Archive December 2018

UK Tax Agency Publishes Detailed Guidance for Crypto Holders

The United Kingdom’s tax agency has just released a comprehensive explanation of how it sees crypto assets and how individuals may be taxed on their holdings. Her Majesty’s Revenue and Customs (HMRC), the government agency responsible for collecting taxes and overseeing other aspects of the nation’s coffers, explained that Wednesday’s report specifically focuses on how individuals possessing crypto assets might be taxed, but does not outline the tax scheme for tokens held by businesses or for business purposes. Guidance on that will be published at a later date. The document follows on previous reports from the UK government, treating crypto assets more as property than as a form of money. “HMRC does not consider crypto assets to be currency or money. This reflects the position previously set out by the report from the Cryptoasset Taskforce (CATF),” it explains, noting that the task force classified cryptocurrencies as either exchange tokens, utility tokens or security tokens. Importantly, Wednesday’s report notes that how a token is treated for tax purposes depends on the token’s use case, rather than its definition. “This paper considers the taxation of exchange tokens (like bitcoins) and does not specifically consider utility or security tokens. For utility and security tokens this guidance provides our starting principles but a different tax treatment may need to be adopted,” HMRC explains. Investors who purchase tokens specifically in the hopes that their value will increase will be required to pay capital gains tax when they sell, while individuals who receive tokens from their employers as a form of payment, from mining, transaction fees or airdrops will have to pay income tax and national insurance contributions. The report continues:
“As set out in more detail below, there may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax would take priority over the Capital Gains Tax rules. HMRC will publish separate information for businesses in due course.”
Notably, HMRC will not consider the purchase and sale of cryptoassets to be the same as gambling. The report goes into detail, explaining to UK residents just how and when their holdings – or transactions – may be classified as securities, providing examples to demonstrate. To simplify the calculations required, individuals can “pool” different assets together. Rather than calculating the gains or losses on each asset individually, they can simply look at the total value when placed in the pool and compare that to the value at the end of the tax period.

Forks and losses

The new guidance later outlines how forks of a blockchain may impact taxation, specifically citing hard forks which cause the chain to split and new tokens to be formed. The section details how forks occur, when a chain might split, and how the value for the subsequent coins would be determined, adding:
“New cryptoassets can only be disposed of if the exchange recognizes the new cryptoassets. If the exchange does not recognize the new cryptoasset it does not change the position for the blockchain, which will show an individual as owning units of the new cryptoasset. HMRC will consider cases of difficulty as they arise.”
Other provisions account for assets which have lost their value, if tokens are stolen or defrauded from the investor or even if the individual somehow loses their private keys. Regarding the latter, HMRC advises that an individual will likely have to claim that their cryptoassets now have “negligible value,” which could, if approved, allow them to claim a loss. Source:

Tim Draper Invests $1.25 Million in Bitcoin Payments Processor OpenNode

U.S.-based venture capitalist Tim Draper has invested $1.25 million in OpenNode, a bitcoin-only payments processing startup. Announcing the seed round on Tuesday, OpenNode told CoinDesk that the raised funds will be used to expand its team and beef up its legal and compliance efforts. The firm claims to process “instant” and “risk-free” bitcoin payments for businesses, generating revenue by charging a 1 percent for transactions. OpenNode taps the lightning network – effectively a transacting layer on top of bitcoin – which is being developed in an effort to enable faster and cheaper transactions that can net-settle to the bitcoin blockchain. OpenNode said in a statement that since the start of its platform, the capacity of the lightning network has grown over 15,000 percent to 456 bitcoin or BTC. “We’ll continue to tackle new emerging markets where the lightning network can cut costs, promote creative payment models, and refine the current user experience with payments,” an OpenNode spokesperson told CoinDesk. Draper, the founding partner of Draper Associates and Draper Fisher Jurvetson (DFJ) Venture Capital, is an early blockchain investor and has backed several startups in the space. Back in 2016, he led a $4.2 million series A funding round in Texas-based company Factom, aimed at building a number of new products for its blockchain data network. Draper also participated in a total $760,000 investment round of bitcoin payroll startup Bitwage in 2015, and a smart contract trading platform called Mirror’s $8.8 million Series A financing in the same year. Source:

Blythe Masters, CEO of Blockchain Startup Digital Asset, Is Stepping Down

Blythe Masters, the CEO of distributed ledger technology provider Digital Asset Holdings, has stepped down after three years running the firm. The company announced Tuesday that Masters will remain as a shareholder, strategic advisor and member of the company’s board of directors, but that she would vacate her position as chief executive for personal reasons. The departure was first reported by Fortune. In a note to employees sent earlier today, Masters wrote that “working as part of the DA family means the world to me, but I also work for my family’s future and I need to focus on this for a while.” Masters will be temporarily replaced by AG Gangadhar, who joined the firm’s board this past April and has been appointed as its chairman. He will serve as acting CEO while the company looks for a new chief executive, according to a press release. In a statement, Masters said the company has “evolved” from being an idea to operating as a technology firm worldwide. She praised Gangadhar, saying:
“We are fortunate to have a deep bench of accomplished executives on the management team and Board, including AG, who have the requisite experience to take the company to the next level. Having come to know and trust AG as an advisor and Board member, I am convinced that he brings what’s needed to guide the company through its next phase.”
Gangadhar has previously worked at Google, Microsoft, Amazon, Cruise (GM) and Uber, according to the release. Masters began leading Digital Asset in 2015, the year after it was first founded. The firm has since grown to work with companies including the Depository Trust and Clearing Corporation, Google Cloud and the Australian Securities Exchange. Michael Bodson, president and CEO of the Depository Trust and Clearing Corporation and member of the Digital Asset board, thanked Masters in a statement, saying “her leadership and vision … has propelled the company from a promising startup to a globally recognized leader in DLT. We are excited to have a world-renowned technologist like [Gangadhar] to help take the company forward.” Source:

Overstock’s Medici Acquires Digital Tokens Representing Startup Equity Shares’s investment wing, Medici Ventures, has successfully purchased digital tokens representing 3.6 million shares from Chainstone Labs, a digital securities company. The shares represents Medicis’s 29.6 percent stake in the startup, worth $3.6 million. They mark Chainstone’s first step in venturing into the security token market, which itself is in the inception phase. Medici is gearing up to launch a security token marketplace in January with its own tZERO token as a primary traded asset. Chainstone is led by Bruce Fenton, CEO at the Atlantic Financial Blockchain Labs, founder of The Satoshi Roundtable conference and a board member of Medici. “We believe that digital securities are a far superior model to old ways of moving securities. Since this is our business focus it’s a natural fit to have our own equity digitized into a securities token,” Fenton told CoinDesk through a spokesperson. According to him, the startup issued 12.4 million digital shares, named CHAINSTONE. The token was issued on the Ravencoin blockchain. Fenton, as well as Medici principal software developer Tron Black and chief technology officer Joel Weight co-authored the platform’s white paper, and are active contributors, he said. The network, designed to support peer-to-peer asset transactions, was launched in January. Fenton said:
“For these shares Ravencoin was a perfect choice. Ravencoin was specifically designed for digital assets. It has several advantages over other platforms because it benefits from the security and salability of the Bitcoin code base.”
That said, Chainstone as a company plans to support projects with ERC-20 tokens, Blockstream’s Liquid and other platforms going forward, Fenton added. Blockchain-based shares will make transactions “faster, more secure, and completely transparent will change the world,” Medici Ventures president Jonathan Johnson said in a press release. He told CoinDesk that there are no current plans to make the token tradable on tZERO, “but this is still an early stage company.” So far, the token is not open to the public, according to Medici. Medici plans to have its security token trading platform, tZERO, up and running in January. The platform has also announced that it is developing a security token for cobalt sales, commissioned by the Hong Kong-based company GSR Capital. Source:

Documents Suggest Tether Has Fiat Funds to Back Stablecoin: Report

A new report seeks to shine a light on one of the prevailing questions surrounding Tether Ltd., the company behind the dollar-pegged stablecoin USDT: whether it has cash reserves to back up its 1.8 billion tokens. Bloomberg News reported Tuesday that it has seen Tether bank statements indicating that, over four separate months at least, the company held sufficient dollars to back the tether (USDT) tokens on the market. While the report, which CoinDesk cannot confirm, does not provide the reassurance of a full audit by a specialist firm, it appear to provide evidence that Tether’s token – used by many crypto traders and exchanges to move value internationally – is backed by more than just claims from the firm, at least during certain windows of time. Bloomberg said it has seen documents from September 2017 suggesting that Tether had $452.9 million in accounts at Noble Bank, Puerto Rico, and Bank of Montreal. At the end of that month, the firm had 435 million USDT in circulation. Bank statements for several other non-consecutive months also indicated its dollar reserves matched tokens on the market, says Bloomberg. Tether had previously promised a full audit of its dollar holdings and had hired auditing firm Friedman LLP to that end, yet that relationship was dissolved in January 2017 without a full explanation and without any audit forthcoming. Departing Noble Bank early in October 2018, the firm moved to use the services of Bahamas-based Deltec Bank and Trust Limited. It soon after released a letter dated Nov 1 from Deltec, stating “the portfolio cash value of your account with our bank was US$1,831,322,828” as of Oct. 31. The lack of a clear audit of reserves has caused much discussion and controversy, both within the crypto community and without, since Tether effectively acts as a bank for exchanges that are not provided traditional banking services. Tether and its sister firm, crypto exchange Bitfinex, have also been accused of manipulating the price of bitcoin using USDT. The U.S. Department of Justice (DOJ) was reportedly focusing a months-long investigation into crypto market manipulation on the tether stablecoin on Nov. 20, Bloomberg suggested at the time. The two firms were also reportedly subpoenaed by the U.S. Commodity Futures Trading Commission in December 2017 to ascertain their levels of fiat reserves. Amid all the controversy, traders appeared to lose faith in the USDT token causing it to briefly lose its 1:1 dollar parity in mid-October, slipping to a value of low of $0.92. The firm soon after issued a statement, stressing “all USDT in circulation are sufficiently backed by U.S. dollars” and “assets have always exceeded liabilities.”At press time, USDT is trading at $1.01, according to CoinMarketCap. Source:

Coinbase Ventures Backs $3 Million Round for Trading Data Startup Nomics

Crypto data startup Nomics just secured $3 million in funding from investors including Coinbase Ventures. The company announced Tuesday that the Series A investment will be used to flesh out its engineering team, as well as continue working to index 95 percent of all data pertaining to how crypto assets are traded. Led by Arthur Ventures, the round also saw CoVenture Crypto, Digital Currency Group, BitGo co-founder Ben Davenport, CityBlock Capital, King Capital, PolyMath and TokenSoft participating. Nomic CEO and co-founder Clay Collins told CoinDesk that, at present, almost every employee at the startup works on development full-time. That reflects the immense amount of data Nomics is trying to index, he said, explaining:
“While it’s a fairly trivial task to price (and have listings for) 95 [percent] of all cryptoassets, getting raw ticks/trades, all on-chain data, and orderbook data (including historical order book) for these assets can prove to be quite an engineering challenge.”
Exacerbating the challenge is the fact that the team is looking to provide “gapless data,” which normalizes the information to account for different time zones, ticker symbols, offline market protocols and other data variations, Collins said. Users can access the data using the Nomics API, which provides both historical and real-time financial data on different tokenizeds assets. This data can include price quotes and trading indicators, and seeks to unite the data from different exchanges. There will be “millions of new pages available” after the information is indexed, according to Collins. “With regards to the API/data product for businesses and institutions, it will look like more API endpoints, more data behind existing endpoints, lower latency, improved documentation, as well as more aggregate data/indicators (like quote currency dominance and future supply simulation),” he said. The service will also provide the ability to analyze or follow individual orders, too. The aim is ultimately that hedge funds and other investors should be able to utilize this data in developing trading algorithms and tracking market fluctuations. Nomic has already indexed more than 3.5 billion data points, and sees roughly 35 million API calls each month, according to provided figures. Source:

South Korean Government Trials Blockchain for Shipping Efficiency Boost

Two South Korean government ministries are exploring blockchain’s potential to bring new efficiencies to marine logistics. Announced Tuesday, the country’s Ministry of Science, ICT and Future Planning and the Ministry of Oceans and Fisheries have launched a blockchain pilot project to see if the tech can help the nations container shipping industry become more efficient. Starting this month, the trial will be conducted at the major southern port of Busan over the next year. Using blockchain tech, the project is aimed to increase transparency between parties in the shipping process, allow real-time sharing of information and ultimately improve import and export business operations. If the pilot proves a success, the two ministries expect to expand the blockchain tech to other ports and areas in the country. The marine logistics project is one of six pilots announced by the South Korean government back in June, with a planned total investment of $9 million for the series. The other five areas of investigation cover livestock supply chain management, customs clearanceonline voting, real-estate transactions and cross-border e-document distribution. “We will establish a roadmap for developing blockchain technology and plan to secure 90 percent of the technology level by 2022 compared to the world’s top countries,” the Ministry of Science, ICT and Future Planning said at the time. Next year, the government may actually double the number of blockchain pilots in the public sector. It also plans to support at least three private-led national blockchain projects. Last month, the body governing South Korean lawyers, the Korean Bar Association also called on the government to hasten the introduction of blockchain regulations in the country to help develop the tech industry and protect investors. Source:

Overstock’s tZERO to Develop a Cobalt-Backed Token for Hong Kong Investor’s tZERO subsidiary has been hired by private equity firm GSR Capital to develop a token for trading cobalt. The engagement could lead to the tokenization of up to $200 million worth of this rare metal, which is used to make electric vehicle batteries, in 2019 alone, Overstock said Monday. However, it has also delayed the closing of Hong Kong-based GSR’s separate, previously announced agreement to invest up to $404 million in Overstock and tZERO. That transaction was set to close on December 15, but the day before, “GSR contacted us and asked for an extension to allow a key partner in the cobalt initiative from outside of China to participate in the deal,” Overstock CEO Patrick M. Byrne wrote in a letter to shareholders Monday. Byrne was contrite about the delay, telling investors:
“Even though the partner in question is well known to us and will be a valuable part of our ecosystem, it was both frustrating to us, as it likely is to you, that the delay came at the eleventh hour.”
Nevertheless, he was bullish about the opportunity to tokenize the trading of cobalt, calling it “one of the most exciting initiatives on the blockchain today.”

Ecosystem in Asia

According to tZERO and GSR, the token will be compliant with regulatory requirements and will simplify identifying, purchasing and tracking the supply of cobalt. tZERO will provide its expertise to “build an ecosystem in Asia for tokenized commodity purchase contracts,” Overstock said in a separate press release. “Smart contract automation of these transactions will significantly reduce overall costs while effectively improving transparency in rare earth metals purchases throughout the supply chain process” Byrne said in the release. In the long term, Overstock and GSR said their collaboration could lead to the development of a security token trading platform like tZERO in Hong Kong. “GSR and our partner will be doing more than just cobalt tokenization, and we see further growth in our partnership with tZERO including consummating an investment directly by next quarter,” GSR Capital’s chairman and founder, Sonny Wu, said in the press release. Cobalt trade has been a controversial subject over the last few years, as while the mineral powers innovative industries like electric car production, more than a half of its world supply comes from the Democratic Republic of Congo, infamous for using child labor in cobalt mines. China has been remarkably active buying cobalt producers and took a lot of blame for funding unsafe ways of production. Blockchain has been seen by some as a possible cure for this: in April, British consultancy RCS Global launched a blockchain-based pilot to detect possible illegal activities at the mines and register it on the blockchain. Overstock is planning to sell its flagship e-commerce business by February to raise cash for Medici Ventures, the umbrella for tZERO and the company’s other blockchain investments. tZERO is expected to launch early next year, with its own token as a primary trading asset. Fonte:

Blockstream Boosts Bitcoin Satellite Service With Lightning Payments

Bitcoin users’ ability to send transactions through outer space has just been given a boost. Blockchain technology firm Blockstream announced Monday that it has expanded its satellite service to the Asia-Pacific region. It’s also added support for lightning network transactions, allowing users to pay for its service using the “layer 2” scaling solution. The company first launched Blockstream Satellite in August 2017, which lets bitcoin users transfer bitcoin through leased satellites. Initially, users in Africa, Europe and the Americas were able to utilize the system. At the time, CEO Adam Back said the service was aimed at individuals with limited internet access or who otherwise face issues accessing bitcoin. In the months since launch, response to the service has been positive, he told CoinDesk Monday. “There are third-party developers that have taken an interest to build local infrastructure using the satellite service, for example connecting it with mesh networks to make bitcoin more accessible in emerging markets,” Back said, regarding applications using the service. The addition of an API integrating the lightning network apparently came after users expressed interest in sending bitcoin-related data. Back said:
“Lightning adds privacy due to its use of onion routing, and off-chain netting; and lightning better supports micropayments that are lower transaction cost, faster and more scalable. These are advantages for retail and web API use-cases generally, and help make the satellite data API service efficient and connect in with other bitcoin-related infrastructure.”
Back was unable to share any user statistics, due to the fact that Blockstream Satellite uses passive receiver technology. To use the service, users need a small satellite dish – TV satellite receivers work fine – that’s connected by USB to a personal computer or a piece of dedicated computer hardware such as a Raspberry Pi. Free, open-source software, such as GNU Radio, can be used for managing the connection. “Recipients can receive bitcoin data without their [internet service provider] being able to see the transactions,” Back explained. The service itself has demonstrated “excellent” up-time, and the network includes redundancies to ensure reliability. “The system is designed to auto-recover from a 24-hour outage in user equipment, by continuous retransmission of recent data as well as live data,” he said. Fonte:

Iranian Official Says Blockchain Could Deliver Economic Boost

An Iranian official has said that integrating blockchain could bring a tech-based boost to the country’s economy. “This is possible with empowering the infrastructure of the blockchain technology with the help of government and private sector,” said Alireza Daliri, head of management development department of the vice presidency for science and technology, according to local reports. To that end, Iran should coordinate with other nations on emerging technologies including blockchain, he said. The official also played down supposed concerns governments have about blockchain technology, saying that it offers more benefits than disadvantages and adding that that his department intends to use blockchain in different areas in the future. Daliri notably also announced back in July that the government is carrying out the groundwork for the issuance of a national digital currency in Iran. The cryptocurrency would back and tokenize Iran’s national fiat currency, the rial, in order to facilitate domestic and cross-border transactions to counter U.S. sanctions, it was reported at  the time. As sanctions have hit, major exchanges such as Binance have moved to force Iranian users off their platforms to comply with the U.S. authorities. Last month, the U.S. Department of the Treasury for the first time added cryptocurrency addresses to its individual sanctions list, blacklisting two Iran residents. The Treasury said at the time that it was “targeting digital currency exchangers who have enabled Iranian cyber actors to profit from extorting digital ransom payments from their victims.” The country is, however, proving to be a draw for international crypto mining firms that have been struggling to turn a profit amid this year’s bear market. Iran, with its extremely low-cost electricity (that can go as low as $0.006 per kilowatt-hour) offers miners of a way to keep on operating while many others have closed down in recent months. Although setting up shop in Iran isn’t a simple affair, as recently reported. Fonte: