China recently announced the creation of a digital currency to which the world and the crypto world reacted with a number of different reactions. Let’s discuss some of the finer points here, shall we?
BBBBBBBBBitcoin has been on a run recently with its quoted price as high as $28,288.84 on 27 December 2020. The total value of all BTC is now flirting with half a trillion USD.
Huge consideration — there will only ever be 21,000,000 BTC. Constrained supply in the face of increasing demand? What does that suggest with an Econ 101 beanie on?
Highest price BTC, 27 Dec 2020 – $28,288.84
Lowest price BTC, 5 July 2013 – $65.53
If you have been into BTC for a long time, you likely have a big smile on your face.
Two weeks ago, Judge Alvin Hellerstein, Federal District Judge of the Southern District of New York, ruled that Kik’s $100,000,000 token distribution event was an illegal issuance of a security — an unregistered securities offering — based upon his analysis of the Howey Test.
It is important to note that Judge Hellerstein’s ruling was on the SEC’s Motion for Summary Judgment, a preliminary action prior to the case being heard. A Motion for Summary Judgment requires there to be little or no disagreement on the facts and thus becomes a matter of the application of only the law.
It would be fair to say that the Judge saw the facts as being agreed by the warring parties and thus was able to opine solely on the law. This rarely happens as there is usually some fact that is in dispute.
This case was a much-watched case and was touted as an important bellwether crypto case.
It is, in reality, a disappointment in its lack of fanfare and grandeur, a yawningly predictable Howey Test case as many — myself included — said from the beginning. Yawn. Sorry.
The United States Securities and Exchange Commission made the noted charge whilst Kik denied that their issuance of “Kin” was an unregistered securities offering.
The parties now have until 20 October 2020 to thrash out some form of an agreement. Stay tuned, amigos.
Understandably, the SEC has the upper hand in this matter whilst Kik is in the unenviable position of negotiating whilst at a huge disadvantage.
While we were all distracted by the life and death of COVID19, our friends at Facebank have made a few changes in their quest to make Libra a viral offering in the crypto world.
You will recall that we spoke of Facebank’s Libra offering here:
So, recently we learn that Facebank, with its newly trimmed roster of supporters, has made a slight pivot. The pivot is driven by the reality of the political and regulatory pushback.
In other words, creating Libra isn’t the two handed dunk shot Facebank, et al, thought it would be.
The crypto industry had called for clarity from the US Securities and Exchange Commission for years.
Let’s be clear. What the crypto industry wants is for the US SEC to roll over and play dead and stop with its pesky rules, interpretations, and “hopelessly outdated Howey Test” nonsense.
It is reported that the men in Hell asked for ice water this morning. The Devil is considering it, but initial reactions are not encouraging.
What has happened is that the US SEC has begun to take firm stands and firm stands mean enforcement actions.
Two that come to mind are the Kik/Kin issue that has blown through its MUI (matter under investigation) notification, a notice of a formal investigation(an important first step because it authorizes the use of subpoenas), a Wells Notice, a Wells submission (formal reply by the company), and a formal complaint — an enforcement action.
Kik subsequently put itself to death and is solely focused on Kin intending to fight it out to the death.
Just when you thought the government of the United States of America had forgotten about you, the Internal Revenue Service sends you a love letter telling you how the cow shall consume the cabbage as it relates to taxes on the use of cryptocurrency.
They had previously opined on the subject last back in 2014 with IRS Notice 2014-21. Five long years and, finally, our pals from the IRS are back with an additional dose of wisdom.
I know what you’re saying, “Wow, this is really going to be great. Oh boy!”
[Pro tip: Hold onto that enthusiasm and, maybe, redeploy it at some future date.]
The guidance (on the specific issue of forks and airdrops) has come in the form of Revenue Ruling 2019-24 which you can find right here.
The real assistance is in the form of a series of Frequently Asked Questions on Virtual Currency Transactions. You can find that gem of wisdom right here.
On Friday afternoon, four additional cracks appeared in the Libra Foundation when Visa, MasterCard, eBay, and Stripe joined the earlier refugee from Libra, PayPal, and announced they were going to take a pass on joining and funding the Libra Foundation, headquartered in Geneva, Switzerland.
What was odd was the revelation that Libra had been taking a lot of incoming from governments — United States, Germany, France — including a letter from Senator Sherrod Brown (D-Ohio) and Senator Brian Schatz (D-Hi).
They had written directly to Visa, Mastercard, and Stripe discouraging their participation as well as warning of a “high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.”
Some time ago, we spoke about Facebook’s Libra cryptocurrency.
We spoke of it here:
Recently, we learned that PayPal has abandoned ship as one of the 28 founding Libra Association members. Sort of caught folks by surprise.
They didn’t give a reason, but mumbled along the lines of this:
Uhhh, ummm, we have decided “to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations.”
The Financial Times said that PayPal was concerned about the regulatory lightning Libra seems to be attracting.