally be considered a broker in similar financial sectors.

“It’s not actually a tax, it’s increasing reporting rules,” said Reid Yager, a former lobbyist and current director of communications at Blockhaus. “Whoever came up with this is actually pretty crafty. It’s easy to say ‘hey, I don’t want to increase taxes on something’ but if it’s just increasing reporting, it’s pretty hard to get a senator to turn their back.”

The provision was apparently inserted by Sen. Rob Portman (R-Ohio), according to multiple individuals familiar with the negotiations. Portman said he was working on a crypto tax provision after a Congressional hearing with IRS Commissioner Charles Rettig in April, but a spokesperson declined to provide further details at the time.

On Sunday, Sen. Ron Wyden (D-Ore.), the chair of the Senate Finance Committee, pushed back on the provision, tweeting that it “fails to understand how the technology works.”

Similarly, Sen. Cynthia Lummis (R-Wyo.) said in a statement that it’s “easy to get [this industry] wrong.” 

“This is why we need a real committee process to consider these issues, instead of secret drafting. We’re working on making it better,” she said through a spokesperson last week.

Sen. Patrick Toomey, the ranking Republican on the Senate Banking Committee, likewise announced his opposition to the provision on Monday.

Process

The infrastructure bill is moving quickly. The bill was announced last Wednesday, and the Senate held a procedural test vote within a day. Yager pointed to Congress’ COVID relief bills in 2020, many of which were voted on very shortly after their texts were published, as a precedent for this sort of speed.

Moreover, the bulk of the infrastructure bill has already been decided, with debate and amendments largely focusing on some details.

It’s not unusual for the text of a bill like the infrastructure legislation to be written until just before it’s fully introduced, Yager said, even as procedural votes are held to open debate on the bill. 

Most lawmakers may not have had a chance to read through the full bill ahead of last week’s procedural vote, and the text itself wasn’t made available to the general public until late Sunday.

Indeed, much of the negotiation likely happened within a small group.

Typically, “there’s four old white dudes in a Senate chamber talking through the bill,” Yager said.

Alongside Portman, the infrastructure bill was largely negotiated by a group, including Sens. Kyrsten Sinema (D-Ariz.), Susan Collins (R-Maine), Joe Manchin (D-W.V.), Mitt Romney (R-Utah), according to a joint press statement.

Over the next few days, lawmakers can propose amendments as they debate the merits and costs of the bill. It’s possible, though not guaranteed, that amendments to strip or modify the language will be included, though it’s unclear whether they’ll be adopted should that happen.

What is clear is that the provision fills a needed funding hole, and therefore may not be easily replaceable.

“For this infrastructure bill by itself, we have honestly seen some of the most convoluted attempts to find money in the U.S.,” Yager said. “They pretty much spent all their ammunition to find money across the U.S. government.”

Still, the actual methodology behind the $28 billion figure from crypto taxes is unknown, said Kristin Smith, executive director of the Blockchain Association. 

“Given all the other entities, miners, software developers, the others wrapped up in the language [who] have no ability to report on the revenue or the tax obligations, we don’t think it’s going to substantially change the score if we clarify that those entities are no longer part of the [definition],” she said. 

Centralized exchanges may be able to provide the total amount by themselves, depending on how exactly the data was scored.

Perianne Boring, the president of the Chamber of Digital Commerce, expects the bill to be finalized roughly around the end of this week. 

Even after that, however, the House of Representatives still has to discuss and vote on the bill before it can head to the President for a signature.

In other words, the bill may not be finalized before September or October. During that time, the House may also try to amend the provision. Rep. Tom Emmer (R-Minn.) has already tweeted that he’s “on it.”

Read the crypto-specific provision below:

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HSBC UK Blocks Payments to Binance Exchange

5 years 2 months ago

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 Conduct Authority’s (FCA) June announcement that Binance was not allowed to conduct any regulated activities in the country.
  • HSBC has been contacting customers advising them to stop payments until further notice, according to tweets.
  • A spokesperson from HSBC confirmed, “We have communicated to HSBC UK customers about changes in this [crypto] space that may impact them.”
  • “We won’t comment on individual securities or cryptocurrency exchanges. We place particular emphasis on high Anti-Money Laundering (AML) and Know Your Customer (KYC) standards, and are closely following developments, client demand and changing regulation in these markets,” a spokesperson from HSBC said.
  • In July, U.K. bank Barclays and Spanish banking giant Banco Santander also blocked payments to Binance for U.K. customers, following several other British banks in blacklisting the exchange.
  • ​​”We are disappointed that HSBC has taken this decision, and would welcome a dialogue to discuss any concerns that they have,” a spokesperson from Binance told CoinDesk.
  • “We take our compliance obligations very seriously, and we are committed to working collaboratively with regulators to shape policies that protect consumers, encourage innovation, and move our industry forward,” the spokesperson said.

Read more: Binance Not Authorized to Operate in the Cayman Islands, Regulator Says

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SEC Boss Gensler Eyeing Robust Regulation of Crypto Market: Report

5 years 2 months ago

The new chair of the U.S Securities and Exchange Commission (SEC), Gary Gensler, said he is weighing up a robust regulatory regime for the crypto market.

  • Gensler said in an interview with Bloomberg Tuesday that his interest in crypto does not mean he will take a hands-off regulatory approach that many in the space are hoping for.
  • “While I’m neutral on the technology, even intrigued – I spent three years teaching it, leaning into it – I’m not neutral about investor protection,” Gensler said.
  • He did not given a timeline on the introduction of SEC action on cryptocurrency, citing 49 non-crypto policy reviews – such as responding to the GameStop trading frenzy, that could slow down any progress on cryptocurrency.
  • Nor did Gensler comment on the potential approval of a crypto exchange-traded fund, despite the long list of applications the regulator has received.
  • Gensler has previously spoken of the need for the SEC to regulate crypto exchanges, and has now said this would be the easiest way to monitor digital token trading, which in turn could bring into play peer-to-peer lending on decentralized finance platforms.
  • The SEC could then regulate such platforms if they are advertising an interest-rate return on a crypto asset. Alternatively, platforms that pool digital assets could be regarded as mutual funds, which would also bring them into the SEC’s purview.
  • Gensler’s appointment as SEC chair was met with a positive reaction from large swathes of the crypto community given the consensus that he understands cryptocurrency in a way that few others in his field do, meaning his regime would bring greater regulatory certainty than has been experienced previously.
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Bitcoin Approaching Short-Term Support at $34K-$36K

5 years 2 months ago

Bitcoin (BTC) sellers remained active during Asia hours as the cryptocurrency slipped further below $40,000 resistance. The next level of support is seen around $34,000-$36,000, which could stabilize the pullback.

Bitcoin was trading around $38,000 at press time and is down 2% over the past 24 hours. The short-term uptrend is weakening, although buyers could return for a brief bounce at support.

  • The relative strength index (RSI) is approaching oversold levels on the four-hour chart, which could encourage short-term buying.
  • Bitcoin broke below a series of higher price lows from the July 19 short-squeeze around $30,000. This suggests buyers are in profit taking mode given recent overbought signals on the daily chart.
  • The weekly chart is not yet oversold, although downside momentum has slowed considerably over the past month.
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Bitwise Launches Crypto Funds for Aave and Uniswap

5 years 2 months ago

Bitwise Investments is adding two funds for decentralized finance (DeFi) protocol tokens – aave and uni – to its lineup of institutionally-focused investment vehicles.

The new funds by the California-based manager will invest directly in one of two large-cap tokens: aave, of the non-custodial lending protocol; and uni, from the decentralized exchange uniswap. Both are the largest DeFi protocols of their type.

Bitwise, which manages over $1 billion in crypto bets, had previously limited its pure-play funds to bitcoin and ethereum – plus a smattering of thematic indexes, including one for DeFi. Launching aave and uni funds is in line with investor demands, according to CIO Matt Hougan.

Related: Market Wrap: Bitcoin Underperforms Ether; Crypto Tax Ahead?

Hedge funders – at least those with an appetite for crypto – have been warming up to the DeFi markets this year. A May study by consultancy PwC estimated that 31% of crypto hedge funds have used decentralized exchanges to execute trades and more than a quarter were invested in aave.

The tokens’ respective protocols have been surging for the better part of a year as investors of all stripes dug deeper into the crypto ecosystem. Aave’s lending tool boomed – up more than 70x since July 2020 with $6.9 billion in loans on platform. Uniswap’s trading platform processed over $60 billion in transactions in June alone.

SEC filings reviewed by CoinDesk show the aave fund, which was operational as early as April, had over $92 million in sales by the end of that month. A spokesperson said both funds contain “meaningful assets” but declined to provide details.

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Bullish Flows Push Bitcoin’s Put-Call Ratio to 2021 Low

5 years 2 months ago

Bitcoin’s put-call open position ratio dropped to the lowest level this year on increased activity in calls, or bullish bets.

The ratio slipped to 0.51 on Monday, hitting the least since Dec. 25 and extending the slide from the July high of 0.67, data provided by crypto derivatives research firm Skew show.

According to Skew’s Twitter feed, about 2,000 bitcoin call option contracts with a strike price of $140,000 and an expiry date of Dec. 31 changed hands on Sunday. Similar volume was seen in the December expiry call with a strike price of $200,000.

Related: Bitcoin Approaching Short-Term Support at $34K-$36K

“All this activity in calls has brought the put-call ratio to YTD lows,” Skew tweeted on Monday. A call option gives the holder the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A call buyer essentially purchases insurance against bullish moves by paying a premium to the seller. A put option gives the purchaser the right to sell.

Data shared by over-the-counter desk Paradigm and analytics firm Genesis Volatility show investors bought Aug. 6 expiry calls at $44,000 and simultaneously sold calls at $50,000, a so-called bull call spread, last week, pulling the put-call open positions ratio down.

The bull call spread involves buying call options at, below or above the spot market price and selling an equal number of calls with the same expiry at a higher strike price.

It’s a limited-risk, limited-reward strategy designed to benefit from an increase in the underlying asset. The maximum profit is earned if the asset expires at or above the short call’s strike price, that is $50,000 in this case, on the settlement day. The maximum loss is limited to the net premium paid while setting the strategy. It is arrived at by subtracting the compensation received for selling the $50,000 call from the premium paid for buying the $44,000 call.

Related: Market Wrap: Bitcoin Underperforms Ether; Crypto Tax Ahead?

Traders also bought September expiry call spreads at $64,000-$124,000 strikes last week. Other metrics measuring the implied volatility or price differential between call and puts also paint a bullish picture.

For the first time in nearly 10 weeks, short-term, medium-term and long-term put-call skews are displaying negative values, a sign of calls drawing higher demand or prices than puts.

Also read: Banished Chinese Bitcoin Miners Look to the West, and Far Beyond 

Bitcoin is currently trading near $38,500, representing a 1.7% drop on the day.

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P2P Exchange Hodl Hodl Reports Security Issue

5 years 2 months ago

Hodl Hodl, a noncustodial bitcoin marketplace, said it had to force-liquidate some users’ contracts to prevent the loss of funds, pointing to a possible security issue.

“Unfortunately, our recent internal and external audit identified that some user payment passwords might have been compromised,” the Hodl Hodl team wrote in a blog post on Monday. “This affected a limited number of contracts, but we are taking proactive measures to ensure that everyone is safe.” The team said it is investigating the issue and working on safely moving funds from potentially compromised contracts.

Hodl Hodl declined to comment on the situation but promised to publish a report as soon as the issues are investigated and fixed. “We have contacted external auditors and are doing external and internal audits on a daily basis,” according to the blog post.

Related: Thriving Under Pressure: Why Crypto Is Booming in Nigeria Despite the Banking Ban

According to a user’s tweet, the issue pertained to the Hold Hodl lending platform, which went live in October 2020. Users also reported the Hodl Hodl website was down for some time on Aug. 2.

Answering questions on Twitter, Hodl Hodl’s official account said the platform did not liquidate all contracts on the platform, only some.

Hodl Hodl is a peer-to-peer noncustodial marketplace. It doesn’t store users’ funds but provides a way for them to buy, sell, lend and borrow bitcoin from each other in an automated fashion. Hodl Hodl weighs in only when there is a dispute about a payment.

Users lock bitcoin in multisignature escrow wallets and use their personal payment passwords to release funds from it. Some of those passwords, according to Hodl Hodl’s statement, might have been compromised.

Related: Bitfinex Now Owns a Stake in No-KYC Bitcoin Exchange Hodl Hodl

On Aug. 1, user HodlBits tweeted concerns about Hodl Hodl, saying they received an email from the company “where they are pushing us to close contracts in the next 2 hours,” and the style of the email seemed weird. Hodl Hodl’s official account responded that the emails were authentic.

Later the same day, Hodl Hodl tweeted that the platform started forced liquidation “in those contracts that are still in In progress stage but are considered as ‘high risk.’ This is done to assure safety of YOUR funds. In order to complete the Liquidation process we will need you to undersign the Liquidation as well.”

A day later, Hodl Hodl published an explanation in its blog and apologized for not communicating with users in a more straightforward way. The team also published a PGP key on the website and in the blog to prove the social network accounts of Hodl Hodl had not been compromised.

Read also: P2P Exchange Hodl Hodl Takes First Step in Bringing Private Bitcoin Trades to BlueWallet Users

More details of the situation will come later in the blog, CEO Max Keidun told CoinDesk.

Hodl Hodl is one of the few places allowing users to buy bitcoin for fiat without sending funds to the third-party wallet of a centralized exchange. The company is owned by the team and a small number of investors, including the centralized exchange Bitfinex.

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Australian Exchange CoinJar Unveils Crypto Mastercard in Country First

5 years 2 months ago

Australia’s longest-running crypto exchange has launched a card backed by Mastercard allowing users to buy, sell and spend digital assets directly from its platform using local dollars.

The CoinJar Card, which marks an Australian crypto first under the Mastercard brand, is available either physically or digitally through both Google and Apple Pay integration.

CoinJar’s card supports up to 30 different cryptocurrencies and features a 1% conversion rate that is returned to customers via an in-house rewards program, the company said in a press release on Tuesday.

Related: What Does Last Week’s Steep Drop in Bitcoin’s Balance on Exchanges Really Mean?

Dominic Gluchowski, chief marketing officer at CoinJar, told CoinDesk via email on Monday the card was the first “Australian-native” crypto card. The exchange brought in assistance from payments solutions provider EML for technological advice.

“All transactions are denominated in Australian dollars (AUD) and are routed through Australian banks and payment providers,” said Gluchowski.

Other providers utilize the U.S. dollar or Singaporean dollars, which in turn, leads to “crippling” international transaction fees while using their cards for everyday purchases, Gluchowski added.

The move comes hot on the heels of Global payments giant Visa approving local Australian startup CryptoSpend to issue a similar product in July.

Related: Australian Lending Startup Loda Gets $15M to Further Crypto Collateralization Efforts

“We know CryptoSpend is attempting to bring the first Australian-native Visa to market in September, so there’s a growing appetite for a local option,” said Gluchowski. “We’re just a tiny bit ahead of them.”

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Senator Toomey Calls Text of Current Crypto Tax Proposal ‘Unworkable’

5 years 2 months ago

Sen. Pat Toomey (R-Pa.) on Monday called the bipartisan infrastructure bill’s proposed crypto tax reporting clauses “unworkable” and pledged to amend them.

The text’s definition of a broker is too broad, according to Toomey, and affects non-financial services parties, like bitcoin miners, that he said should be exempt. Plus, non-custodial services would struggle to properly file identification forms with the IRS, he said.

“Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences,” he said in a press statement.

Related: Market Wrap: Bitcoin Underperforms Ether; Crypto Tax Ahead?

Toomey promised to amend the bill. He is now looking for a democratic senator to partner with, according to a source familiar with the matter.

The statement by the Senate Banking Committee’s top Republican member highlights the rocky road ahead for the $1 trillion dollar infrastructure bill. The Biden administration signature push calls for $550 million in new congressional spending, some $28 billion of which would come from a crypto tax.

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Former Monero Maintainer ‘Fluffypony’ Arrested and to Be Extradited for Non-Crypto Crimes

5 years 2 months ago

Riccardo Spagni, the former maintainer for privacy coin Monero, was arrested in Nashville, Tenn. on July 20 and will be extradited to South Africa to face fraud charges for crimes unrelated to crypto.

Spagni, known online 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.

Spagni was previously charged with fraud and related charges in a regional court in Cape Town, but pleaded not guilty and failed to appear in court. According to court documents, South African authorities could not find Spagni at his home address in South Africa, and after speaking with Spagni’s friends and family, found that Spagni had fled South Africa.

Related: Bug Found in Decoy Algorithm for Privacy Coin Monero

South African police issued a warrant for Spagni’s arrest in April. 

Spagni’s wife, Sashka Spagni, tweeted a message on her husband’s behalf on Monday in which he said that “Unfortunately, due to a misunderstanding with regards to the setting of court dates in an old matter, which I have continuously been trying to resolve since 2011, I have been held in contempt of court and currently awaiting extradition.”

Spagni added that he was hoping to resolve the issue soon and that “in the meantime my business affairs will continue under the leadership of my partners.”

Though Spagni stepped down from his day-to-day leadership role at Monero in 2019 after five years with the privacy-focused project, he was still a public representative of Monero and often took responsibility for coordinating Monero’s press and public-facing information. 

Related: ¿Qué es el hashrate y por qué importa?

Spagni was arrested in Nashville when a private charter jet he was flying on for a trip from New York to Los Cabos, Mexico stopped for fuel. 

According to the arrest warrant, Spagni is currently in the custody of the U.S. Marshals Service and will be held without bail until his extradition.

Spagni is believed to have “significant cryptocurrency assets that would enable him to flee” as well as a “watch valued at $800,000,” according to the warrant.

UPDATE (August 2, 21:48 UTC): Updated with Spagni’s response as tweeted by his wife.

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Market Wrap: Bitcoin Underperforms Ether; Crypto Tax Ahead?

5 years 2 months ago

Cryptocurrencies were mostly higher on Monday as bullish sentiment continues into August. Bitcoin underperformed other major cryptocurrencies and is down about 3% over the past 24 hours compared to a 2% rise in ether over the same period. 

Buyers remain active despite ongoing regulatory crackdowns in China. On Sunday, the People’s Bank of China (PBoC) said it will keep applying high regulatory pressure on crypto trading, mostly due to concerns about financial risk. 

Traders are also digesting the 58-page “Digital Asset Market Structure and Investor Protection Act, proposed by Rep. Don Beyer’s (D-Va.), seeking to create an exhaustive regulatory regime for digital assets. The U.S. Senate is also advancing a $1 trillion infrastructure bill with a crypto tax provision, which could be a source of market anxiety. 

Related: Senator Toomey Calls Text of Current Crypto Tax Proposal ‘Unworkable’

For now, a breakdown on intraday charts “suggests that bitcoin may fall back to the mid-range at around $36,000, or lower, before the rally continues,” wrote Marcus Sotiriou, trader at the U.K.-based digital asset broker GlobalBlock, in an email to CoinDesk

Latest prices

Cryptocurrencies:

  • Bitcoin (BTC) $39,164.5, -5.06%
  • Ether (ETH) $2,604.8, -2.05%

Traditional markets:

  • S&P 500: 4387.15, -0.18%
  • Gold: $1812.9, +1.44%
  • 10-year Treasury yield closed 1.173%, compared with 1.236% on Friday.
Meme stock rotation

Over the past month, popular “meme stocks” have sold off as bitcoin rallied. This inverse relationship was noted in The Daily Shot newsletter a few months ago, and indicates a pattern of buying and selling across high yielding traditional and crypto markets. 

Related: What Does Last Week’s Steep Drop in Bitcoin’s Balance on Exchanges Really Mean?

It is possible that traders will flock to meme stocks if bitcoin pulls back from overbought levels. 

Bitcoin call buying

The bitcoin options market has been heavily skewed towards call buying over the past month, which could signal the return of bullish sentiment. 

“Now that the large spot price sell-off already occurred in May, there aren’t as many gains to be protected via put buying,” wrote Gregoire Magadini, co-founder and CEO of Genesis Volatility, in a Telegram chat. 

“Combine the lower spot prices with lingering high-ish implied volatility, and bitcoin puts start to look very unattractive,” Magadini wrote. “It makes more sense to buy the dip with call structures than to position oneself using puts.”

The chart below shows the bitcoin put/call ratio at the lowest level since January, which preceded a brief 25% pullback in the bitcoin spot price. 

Crypto fund outflows continue

Digital-asset investment products had their fourth straight week of net outflows, even as cryptocurrency markets staged their biggest rally since early this year. 

Net outflows across all digital-asset funds totaled $19.5 million, according to a report Monday by CoinShares.

Bitcoin-focused funds had outflows totaling $19.7 million, partly offset by net inflows to funds focused on other categories, including multi-asset funds, wrote CoinDesk’s Lyllah Ledesma.

July crypto comeback

Cryptocurrencies rebounded in July after a sluggish May and June. AAVE, an open-source and non-custodial protocol that runs on the Ethereum blockchain, outperformed major crypto currencies with a 33% gain in July. Bitcoin was not far behind with a 20% gain compared to a 12% gain in ether.

Ether developments

Ether looks to extend its record daily winning streak in the run-up to a planned upgrade on Ethereum’s blockchain that could significantly reduce the cryptocurrency’s supply growth.

Aside from bitcoin’s price recovery from $30,000, ether may have received a boost from Ethereum’s upcoming 11th backward-incompatible upgrade, or hard fork, slated to happen on Aug. 4, CoinDesk’s Omkar Godbole reports. 

The so-called London hard fork contains four Ethereum Improvement Proposals (EIP), of which EIP-1559 will activate a mechanism that would burn a portion of fees paid to miners. Once it takes effect, increased network usage will result in a higher amount of ETH being burned, thereby curbing the cryptocurrency’s supply growth over time.

Meanwhile, 27 of 40, or 68%, of crypto experts surveyed by Finder believe that ether will one day overtake bitcoin as the largest cryptocurrency by market cap; 58% of the panelists believe that the “flippening” could happen within the next five years. 

The price of ether is expected to reach $4,596 per ETH by the end of this year, according to the average forecast from 27 experts on Finder’s panel who gave their price predictions. 

Relevant news: Other markets

Most digital assets on CoinDesk 20 ended lower on Monday. 

Notable winners of 21:00 UTC (4:00 p.m. ET):

tezos (XTZ) +3.1%

chainlink (LINK) +0.59%

Notable losers:

polkadot (DOT) -6.91%

the graph (GRT) -6.04%

stellar (XLM) -5.24%

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What Does Last Week’s Steep Drop in Bitcoin’s Balance on Exchanges Really Mean?

5 years 2 months ago

The amount of bitcoin being held across all exchanges fell sharply last week, a sign that based on past experience was taken a positive for the bitcoin market. 

But the changing dynamics of the market show that as the crypto market grows bigger, relying on just one or two metrics can’t always reveal the full story of what’s going on.

Data from blockchain data firm Glassnode shows that the balance of bitcoin on all exchanges fell 4.1% to 2.48 million from 2.587 million in the last four days of July.

Related: Market Wrap: Bitcoin Underperforms Ether; Crypto Tax Ahead?

The market’s initial reaction to the drop was positive, because as recently as last September, a decrease in the number of bitcoin held on all exchanges came at the same time as a price rally.

The presumed logic is simple: More BTC was moved off exchanges, potentially to cold storage wallets, as investors became more bullish about the long-term value of their bitcoin holdings.

But after analysts took a closer look at the data, particularly given that the recent drop was much steeper than the previous one, they said that the decline may not necessarily reflect just bullish sentiment.

It is “really hard to know what’s happening with just one dimension,” Willy Woo, an independent blockchain data analyst, told CoinDesk. “As the network changes, the measuring stick does along with it.”

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Indeed, just as the market started noticing the drop, crypto exchange Kraken, for example, announced last week that the bitcoin balance drop on its exchange was the result of its internal transfers, which immediately damped some of the initial excitement. 

“We can’t confirm that the drop is not entirely due to exchanges’ internal transfers,” Philip Gradwell, chief economist at blockchain data firm Chainalysis, said. “Some are, but not all, and potential withdrawals need to be observed for longer to see if they are genuine withdrawals.

“This makes giving definitive statements on exchange balances far back in the past pretty tricky,” he concluded. “We are working on an improvement to understanding this.”

Clara Medalie, research lead at blockchain data firm Kaiko, said that while it is easy to tell which addresses belong to an exchange, many more entities such as over-the-counter (OTC) desks and brokers associated with the exchanges are receiving lots of bitcoin.

“Thus, it is difficult to actually measure an exchange outflow because these transfers very well could just be being sent to other exchanges or trading desks, or simply between addresses on the same exchange,” Medalie said.

Bullish, but conservatively bullish

Some argue, however, that by also looking at a few other blockchain data metrics, last week’s drop in bitcoin’s balance on exchanges might still reflect a bullish market sentiment by large.

Woo told CoinDesk that when the drop took place last week, the holdings of the cohorts owning small, medium and large amounts of bitcoin increased, showing some aggressive purchases by both bitcoin whales (large holders) and smaller investors.

As CoinDesk reported, the actual number of BTC available for trading is much lower than bitcoin’s current supply at 18.77 million, or 89% of the 21 million cap, because of increased hoarding by investors and the permanent loss of mined BTC over the years. A decline on BTC’s balance on exchanges and increased BTC balances of holders across their wallet addresses indicate that some of the coins were sold to buyers off the exchanges.

“The largest of the whales may be exchanges that were previously thought of as distinct separate entities, when now we discover in effect they were exchanges all along,” Woo said. “‘Shrimps (bitcoin holders with less than one BTC) to smaller whales all increased their holdings … These guys are unlikely to be exchanges, so it validates most of the coins that left exchanges are real.” 

As data from Glassnode shows, in the past two weeks, the total circulating supply held by entities with different amounts of BTC all increased, with the exception of entities with balances between 100 and 1,000 BTC, and those with balances of more than 100,000 BTC.

“When I see big outflows like this, I think that traders ‘like the price’ and are willing to hold over a longer time period,” George Kaloudis, research associate at CoinDesk, said. “It certainly shows that investors are more willing to weather the storm in the near-term given the friction of moving funds back on exchanges to liquidate.”

Changes in preferred exchanges

The outflows of bitcoin balance on exchanges, based on analysis by Chainalysis, is also a case-by-case situation, an indication that some investors and traders may have changed their preferred platforms for trading and other crypto activities.

As the chart below shows, the drop in the number of bitcoin held on crypto-to-crypto exchanges was much steeper than the drop in bitcoin balances on crypto-to-fiat exchanges since May 1.

“I think much of the bitcoin that has been withdrawn is moving exchanges, as people change which exchanges they trade on,” Gradwell said.

Even though it is not clear what has triggered the change of preferred crypto exchanges by traders and investors, Binance, the most popular crypto exchange by trading volume, has faced tougher regulatory actions in countries around the world.

Bitcoin’s recent outflows from exchanges “was presumably catalyzed by Binance’s announcement of dramatically lower withdrawal limits for non-KYC (know-your-customer) customers,” blockchain research firm Delphi Digital wrote in its daily market update on July 29, which also noted that Binance and Coinbase were the top two exchanges in terms of absolute outflows.

Binance also said that its users in Germany, Italy and the Netherlands won’t be able to open new futures and derivative positions on the platform.

On the other hand, the shift in preference for crypto-to-fiat exchanges also could signal that new investors in crypto are more comfortable with bitcoin investments only, according to CoinDesk’s Kaloudis.

“We are seeing new entrants to the bitcoin market who are presumably less comfortable trading across cryptos in general, [which is] theoretically more bullish for bitcoin adoption,” he said.

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