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Cryptocurrencies: The threat of taxation in the United States

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The past week has been particularly turbulent in the cryptocurrency market. Between a power outage in China, which led to a slowdown in the network, and the US treasury’s firmer discourse against cryptocurrencies, the price of major projects and the entire sector plunged. But another factor could also explain the downtrend of the previous week: the increase in taxes on capital desired by the Biden administration.

The elements of Joe Biden’s taxation plan

The objective of this tax will be to finance massive investments in the American economy. Among the elements of this taxation plan, we find the desire to tax at 39.6% income from movable capital for American households with income above $ 1 million per year. Remember that this rate is currently 20% and should therefore double to align with the highest bracket of income tax. The idea is therefore to align the taxation of capital with that of income. Indeed, in the United States, it is common to remunerate senior executives of large companies through a donation of group shares. With this reform, the Biden administration intends to tax the resale of these shares and the income received at the same level.

This announcement and the press release also had a direct impact on stock markets around the world and on an index like the CAC 40. An increase in addition to the increase in taxes for companies and a rate which went from 21 to 28%. Tax increases which should make it possible to finance measures aimed at families weakened by the health crisis but also the education sector.

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In this climate of rising taxes, investors are looking to pocket their profits, whether it’s in stocks or other assets like cryptocurrency. By the way, creating a sales surplus in relation to demand and an inevitable drop in the price of the assets concerned. The official announcement of this measure is expected tomorrow, Wednesday April 28.

What impact on the crypto market?

This information has had a significant impact on the crypto market. This impact is all the stronger when we know that the United States is one of the most influential countries in the world in the digital currency market.

After peaking above $ 65,000 in mid-April, Bitcoin fell sharply last week and finally fell below $ 50,000. Carrying with it, the downtrend of a large number of digital currency projects. During this week, the cryptocurrency market has slipped by more than $ 450 billion.

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At the start of the week, the trend seems to be more positive again with a strong rebound in Bitcoin. Nonetheless, technical analysis still calls for caution and there is no indication that this rebound is the start of a real uptrend.

Bearish trend: a conjunction of factors

Nonetheless, it seems difficult if not impossible to attribute the entire Bitcoin correction to this factor alone. Indeed, the week was marked by a gigantic power failure in China which had an impact on the Bitcoin network.

The more muscular discourse of the American treasury and its desire to fight even more actively against money laundering has also played on the BTC price and on major crypto projects. Other factors like the disappearance of the Turkish platform Thodex and the leak of its creator with more than 2 billion dollars can also be explanatory variables of this bad week.

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For others, this multi-day downtrend was also a response to a boom in Bitcoin after the Coinbase platform went public. It is actually the conjunction of all of these factors that explains the bad week for the crypto market.

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Central Bank of Spain requires cryptocurrency companies to register in the country

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The Bank of Spain (BDE) made available on Thursday (21) an electronic form for registering individuals and companies wishing to initiate or formalize operations with cryptocurrencies. The call comes a week after the agency formally sent a notice on the subject to the country’s financial institutions.

According to the BDE, registration is mandatory for companies operating in the cryptocurrency sector, regardless of whether they already have registration with the country’s central financial agency, that is, even banks. Such a requirement could confuse financial entities already licensed in Spain, as they are already directly supervised, Coindesk commented.

“The obligation to register in this form applies to all individuals or legal entities that provide exchange services between virtual and fiduciary currency and custody, regardless of whether they are also registered in other administrative records at the Bank of Spain or other competent authorities”, says a short excerpt from the BDE instructions.

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Another point is what clarifies the BDE about the registration of individuals who work in the exchange service in Spain, such as P2Ps. Something that the central bank makes clear is that these actors must register “regardless of the location of the service recipients”. However, both individuals and corporations will have to adapt or revise their money laundering policy.

Entities now have one week to start the registration process and deliver documentation. The BDE advises that “it is advisable to submit all documents complete from the start to avoid delays in processing the order”.

Cryptocurrencies in Spain

About four months ago, the BDE said it would provide instructions and the necessary forms to apply for registration. But the instructions have only just arrived, with just 7 days to go before the registration deadline.

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Another point of action by the BDE is the lack of clarity, since the entity works as the country’s central bank, but under the supervision of the European Central Bank (ECB).

The Spanish bank BBVA, for example, already has a bitcoin trading and custody service in Switzerland. CaixaBank, the third largest Spanish bank, is also preparing to explore the cryptocurrency sector with startup Onyze.

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This Is What Jack Dorsey’s Cryptic ‘705742’ Tweet Might Mean

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A simple but cryptic tweet from Jack Dorsey, Founder and CEO of Twitter and payments firm Square, has sparked a debate about the meaning of the post, and whether the well-known Bitcoin (BTC) advocate has any BTC-related plans that have yet to be announced.

As pointed out by many users replying to the thread, the tweet, saying just “705742,” likely refers to a block number on the Bitcoin blockchain. A block with that number was indeed mined on Tuesday at 20:14 UTC, but it is still unknown what else is special about the particular block.

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Twitter users were quick to pull up the bitcoin block explorer to see if there was anything unusual about block 705742, which at that point had yet to be mined. However, little out of the ordinary could be found.

Others, meanwhile, joked that the number could be Dorsey’s “[end of year] price target for bitcoin,” or that it could be somehow related to “Moscow time,” – bitcoin slang for the value of 1 USD in satoshis.

Speculating further, one user on Reddit suggested that the block number could be the first block to be mined by a new mining system that Dorsey has proposed.

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“Maybe the first block that Square mined as part of their [research & development] for a potential public mining platform,” the user wrote, before adding that it looks like the wallet that received the block reward already has both in and outbound transactions worth almost USD 2bn. “Seems like a plausible volume for Square/Cashapp,” the user added.

However, according to various Bitcoin blockchain explorers, the block in question included 2,787 transactions and was actually mined by the BTC.com pool. Moreover, the block was mined almost an hour after the tweet was published.

In either case, as reported, the latest tweet from the Twitter CEO followed another thread from last Friday, where Dorsey said that Square is considering building “a bitcoin mining system based on custom silicon and open source.” 

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“Mining needs to be more distributed” and it “should be as easy as plugging a rig into a power source,” Dorsey wrote, asking his followers what the biggest barriers are for people who want to run miners.

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Facebook Finally Launches Digital Currency Wallet Novi but Senators Want to Close This Project

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Amid the Facebook Novi launch, some federal legislators want the social media giant to discontinue the project.

Facebook Inc (NASDAQ: FB) has launched the pilot phase of its digital currency wallet Novi in the US and Guatemala using stablecoin Paxos. Facebook finally launches Novi and is going with Paxos’ USDP after its own native crypto Diem failed to secure regulatory approval. Furthermore, the social media giant heralded the pilot launch in a blog post on Tuesday.

Novi’s pilot launch is more than two years after it was first announced. The wallet will facilitate fast, secure, and free fund transfers between users via mobile smartphone apps. However, all users must register with government-issued identification.

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For now, Paxos’ stablecoin will serve as Novi’s transactional currency, while powerhouse exchange Coinbase will provide custodial services. According to David Marcus, head of Facebook’s Novi wallet, this pilot phase will, “test core feature functions, and operational capabilities in customer care and compliance.” Furthermore, it will test the viability of stablecoins as a valid and sustainable form of payment.

Facebook Launches Novi to the Disapproval of US Congress

Amid the Facebook Novi launch, some federal legislators are calling for the social media giant to discontinue the project. Senate Democrats addressed a letter to Facebook CEO Mark Zuckerberg on Tuesday questioning the company’s credibility with crypto. In their own words, Facebook “cannot be trusted to manage cryptocurrency”. The senators base this conviction on the social media company’s past inadequacies in handling cyber risks and keeping consumers protected. Signed by Senators Brian Schatz, Sherrod Brown, Elizabeth Warren, and others, the letter read:

“Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general.”

Part of the Congress letter to Facebook further states:

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“We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”

Facebook responded to the Senators’ query through a spokesperson for Novi, suggesting that the company would address the issues raised therein.

Facebook Has a Long-Running History with Federal Lawmakers over Its Operational Practices

In recent times, Zuckerberg and Facebook have locked horns more frequently with Congress. Back in 2019, Congress summoned the Facebook CEO to provide testimony on the Diem project (then called Libra). Zuckerberg’s summoning was the culmination of weeks of tussling, between Facebook and the federal lawmakers, who were skeptical of the project. In addition, the Zuckerberg hearing came just a year after Facebook’s Cambridge Analytica scandal. This may have been another reason federal legislators were agitated against the company.

Another recent red flag raised against Facebook was earlier this month from whistleblower Frances Haugen. Haugen appeared before the Senate Commerce Committee to testify on the threat Facebook posed to users. Some of these include the usage of Facebook itself and other affiliated services, such as photo and video-sharing behemoth Instagram.

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