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US Treasury Met With Industry Leaders To Discuss Crypto Regulatory Challenges: The U.S. Department of the Treasury held a meeting yesterday to discuss the challenges of regulating the digital assets space.

Industry thought leaders and compliance experts joined the working session to discuss how cryptocurrencies can be prevented from the misuse by money launderers, terrorist financiers, and other bad actors.

Treasury said it would not tolerate the use of crypto in support of illicit activities.

On March 2nd, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Chinese nationals — Tian Yinyin and Li Jiadong — for their role in laundering funds tied to a multi-million dollar crypto exchange hack. OFAC also added 20 bitcoin addresses to its sanctions list, all of which are related to Tian and Li.

“The U.S. welcomes responsible innovation, including new technologies that may improve the efficiency of the financial system,” said Treasury Secretary Steven Mnuchin. “We must ensure that we balance innovation with the need to protect our national security and maintain the integrity of our financial system.”

Mnuchin has been vocal about rooting out bad actors from the crypto space. He once described the issue as a “national security issue.” Mnuchin also said at the time that “very, very strong” regulations are needed to ensure crypto doesn’t become like anonymous Swiss bank accounts, “which were obviously a risk to the financial system.”

Last month, President Donald Trump’s 2021 budget also proposed moving the U.S. Secret Service back to the Treasury to help fight crypto-related crimes. If the proposal goes through, Treasury could have more supervisory powers over the crypto space.

In separate news, the Internal Revenue Service is also holding a summit today at its Washington, D.C. headquarters, to discuss tax-related issues around cryptocurrencies. The summit will feature four 90 minute panels touching on technology updates, taxation issues facing crypto exchanges, tax return preparations, and regulatory compliance.

Exchanges Call For Greater Regulatory Clarity At IRS Crypto Tax Summit: Representatives for two cryptocurrency exchanges called for greater regulatory clarity from the Internal Revenue Service (IRS) during a Tuesday event at the U.S. tax authority’s headquarters in Washington, D.C.

During an IRS Virtual Currency Summit panel focused on exchange issues, the audience — comprised of industry stakeholders and IRS officials — heard from Coinbase head of global tax information reporting Sulolit Mukherjee and Kraken head of global tax Lisa Askenazy Felix. Also appearing on the panel was Jamison Sites, Washington national tax manager for RSM Tax LLP as well as John Cardone, assistant deputy commissioner for compliance integration.

Still, Mukherjee struck a positive note given the very existence of the event itself, commenting:

“I think the willingness of the IRS to engage us in conversations like this is a very healthy sign.”

Front-and-center during the panel: that crypto exchanges want more clarity from the IRS, both in terms of what their business requirements are under U.S. laws and the exact steps they need to take to meet them.

Indeed, Cardone acknowledged that there is “uncertainty” among relevant parties on the issue of exchange reporting and a lack of specificity on certain topics, including which forms should be issued to users.

Part-and-parcel to that notion was an emphasis on the nascent nature of the crypto industry. Comments during the panel show concerns that a beefed-up regulatory regime might prove burdensome to exchanges — particularly those that are spending time and money to remain compliant with U.S. rules.

US House Subcommittee To Host Hearing On Digital Currencies Next Month: Congress is set to host its latest hearing on digital currencies late next month.

The U.S. House Committee on Financial Services Subcommittee on National Security, International Development, and Monetary Policy will host a hearing on “A Review of Domestic and International Approaches to Digital Currencies” on March 24 at 2 p.m. ET, according to a notice published on Feb. 21. The subcommittee is chaired by Rep. Emanuel.

No other information has been published about the hearing, including witnesses or areas of potential inquiry. A request for comment sent to the U.S. House Committee on Financial Services Democrats was not returned by press time.

It’s possible that the Facebook-backed stablecoin project Libra will be up for discussion, given past opposition to the initiative from committee chairwoman Rep. Maxine Waters. Waters called on Facebook to halt work on the stablecoin in the wake of its launch.

Other members of Congress have raised questions about Libra, with U.S. Fed chairman Jerome Powell being questioned about it during twin appearances before the House and the Senate earlier this month.

US Securities and Exchange Commission Issues Advice for Crypto-Curious Investors, Warns Against ICOs and Digital Asset Scams: The rise in the number of initial coin offerings (ICO) and initial exchange offerings (IEO) is giving unscrupulous individuals the opportunity to run crypto-related scams.

To combat illegal ICOs and IEOs, the US Securities and Exchange Commission (SEC) put together a list of resources that helps investors navigate the complex realm of investing in digital assets.

The list covers a wide array of topics that helps investors avoid scams including:

The resource list is comprehensive as it is part of the SEC’s efforts to keep investors away from the jaws of scammers in the cryptocurrency world.

SEC Rejects Bitcoin ETF: The US Securities and Exchange Commission (SEC) just denied Wilshire Phoenix in their proposal for a Bitcoin exchange-trade fund (ETF). According to the decision, Wilshire has not provided enough evidence to show that BTC is resistant to market manipulation.

“The Commission concludes that NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest.’”

Wilshire had hoped to end the SEC’s long streak of Bitcoin ETF rejections. The SEC has said no to all ETF proposals that have come its way, primarily based on the concern that the Bitcoin market is too easy to exploit.

As US regulators deny yet another crypto investment vehicle, Germany’s second-largest stock exchange, Boerse Stuttgart, has listed a new exchange-traded product (ETP) that keeps track of the inverse Bitcoin value in euro. 21Shares, the company that created the ETP, says the tracker is unprecedented in both the cryptocurrency and ETP worlds. When Bitcoin’s price falls, the ETP rises.

SEC Commissioner Hester Peirce Files Dissent To Agency’s Rejection Of Bitcoin ETF Proposal: The U.S. Securities and Exchange Commission has once again rejected a bitcoin exchange-traded fund — and one of the agency’s commissioners has publicly disagreed with the move.

Last Wednesday, the SEC rejected the proposed rule change, as submitted by NYSE Arca, that would have allowed the listing and trade of the United States Bitcoin and Treasury Investment Trust from the New York-based firm Wilshire Phoenix. As in the past, the agency cited market manipulation fears and a lack of surveillance-sharing agreements.

Peirce notably broke with her fellow commissioners in the summer of 2018 when the SEC rejected a proposed rule change that would have allowed the listing of the Winklevoss Bitcoin Trust on the Bats BZX Exchange.

In her latest published dissenting statement, Peirce stated that “the Commission once again disapproved a proposed rule change that would give American investors access to bitcoin through a product listed and traded on a national securities exchange subject to the Commission’s regulatory framework.”

She went on to write:

“This order is the latest in a long string of disapproval orders that the Commission has issued regarding bitcoin-related products. This line of disapprovals leads me to conclude that this Commission is unwilling to approve the listing of any product that would provide access to the market for bitcoin and that no filing will meet the ever-shifting standards that this Commission insists on applying to bitcoin-related products — and only to bitcoin-related products.”

Specifically, Peirce’s dissent falls into two buckets: that the SEC has created a “unique, heightened standard” for proposals that related to cryptocurrencies and digital assets, and that the SEC’s overall mindset “impedes institutionalization and innovation.”

The Case For Reg A: A Response To Commissioner Peirce by Zachary Fallon, James Blakemore, and Josh Garcia, attorneys who lead Ketsal, a strategic advisory firm focused on fintech compliance, as well as an associated law firm.

Crypto Taxes a ‘Nightmare’ — Congress Hears the Latest on Blockchain for Small Business: In a United States congressional meeting titled “Building Blocks of Change: The Benefits of Blockchain Technology for Small Businesses,” one of the testifying witnesses called out current cryptocurrency taxation expectations for their overbearing complexity.

“Doing your taxes for crypto is the worst nightmare,” Protocol Labs General Council member Marvin Ammori said, fielding a question from U.S. Representative Steve Chabot on blockchain’s status in terms of whether or not the tech is ready for mass adoption.

On March 4, parties gathered for a hearing on blockchain’s impact on small businesses.

Four witnesses sat in front of a panel of government officials, discussing various aspects of blockchain, the technology made famous for underpinning Bitcoin, crypto’s largest asset. Cryptocurrency itself also headlined various conversations.

Although Ammori said blockchain is ready for mass adoption, he stated the need for a few technical changes, including enhanced user interfacing.

Moving on to the legal scene, Ammori mentioned tax difficulties with the Internal Revenue Service, or IRS. “The tax treatment is very complicated,” Ammori pointed out.

Using an example, Ammori said:

“If you wanted to spend Bitcoin on a coffee this morning, you’d have to keep track of what you paid for the Bitcoin and how much it was worth the moment you spent it, and pay the capital gain or loss on every single transaction.”

Describing a solution, Ammori proposed a form of exemption. “If we could have a de minimis tax exemption, which has been proposed — the Virtual Currency Tax Fairness Act — I think all of you should support that,” he said.

Budget Requests Show That U.S. Agencies Are Pushing For Smarter, Better Staffed Crypto Oversight:

U.S. agencies are seeking millions of dollars in additional funding

The requests indicate a push for a smarter, better staffed federal workforce on the crypto and blockchain front

The budget docs reveal a push for more in-house expertise.

Caitlin Long Targets $300 Billion Asset Class, Introduces Crypto Bank With First-Ever Bitcoin Products in the US: A full-reserve custody bank for cryptocurrencies is underway. Caitlin Long, who drafted Wyoming’s blockchain and crypto-friendly legislation to support entrepreneurs in the space, has introduced Avanti, a new US bank serving the digital asset industry through a suite of products and services not currently available in US dollar markets.

A New Crypto-centric Bank Is Taking Shape In Wyoming Supported By Bitcoin Startup Blockstream: A new effort is underway in the U.S. state of Wyoming to create a new bank dedicated to the crypto and blockchain industry.

Avanti Bank was announced last Monday by Caitlin Long, a Wall Street vet and crypto advocate who, during the past two years, helped shepherd a range of blockchain-centric legislative efforts — thirteen in total — in Wyoming. CoinDesk first reported the announcement.

Long said on Twitter that Avanti is “preparing [for a] long process of charter application & [aims] to open early 2021.” She said a seed funding round had recently been closed, which CoinDesk reported was to the tune of $1 million.

Avanti is partnering with bitcoin startup Blockstream, according to CoinDesk, with the company supplying Avanti with technological infrastructure, particularly for the custody of digital assets.

The goal of Avanti, according to its official website, is to “serve as a compliant bridge to the US dollar payments system and a custodian of digital assets that can meet the strictest level of institutional custody standards.”

Long noted in a tweet-storm Monday that “Avanti will be PROTOCOL NEUTRAL” and, as such, may ultimately support digital assets beyond bitcoin.

Actor Steven Seagal Settles ‘Bitcoiin’ ICO Endorsement Disclosure Charges With SEC: The U.S. Securities and Exchange Commission announced lastThursday that is has settled charges with action film actor Steven Seagal, who allegedly failed to disclose payments he received in connection with an initial coin offering.

Seagal was the notable promoter of a cryptocurrency called Bitcoiin (B2G) in early 2018, as CoinDesk reported at the time. Bitcoiin’s backers promised “considerable profit from holding Bitcoiin (B2G)” in connection with a staking scheme. Seagal’s involvement as a promoter was said to end once the ICO was complete.

“The SEC’s order finds that Seagal failed to disclose he was promised $250,000 in cash and $750,000 worth of B2G tokens in exchange for his promotions, which included posts on his public social media accounts encouraging the public not to ‘miss out’ on Bitcoiin2Gen’s ICO and a press release titled ‘Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen,’” the agency said last Thursday.

Per the order published alongside the statement, the SEC considers the B2G token to be a security. According to the document, B2G’s backers “offered and sold tokens that were investment contracts and therefore securities pursuant to Section 2(a)(1) of the Securities Act. B2G described B2G tokens as ‘the next generation of Bitcoin.’”