2023-11-17 21:07

The board said it "no longer has confidence in [Altman's] ability to continue leading" the company. Artificial intelligence (AI) company OpenAI ousted Sam Altman as CEO and from the board, the board of directors announced in a blog post Friday. "Mr. Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities," the blog post said. "The board no longer has confidence in his ability to continue leading OpenAI," it added. Worldcoin (WLD), Sam Altman's eye-scanning cryptocurrency project, dropped 12% in the immediate aftermath of the announcement. The company appointed chief technology officer Mira Murati as interim CEO, and is searching for a permanent successor. Greg Brockman – who was among the co-founders of OpenAI – was removed as chairman of the board. He will remain as company president, reporting to Murati. https://www.coindesk.com/business/2023/11/17/openai-ousts-sam-altman-from-ceo-and-board-roles-worldcoin-drops-12/

2023-11-17 20:15

The moves were expected and aren't having any immediate effect on the bitcoin price. Decisions on approvals for both Franklin Templeton's and Global X's spot bitcoin ETF applications have been delayed by the U.S. Securities and Exchange Commission (SEC), according to a just-released note. The deadline for the SEC to move on Franklin Templeton was today and on Global X's attempt was Nov. 21; with these delays, the new deadlines move into early 2024. Few had expected any spot bitcoin ETF approvals this week, so the SEC's action comes as little surprise. Bitcoin (BTC) is trading at $36,450, up modestly for the day. Updated (18:45 UTC, Nov. 17): Added Franklin Templeton news to the story. https://www.coindesk.com/business/2023/11/17/sec-delays-decision-on-global-x-spot-bitcoin-etf/

2023-11-17 17:50

A Bank for International Settlements, or BIS, study found that privacy increases participants' willingness to use a CBDC by up to 60% when purchasing privacy-sensitive products. A Bank for International Settlements report found that privacy is viewed as a key component of CBDC design. More countries are exploring the use of CBDCs. Central banks have toyed for years with the idea of issuing digital versions of their nations' currencies – a digital dollar and the like. These so-called central bank digital currencies, or CBDCs, are envisioned being built atop blockchains, the ledger technology invented in the cryptocurrency realm, where expectations of privacy run high. A new study from the Bank for International Settlements has found that prospective CBDC users will likely make similar demands and that privacy protection should be considered. The report from BIS, colloquially known as the central bank for the world's central banks, queried 3,500 people on how their use of a CBDC as a means of payment would vary depending on the level of privacy. The provision of information on privacy was also an important factor. "We find that both factors significantly increase participants' willingness to use CBDC by up to 60% when purchasing privacy-sensitive products," according to the report, which was conducted by researchers not on the BIS staff. More countries are exploring the use of CBDCs. Privacy has not always been viewed as a core goal. Nations like the U.S. have said that their CBDC will not be anonymous. "Our findings imply that as long as CBDC is designed to provide sufficient anonymity and protect privacy while meeting the AML anti-money laundering and/or CFT combating the financing of terrorism regulations, it is more likely to substitute the existing payment instruments provided by the private sector, including commercial banks' demand deposits," the report said. The experiment found that when CBDCs are available for offline purchases, they are the second-most-popular means of payment (picked by 27.3% of respondents) after credit or debit cards (31.3%). For online purchases, CBDCs are the most-popular (42%) when privacy-sensitive products are being purchased and in second place (29.7%) for privacy-insensitive products. CBDCs would be an officially issued version of a currency. They already have private-sector competition in the form of stablecoins like Tether's USDT and Circle Internet Financial's USDC. Each of those tokens is supposed to always be worth close to $1, making them a blockchain-powered stand-in for the old-fashioned U.S. dollar. The BIS recently released a report looking critically at stablecoins, arguing that not one of the ones its researchers observed had managed to maintain its peg to its underlying currency and advocated for CBDCs. https://www.coindesk.com/policy/2023/11/17/cbdcs-like-a-digital-dollar-face-doubts-without-privacy-protections-key-organization-finds/

2023-11-17 16:44

Unpacking the IRS’ controversial new crypto tax regulation proposals. Arguably, one of the largest developments affecting the digital asset industry this year comes from a sleepy corner of the tax law. In August, the Department of the Treasury and the Internal Revenue Service issued proposed regulations implementing a law that extended Form 1099 information reporting by securities brokers to digital asset brokers. The proposed regulations would apply broadly to many businesses in the digital asset ecosystem, which will require them to set up systems to collect and report the information to the IRS and their customers and require collection of most of the information beginning in 2025, and since we do not anticipate final regulations until sometime next year, companies will have little time to set up their systems. This post is part of CoinDesk's Tax Week 2023, presented by TaxBit. Here we discuss the broad scope of the proposed digital asset reporting regulations and what it might mean for potential brokers and their customers. Background Before the Infrastructure Investment and Jobs Act of 2021, section 6045 generally required brokers to file information returns on Form 1099-B for each customer for whom the broker sold stocks, commodities, regulated futures contracts, and other specified financial instruments. The Form 1099-B is filed with the IRS, and a copy is sent to the customer so that the customer has the information needed to complete and file their tax return. The IRS then matches the Form 1099-B to the tax return and identifies any under-reported amounts. Because of this matching process, Americans’ voluntary tax compliance increases substantially when there is third-party information reporting. For example, the U.S. Government Accountability Office published an analysis in December 2020 showing that the net amount misreported was 55% where there was little or no information reporting (e.g., sole proprietor earnings or sale of business property), but that amount fell to 5% where third-party information reporting was required. As a result, when the IRS expressed concern that there was substantial nonreporting of cryptocurrency transactions, Congress responded by expanding information reporting to digital asset brokers. The amendments made by the Infrastructure Act were effective for information returns filed after December 31, 2023, which means that brokers would have had to begin collecting information on January 1, 2023 for Forms 1099 required to be filed in early 2024. However, the proposed broker regulations were not issued until August 29, 2023, so the rules propose to delay information collection until January 1, 2025 for Forms 1099 to be filed in early 2026. The IRS has announced that it plans to issue a new form for this purpose, a Form 1099-DA (for digital assets). Scope of digital asset broker The proposed regulations introduce a new term, “digital asset middleman,” to refer to brokers that make sales of digital assets. The definition of this term is very broad and would include multiple brokers with respect to the same transaction. Specifically, the definition includes any person who provides a facilitative service with respect to a sale of digital assets, and the nature of the service arrangement is such that the person ordinarily would know or be in a position to know the identity of the customer and the nature of the transaction. The proposed regulations further broaden this definition by providing that facilitative services include services that indirectly effectuate a sale of digital assets and persons are in a position to know the customer identity and nature of the transaction if they have the ability to change the fees charged for these services. For example, the proposed regulations would treat as reporting brokers: digital asset trading platforms that provide custodial wallet services; non-custodial digital asset trading platforms (including decentralized platforms that operate through smart contracts); wallet providers that include software that allows users to directly access trading platforms; digital asset payment processors; operators and owners of digital asset kiosks; and issuers who regularly offer to redeem digital assets (including stablecoin issuers). Although the proposed regulations contain exceptions for validators (e.g., miners and stakers) and hardware and software wallet providers, these exceptions only apply if no other functions or services are provided. In addition, retailers who accept digital assets from a customer as payment for goods or services, and artists who create and sell NFTs representing interests in the artists’ work are also excluded. Impact on customers This broad definition would include multiple brokers for the same transaction. For example, if a user connects their self-hosted wallet to a DeFi platform and engages in a swap of tokens, then at a minimum the wallet provider and the DeFi platform could be digital asset middlemen. In addition, it is not clear whether ancillary participants, such as liquidity providers and holders of governance tokens controlling the DeFi platform, would also be digital asset middlemen. The securities broker reporting rules contain a multiple broker rule, which exempts brokers who conduct sales on behalf of other brokers so that only the broker with the closest relationship to the customer is required to report. But the proposed regulations do not provide a similar rule for digital asset middlemen. As a result, each digital asset middleman involved in the sale of digital assets must send its own Form 1099-DA to the IRS and the taxpayer. This could create a lot of confusion for the taxpayer. Some taxpayers may just report the gain from each Form 1099-DA, which would result in over-taxation. Other taxpayers may try to reconcile all the Forms 1099-DA and report the transaction only once, which could trigger an IRS notification due to a mismatch between what was reported by the brokers and by the taxpayer. Either way, it would impose a burden on the taxpayers. Impact on potential brokers Before the proposed regulations were issued, some companies reasonably believed that they would not fall within the definition of digital asset broker, so these rules were not on their radar. Although many remain hopeful that Treasury and the IRS will scale back the definition of digital asset middleman in the final regulations, any scale-back will likely just be around the edges. As a result, businesses throughout the digital asset ecosystem will have to develop, test, and implement information collection and reporting systems. If the proposed effective dates are retained in the final regulations, businesses will not have much time to do this. Most of the information required to be reported (e.g., customer data, name and number of units of digital assets sold, gross proceeds, transaction ID and wallet address) would need to be collected beginning in 2025, but presumably, no one will want to program their systems until the regulations are finalized. As of writing, more than 120,000comments had been filed in response to the proposed regulations. These will take some time for the government to review and consider, so it seems unlikely that Treasury and the IRS could issue final regulations before Spring or even Summer 2024. This seems like an enormous lift for companies that do not currently collect any customer data, as they do not have any of the required systems in place. Conclusion We believe that final regulations should address the two critical points to ensure that the Forms 1099-DA are useful: (1) a multiple broker rule to prevent multiple Forms 1099-DA for the same transaction; and (2) an extension of the effective date to give companies sufficient time to develop information reporting systems that are reliable and compliant. Otherwise, a tool to promote tax compliance could turn into a tool that results in tax confusion. https://www.coindesk.com/consensus-magazine/2023/11/17/new-form-1099-da-what-it-means-for-digital-asset-brokers-and-their-customers/

2023-11-17 16:00

The latest entrant to crypto's RWA craze gives upside on Republic's venture portfolio. Startup fintech Republic Crypto plans to host its soon-to-launch revenue-sharing tokenized security on the Avalanche blockchain, the company told CoinDesk Friday. The asset, called R/Note, will be the vehicle through which Republic distributes stablecoin dividends to investors who bought a slice of the upside in the company's venture portfolio. Every time Republic exits a particularly successful investment it will send holders their pro rata share of up to 25% of the dividend pool. Part of crypto's burgeoning "real world asset" (RWA) craze, R/Note is most definitely a security – a difference between it and the thousands of other crypto tokens that claim they are not. That's by design: It'll be paying dividends from the proceeds of equity sales, after all. Tokenization – bringing traditional investments or RWAs such as bonds or private funds to blockchains in a token form – has become one of the hottest corners in crypto, as even global banks are testing this trillion-dollar opportunity. This distinction means R/Note must follow stricter rules around who can own and trade it than most other blockchain-based tokens. Avalanche blockchain is best-suited for RWAs "because it has innate features" that other chains don't have, like the ability to set up controllable subnets, said Andrew Durgee, head of Republic Crypto. Subnets are highly customizable side chains that can optimize for, among other things, the regulatory rules associated with being a digital security. Other big names in the investing world have taken a similar interest in Avalanche. This week, J.P. Morgan said it tested a tokenized portfolio on a permissioned Avalanche subnet. Avalanche's (AVAX) token is higher by about 40% over the past week. Beyond the choice of chain, Durgee said digital securities such as R/Note have a leg up on their off-chain counterparts. For example: quickly distributing the dividends from equity exits – its raison d etré. "It's nearly impossible for me to directly send you additional security in a regular form. But in a tokenized form I can send it to you immediately," he said. Republic sold $30 million worth of R/Note in a recently closed public sale, according to Durgee. Once the asset is live on the Avalanche blockchain it plans to have a secondary market. While tokenized securities are not new to crypto, Republic says its iteration is more accessible – and thus viable – than many of the preceding contenders. Durgee attributes this to Republic's "whole stack" structure for issuing and then trading these assets in-house, instead of relying on counterparties "with different goals and different motives." "If you believe in a tokenized future, Republic is at the very top of that pyramid," he said. https://www.coindesk.com/business/2023/11/17/republics-profit-sharing-token-on-avalanche-will-pay-investors-vc-dividends/

2023-11-17 14:53

Belshe says the SEC could reject ETF applications until exchanges and custody separate out. BitGo CEO Mike Belshe said it's "quite likely" the U.S. Securities and Exchange Commission (SEC) will reject a series of spot bitcoin (BTC) exchange-traded fund (ETF) applications despite industry-wide optimism. Speaking in a Bloomberg interview, Belshe said the SEC might reject current applications on the basis that exchanges and custody are not separated. Coinbase (COIN) has been selected by several applicants as a custody partner for a potential ETF. "There are a lot of risks in that entity Coinbase that are not understood," Belshe said. "I think that the SEC could quite likely come back and say: 'Nope, you've got to separate out those things fully before we move forward.'" Several ETF analysts have said that the chances of an ETF being approved in January are around 90%. The SEC has rejected numerous applications over the years, citing concerns over potential market manipulation and a lack of customer protection. Fund manager BlackRock filed an application for a spot bitcoin ETF in June. Since then, the price of BTC has rallied by 45% to $36,200, according to TradingView data. https://www.coindesk.com/business/2023/11/17/more-bitcoin-etf-rejections-quite-likely-bitgos-belshe-says/