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Canada’s First Bitcoin ETF Collects $421M In First 2 Days

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Times are changing and Bitcoin ETF’s long-term outlook is brightening, at least in North America. The first-ever Bitcoin ETF that was launched earlier this week has reportedly collected an astonishing $421 million in assets in the first two days of its launch.

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This was revealed by Bloomberg’s Analyst Eric Balchunas in his latest tweet about the world’s first Bitcoin ETF by the asset management company, Purpose Investments Inc. It made a debut on the Toronto Stock Exchange on the 18th of Feb.

Soaring Bitcoin ETF

Here’s what Balchunas had to say about the latest figures of the Bitcoin ETF,

“Proportionally speaking it is the equiv of a US ETF taking $8 billion in first two days. If it were to keep up this pace it will be the biggest ETF in Canada in 20 days.”

He also went on to add,

“The premium on this puppy was a mere 0.40% on Friday, or 250x less than $GBTC on Day Two. The beauty of arbitrage. This is about what we thought it would be, 20-60bps depending on day and poss over 100b on crazy days. In short, working as designed”

The figures show the popularity of Bitcoin ETFs in the country as its underlying crypto-asset continued to conquer new highs every week as it sits above the $1 trillion market cap.

The immense popularity can be attributed to the fact that these vehicles offer investors looking for a low risk way of reaping the profits Bitcoin’s bull run.

For the uninitiated, two Bitcoin exchange-traded funds were launched back to back on the Toronto Stock Exchange this week. Leading the charge was Purpose’s ETF, under the ticker “BTCC” launched this Thursday.

The fund witnessed a monumental interest, as it was found to be trading more than $100 million shares on its first day alone. If this continues, the ETF could potentially reach $1 billion in assets by the end of next week.

Just a day later, Evolve Funds Group Inc which happens to be yet another Canadian platform with $1.7 billion in assets under management [AUM], announced the launch of the Bitcoin ETF – EBIT. This Bitcoin ETF, on the other hand, was trading at $1.271 million AUM.

The latest news definitely raises stakes for the US policymakers especially the SEC which is yet put a stamp of approval to a Bitcoin exchange-traded fund.

Kraken Becomes Latest Crypto Venue To Halt XRP

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Troubled times for XRP continued as San Francisco-based cryptocurrency exchange Kraken becomes the latest to announce its plan to halt the trading of the crypto-asset for U.S. residents by the 29th of January 2021 at 5 pm PT. This comes after the US Securities and Exchange Commission [SEC] brought its lawsuit against blockchain company Ripple last month, which alleged that the sales of XRP qualified as an unregistered securities offering.

Kraken is not the only prominent exchange to have made plans to suspend trading of the token whose value dropped by nearly 50% since the regulator filed the suit. Notably, well-known crypto platforms such as OKCoin, Coinbase, Bittrex, Genesis, Binance.US, and eToro has also suspended XRP trading in recent weeks.

What Does Kraken’s Move Mean For Customers?

The platform notified that it will be implementing the process any time of the said data and the US-based customers will have just two weeks to continue trading the crypto-asset. It also urged its customers to resolve their positions prior to the 29th of January. Despite this, the clients residing in the country will still be able to deposit, hold, and withdraw XRP with Kraken.

According to the official blog post released by the platform, those residing elsewhere will not be affected in any way.

Kraken further noted that the US residents with spot positions on margin must satisfy any outstanding margin obligations latest by the 28th of January or face liquidation. Its post read:

We intend to cancel open XRP orders and liquidate open XRP positions for U.S. resident We are monitoring the situation regarding the SEC’s filing and will adapt according to any new developments.

Should the position regarding holding, depositing, and withdrawal of XRP happen to change in the future, the exchange would make a public announcement accordingly.

XRP Collapses

XRP did not take the news well as it registered a fall of more than 16% over the past 24-hours driving the price to $0.279 at the time of writing. Soon after which DeFi token Polkadot [DOT] blasted past XRP to become the fourth largest cryptocurrency

Brazil’s Regulator Orders Binance to Stop Providing Crypto Derivatives

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Brazil ‘s financial regulator, the Securities and Exchange Commission, which is commonly known as CVM, has prohibited Binance ‘s giant trading platform from offering cryptocurrency derivatives in the country. According to the authority, derivatives are cryptos or underlying assets, which are considered to be securities.

As such, Binance is required to register with CVM in order to secure an operating license to offer crypto derivatives. The Binance Exchange Platform does not, however, hold such a license to operate as a securities intermediary in Brazil. Indeed, the regulator’s notice points to the growing interest of the investor in cryptocurrency derivatives.

Growing investor interest in the crypto derivatives market

Crypto derivatives allow investors to bet on the market value of cryptos without the need for an actual token. Caution also follows a period when the majority of vital cryptocurrency spots begin to focus on public crypto derivatives offerings on the market, such as BitMEX. For instance, Binance launched a trading margin functionality.

Crypto derivatives offered by Binance aim to form a market that imitates the traditional markets sub-structure. Binance primarily focuses on integrated investment products to drive cryptocurrency adoption in the form of crypto derivatives. As of now, Binance is yet to respond to the ban. Furthermore, the ban will directly impact traders who deal with crypto derivatives in Brazil. The order by CVM reads: 

“It remains evident that the company Binance Futures, through the webpage ‘www.binance.com,’ captures customers residing in Brazil with a public offering of derivative intermediation services…; the aforementioned company does not hold authorization from this Securities and Exchange Commission to act as a securities intermediary.” 

Brazilians not missing cryptocurrency trend

Brazil has off late been a hive of crypto activities in recent years. Brazilians are yet to miss crypto-related trends in the nation. Indeed, in the LATAM region Brazil was the top country in terms of both policing and innovation. In conclusion, Brazil’s journey towards crypto oversight took an additional step in 2019 after the lawmakers formed a commission to contemplate the subject. 

Telegram and SEC Courtroom Tale Ends with $1.2 Billion Settlement

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Federal judge Kevin Castel signed the final ruling in the Telegram and SEC courtroom tale on June 26. The last court ruling by the New York Southern District Court ordered Telegram to reimburse investors up to $1.2 billion after the Telegram Open Network ICO collapsed.

The United States court approved the final judgment of a lengthy court battle between the Securities and Exchanges Commission and Telegram yesterday. The protracted court battle began when the SEC ordered Telegram to cease distributing its imminent GRAM tokens to the investors.

In a statement regarding the conclusion of the case, the SEC said:

“New and innovative businesses are welcome to participate in our capital markets; but they cannot violate the registration requirements of the federal securities laws.”

SEC demands fines in millions of dollars

In a judgment proposal by the securities regulator on June 25, the authority requested the federal Court to demand fines in millions of dollars from the several defendants connected with the lawsuit. 

Moreover, Telegram accepted to repay $1.2 billion to TON investors and penalties to the Securities and Exchange Commission. Of the total amount, $1.19 billion represents the amount paid by the defendants as ending total; the initial contract agreement to refund investors.

Telegram and SEC courtroom tale awaiting penal settlements

On the other hand, Telegram is inclined to pay $18.5 million in civil penalties. According to the SEC, the penal fees should be settled within thirty days after the approval of the judgment proposal. As per the consent reached on June 11, Telegram has agreed to pay the $18.5 million. The agreement, approved by the court, finally puts the Telegram and SEC courtroom tale to an end after a long period.

In conclusion, if Telegram fails to settle the amount in thirty days after court approval, the SEC may implement the Court’s ruling for disgorgement and civil penalty by going for civil contempt. 

Co-founder of Centra Tech Crypto Firm Pleads Guilty to ICO Fraud Promoted by Mayweather and DJ Khaled

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The crypto founder of Centra Tech crypto firm, Robert Joseph Farkas, also known as “RJ,” pleaded guilty on 16 June on charges of conspiracy to commit securities and wire fraud. The 2017 ICO fraud was promoted by celebrities such as the Floyd Mayweather boxing icon and the DJ Khaled music producer.

According to a press release published by the Department of Justice, crypto founder Robert Farkas pleaded guilty to conspiracy to commit securities and wire fraud in connection with a dubious cryptocurrency project that hoodwinked investors up to $25 million.

Farkas, along with his team, used false information and data omission to lure investors to purchase securities in the form of tokens issued by Centra Tech. The tokens were distributed in the form of an Initial Coin Offering ( ICO) in early July 2017.

Co-founder of Centra Tech crypto firm lied to investors

Centra Tech was one of the many startups that took advantage of the ICO boom in 2017. After promising investors that the funds would develop a range of financial products for the digital economy, the firm distributed unregistered CTR tokens.

The co-founder of Centra Tech Crypto and his team also lied to investors about the firm’s partnership with some of the world’s leading financial services companies. For example, investors were once told that the firm had reached an agreement with Visa and MasterCard; to develop a Centra Fiat-to-Crypt card that would facilitate an instant conversion. The two companies, however, denied the claims.

Celebrity endorsements

Nevertheless, the most effective weapon in their arsenal was the endorsement by international icons such as boxing champion Floyd Mayweather and popular hip hop and record producer DJ Khaled. Mayweather and Khaled urged their fans to invest in Centra Tech; leading to a successful ICO that ran between July 2017 and March 2018.

Furthermore, investors also sued the two celebrities for infringing securities regulations; however, a federal court discharged them from the case in May 2019. In the case of Farkas, he will pass judgment on a date that will be determined. He could face a ten years prison sentence.

U.S. Court Judge Issues Temporary Injunction Against Telegram’s Digital Token Offering

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A U.S. federal court judge has directed the Telegram messaging platform to refrain from issuing its native gram tokens as scheduled in April, accepting a Securities and Exchange Commission (SEC) request for an injunction.

In a preliminary injunction held on March 24, Judge P. Kevin Castel, of the New York Southern District Court, stated that the SEC had demonstrated a substantial likelihood of victory in substantiating that the purpose of Telegram to roll out grams token is “an offer of securities under the Howey test. The Howey test refers to a factual test developed by the Supreme Court to evaluate if such precise transactions meet an investment contract’s requirements.

The Judge wrote:

“The Court finds that the SEC has shown a substantial likelihood of success in proving that the contracts and understandings at issue; including the sale of 2.9 billion Grams to 175 purchasers in exchange for $1.7 billion; are part of a larger scheme to distribute those Grams into a secondary public market; which would be supported by Telegram’s ongoing efforts.”

Telegram raised $1.7 billion for gram tokens in 2018

Two years ago, the messaging giants raised $1.7 billion through an ICO in an agreement to supply 2.9 billion gram tokens to 175 buyers. The buyers would make good profits after a resale of the digital asset to the public. According to Telegram, the project was legal citing a private placement of securities covered by a Regulation D 506(c) exclusion.

Moreover, Telegram sold the gram digital asset under a presumed simple consensus for future tokens or SAFT. SAFT refers to an investment contract built to offer an adaptable substitute to an ICO. 

The SEC had complained back in October 2019 that the selling of the Telegram Open Network (TON) was unlawful. The agency argued that the grams made up of securities should be registered with SEC under U.S. laws and the selling of securities. The messaging platform has since disagreed with the claims. However, Telegram has agreed to withhold the launching of Telegram Open Network (TON) until its dispute with the SEC is resolved.

Last year, on 11 October, the SEC successfully requested a temporary injunction to halt the inauguration of the TON blockchain. Generally speaking, Gram tokens can not exist without the TON blockchain network. Since that temporary injunction, the SEC has been struggling to stop the blockchain from being launched for good.

The Securities and Exchanges Commission made a huge leap towards obtaining a permanent injunction in the latest case. According to Judge Castel:

“Considering the economic realities under the Howey test, the Court finds that in the context of the scheme; the resale of Grams into the secondary public market; would be an integral part of the sale of securities without a registration statement.”

Despite the closure of courtrooms during the ongoing COVID-19 crisis, Castel’s ruling was imminent before the end of the month. According to a clause during the purchase of grams agreement; Telegram may reimburse its investors if the TON network fails to launch by April 30. 

US Congress Discusses Crypto Taxes and Benefits for Small Businesses

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The United States government has been active in monitoring developments in the cryptocurrency industry and ensuring they adhere to written law. Government agencies have also taken steps to listen to, and devise strategies for, the digital asset space

During a recent US congressional meeting, one of the testifying witnesses claimed that the US cryptocurrency taxation expectations were mired in complexities.

The meeting was titled “Building Blocks of Change: The Benefits of Blockchain Technology for Small Businesses and included parties that defended as well as attacked blockchain technology. The focus was on small businesses because regulators believed that blockchain technology could really help them build from the ground up.

Officials like Marvin Ammori, who serves as a member of the General Council of Protocol Labs, have added that cryptocurrency taxes are the worst nightmare, in response to a question as to whether crypto is ready for mass adoption. Compared to discussions on launches, such as Facebook’s Libra, the Small Business Committee took a new look at distributed ledger technology.

Congress aimed to have a healthy conversation about how blockchain can help emerging businesses grow, rather than just applying it for cryptocurrencies. Mr. Marvin Ammori also pointed out the difficulties that may arise when cryptocurrencies like Bitcoin are used. He 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. 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.”

The confusion caused by the decisions of the Securities and Exchange Commission [SEC] and the CFTC was also discussed in US Congress. The need for clarity among regulators has been a major marker in the industry, as a number of inane laws have brought down critical cryptocurrency projects. Some cryptocurrency enthusiasts even say that the SEC directives do not allow the creation of a Bitcoin ETF.

This was the first time in a long time that the US Congress actually made some valuable points rather than just making a mockery of the industry. The cryptocurrency space has been the subject of ridicule several times earlier with people who have no idea about the technology partaking in it. Meetings such as the Building Blocks of Change act as stepping stones in improving the talk around crypto.

The most recent meeting was a follow-up to another meeting held on 3 March. During the earlier discussion, four digital asset space experts spoke about their recent leaps and opportunities. The panel also included Jesse Sprio, Chainalysis ‘ Global Head of Policy and Regulatory Affairs.

FinCEN Warns Social Media Companies Eyeing on Cryptocurrency 

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  • FINCEN’s Jamal El-Hindi warns companies building cryptocurrencies about illegal transactions.
  • FinCEN will have a close look at all the illicit transactions happening across Social Media.
  • FinCEN sees Social Media, Messenger applications as the top infected platforms for money laundering and terrorist financing.

Speaking during the Anti-Money Laundering conference, the deputy director of the Financial Crime Enforcement Network (FinCEN), Jamal El-Hindi remarked that the Social media networks and messaging platform with crypto activities must look at the anti-money laundering acts. 

FinCEN appointed Jamal El-Hindi in May 2015 to oversee several tasks required to safeguard United States’ financial system from illicit transactions, money laundering activities and other transactions that are associated with criminal acts in a country. 

20th SIFMA Anti-Money Laundering and Financial Crimes Conference

Noticeably, the report comes in the wake of Jamal El-Hindi’s presence at the 20th conference of Securities Industry and Financial Market Association (SIFMA) which was held in New York on February 06, 2020. SIFMA is a non-profit trade association, representing financial firms of all sizes including investment brokerage firms, securities brokerage firms and other investment entities in the United States. 

While delivering the talk on the illicit transactions fostering the Money Laundering and Terrorist Financing, Jamal El-Hindi stated that the social media companies, especially those who are building cryptocurrencies must guard their system. He elaborates that these companies must be careful and vigilant about any illegal transactions. 

Undeniably, Facebook’s plan of launching Libra is under fire following continued regulatory push backs – however, reports also note that the prepared remark of Jamal El Hindi neither had any highlight about Facebook nor about Libra. 

Nonetheless, FinCEN will maintain a bird’s eye on every entity striving to enter the global financial system. Furthermore, they will review whether or not the companies entering the financial system with the approach of cryptocurrency adhere to laws set in place including – preparing a report on money laundering, terrorist financing, and other impermissible activities.

It was also reported that FinCEN is working closely with two the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to deal with the issues concerning digital assets. More so, FinCEN is reportedly focusing on the web and mobile application of social media platforms as they perceive these applications tend to attract money laundering and terrorist financing.

Coin Centre Bill Could Loosen Cryptocurrency Taxation Policies and Pave Way for Mainstream Adoption

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Crypto asset taxation could be lengthening the long walk to crypto adoption in the United States. While the CFTC deems cryptocurrency as commodities, the Internal Revenues Service (IRS) classifies them as property. Hence, once an individual purchases any amount of digital currency, they are creating a taxable event. 

The outlook on the future of cryptocurrency taxation and adoption is however based on more theory than practice. What community participants fail to notice is just how difficult it would be for bitcoin to go mainstream. Especially if these hardly compliant participants are to comply with existing taxation laws. In fact, it is right to say that mainstream crypto adoption would turn out such a headache, if current legislatures are anything to go by. 

Like-Kind Exchange Scenario 

Another problem is crypto adoption and usage seems so simple at face value. While on the other hand, cryptocurrency taxation regards to even tiny investments is complex. Take for instance the loose translation of a section of the IRS Code Section 1031: 

“Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange.”

This is quite a controversial exaggeration at worst given that it’s not at all times a crypto exchange event will result in a gain. A scenario which raises the question of a like-kind exchange. Note that exchanging Bitcoin to Ethereum, vice versa would only create a taxable event once the ethereum is converted to fiat. One of the confusing cases thereof is that of an individual crypto trader executing to and fro (fiat-crypto) transactions. Don’t you think taxation laws would overestimate the trader’s portfolio, and therefore end up overtaxing them? 

Washington-based Coin Centre is attempting to change things by introducing a more practical taxation legislature. The not for profit organization has been working with congress member to introduce a bill that can exempt low-value transactions from taxation. 

Cryptocurrencies are Treated Either as Property or Commodity 

Any event of cryptocurrency taxation following a transaction creates serious headaches among holders during tax season.

Back in 2014, the IRS published a detailed guide on cryptocurrency taxation. The guide stated that Bitcoin and other cryptocurrencies would be treated as property; hence all would incur profits if sold or bought. Thereby, the introduction of capital gains into instances of crypto purchases. This would also include crypto events for trivial purchases and payments. 

Pros and Cons of Listing Crypto as Property

IRS classification of cryptocurrencies as property brings with it several cons and one pros.. 

Pros

  • A 15% Maximum rate will apply to any cryptocurrency’s capital gains. A figure that is likely to be the lion’s share of what an average individual would report. Moreover, this figure is at least 10% less than the maximum for the normal income tax. Nonetheless, crypto miners, stakers, traders and workers accepting crypto would anticipate a narrow tax rate of 25% on their average crypto income. 

Cons

  • Compliance burden among crypto users. It’s cumbersome to track capital gains/losses, transactions, and crypto price (in US Dollars) every single time. Sometimes the pricing varies with exchanges. Hence placing a large burden on regulator requirements for reporting all transactions taking place. 
  • The Internal Revenue Service caps the amount of deductible loss for all property transactions at an annual $3,000 sum. Therefore tightening and offsetting big investment losses against the average taxation bill. 

However, the prices of major digital currencies have a tendency to bounce. Therefore, reporting of values following bounces would pose a great challenge to daily crypto users. The 2020 Virtual Currency Tax Fairness Act is attempting to address this problem.  Representatives of both Democrats and Republicans parties introduced the bill to the US Congress today. The legislature will ensure that low-value crypto transactions are easy to execute. 

Representatives Schweikert, Emmer, DelBene and Soto introduced the new act to parliament. The measure will allow tax authorities to exempt cryptocurrency transactions from taxation. In fact, the initiative would similar to the exemption of small value foreign currency de minimis. As a result, individuals using cryptocurrencies would not have to report transactions that created a gain/loss of less than $200. 

Coin Centre has been working round the clock for a feasible solution that would lead to massive crypto adoption. The Washington based research group released a report claiming that it had collaborated with Schweikert and DelBene; in a bid to attract attention from lawmakers.

 

Telegram Seeks 5-7 Weeks Time to Gather SEC’s Requested Details

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Telegram has undeniably one of the leading platforms for the crypto community. However, the Securities and Exchange Commission is currently investigating the platform’s token sale and in contrast, it has informed that it needs around 5-7 weeks of time to gather SEC requested details.

Telegram is yet to share SEC’s requested details

The report was first shared by Telegram’s law firm Skadden via Inner City Press on January 09, 2019. It was reported that the lawmakers requested full bank details of 770 individuals or entities in over 12 countries.

The law firm  Skadden has so far reviewed only 76 entities since September. Henceforth, it is requesting to exceed the time to at least 5-7 weeks more.

Essentially, SEC is urging Telegram to share bank details of parties involved in the company’s $1.7 billion worth token sale. On the other hand, Telegram denied acting. However, the court then proceeded the case and ordered Telegram to share “a proposed schedule for a review of the requested bank records to ensure that production of such records complies with foreign data privacy laws”.

This being said, Telegram had January 09 as the last date to submit the proposed schedule.

With the latest report into consideration, the law firm seeks around 5-7 weeks’ time to work upon the order. It’s worth noting that the legal watchdog claims Telegram sold unregistered securities and henceforth seeking to gain the company’s financial account to ensure the proper conduct of the token sale. Alongside this, it also wants to understand how the funds are being used that it raised two years ago.

While Telegram is dealing with legal affairs for quite long, the platform didn’t step back sharing the current state of the development of TON (Telegram Open Network blockchain).

In a most recent public notice on its website, the Telegram team informed that they will have no control over upcoming TON Blockchain – it further reasoned that the TON Blockchain will be decentralized and maintained by third parties.