According to the Coinbase website, “staking” is “the process of actively participating in transaction validation (similar to mining) on a proof-of-stake (PoS) blockchain. On these blockchains, anyone with a minimum-required balance of a specific cryptocurrency can validate transactions and earn Staking rewards.” On May 26, 2021, a Tennessee couple sued the IRS seeking a refund for taxes they paid on Tezos tokens that they earned through staking. As explained in their complaint: The Tezos public…
The U.S. Securities and Exchange Commission announced on May 28, 2021 that it had filed an action against five individuals alleging that they promoted a global unregistered digital asset securities offering that raised over $2 billion from retail investors. These activities relate to BitConnect, which shut down its business in early 2018, shortly after, as we reported, the Texas State Securities Board issued a cease and desist letter. At that time, the regulator alleged that…
One of the byproducts of the initial coin offering craze was class action lawsuits that alleged that the underlying tokens were securities and that the securities law were violated because the offerings for those alleged securities did not comply with the securities laws. The US Securities and Exchange Commission continues to pursue cases for the improper sale of unregistered tokens. Not surprisingly, with the recent advent of the popularity of NFTs (non fungible tokens), a…
It has been widely noted that the new Chairman of the Securities and Exchange Commission in the U.S., Gary Gensler, is much more tech savvy that his predecessor. Gensler has taught at MIT on topics such as blockchain technology, digital currencies, financial technology, and public policy. Last week, Gensler addressed his views on the regulation of cryptoassets in two public appearances. On May 6th, Gensler testified before Congress for the first time as Chairman. …
This blog has previously reported on the numerous enforcement actions taken by the U.S. Securities and Exchange Commission against unregistered token sales. History, was made, however, on May 3, 2021 when INX Limited announced that it had officially closed its IPO with an estimated $85 million in gross proceeds from token sales, received from over 7,200 institutional and general public (retail) investors. INX is the world’s first company to debut and successfully complete an SEC-registered IPO of…
Depending on the particular branch of the U.S. government one is talking to, cryptocurrency can be property (IRS), a security (SEC) or a commodity (CFTC). On April 20, 2021, the U.S. House of Representatives passed a bill aimed at remedying this situation. The bipartisan Eliminate Barriers to Innovation Act will establish a digital asset working group to ensure collaboration between regulators and the private sector to foster innovation. The new law will require the SEC and CFTC to…
In 2013, the U.S. Securities and Exchange Commission was asked for the first time to approve a Bitcoin exchange-traded fund. That request was denied. More than a dozen other applications followed, each resulting in denial. With at least six applications pending, and a number of changed circumstances, it is hoped that the SEC is finally ready to approve Bitcoin ETFs. For a more detailed discussion of the state of play of Bitcoin ETFs, you can…
In a previous post, we explained how the U.S. Internal Revenue Service had introduced a question on the 2020 tax form that asked, “at any time during 2020 did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency.” Along another path, the IRS’s Operation Hidden Treasure is a partnership between the civil office of fraud enforcement and the criminal investigation unit aimed at rooting out tax evasion from cryptocurrency owners. …
On March 29, 2021, the U.S. Securities and Exchange Commission charged LBRY, a blockchain company, with conducting an unregistered offering of digital asset securities. According to the SEC’s complaint, from at least July 2016 to February 2021, LBRY, which offers a video sharing application, sold digital asset securities called “LBRY Credits” to numerous investors, including investors based in the U.S. The complaint alleges that LBRY did not file a registration statement for the offering, and…
We previously reported that, in July 2019, the U.S. Internal Revenue Service announced that it had begun sending the now infamous letters to taxpayers who, supposedly, may have failed to properly report income and pay taxes associated with cryptocurrency transactions. About 10,000 of these Letter 6173 were sent. And we previously reported that James Harper had sued the IRS claiming the IRS violated his rights under the Fourth and Fifth Amendments of the U.S. Constitution…