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Cryptocurrency Industry in Chaos as White House Endorses New Amendment to Controversial Crypto Tax Provision

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A White House-supported amendment to the controversial cryptocurrency provision in the infrastructure bill has seemingly divided the cryptocurrency community along tribal lines.

A competing amendment to the controversial cryptocurrency tax provision proposed by Senators Mark Warner (D-VA) and Rob Portman (R-OH) has wreaked havoc on the cryptocurrency industry.  

The rewrite was widely criticized within the cryptocurrency community for only giving a pass to proof-of-work mining and sellers of cryptocurrency software and hardware.

As reported by U.Today, the hotly debated provision in the infrastructure bill, which was initially proposed by Portman, could potentially ensnare all sorts of non-custodial cryptocurrency entities by expanding the definition of the term “broker” and enforcing draconian tax reporting rules.

Senators Patrick Toomey (R-PA), Sen. Ron Wyden (D-OR), and Ron Wyden (D-OR) jointly proposed a legislative exclusion that would safeguard both miners and software developers.

However, the White House came out in support of the Warner-Portman plan, claiming that it “strikes the right balance” and makes an important step toward enhancing tax compliance.       

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The U.S. Senate will reconvene on Saturday in order to continue working on the infrastructure bill after failing to come to an agreement on Thursday night.

A rift within the community

Many members of the cryptocurrency community criticized the Joe Biden administration for picking sides in the debate.

Stuart Alderoty, Ripple’s general counsel, claims that an amendment to the crypto provision should be blockchain agnostic, adding that the government should not be picking winners and losers.

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However, Wyden was slammed by the Bitcoin community for describing proof-of-work as “the most climate-damaging” form of cryptocurrency technology.

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Morgan Stanley CEO: Crypto Won’t Go Away

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Morgan Stanley’s boss is bullish on cryptocurrency but says that demand is scanty so far

Morgan Stanley CEO James Gorman sounded upbeat about cryptocurrencies during the bank’s third-quarter earnings call, claiming that the industry will not go away:

I don’t think crypto’s a fad. I don’t think it’s going to go away.

Morgan Stanley was the first major U.S. bank to grant its wealthy clients access to Bitcoin funds in March.

So far, Gorman does not see a lot of client demand for Bitcoin, but he does not rule out that crypto may start playing a bigger role in its business:

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For us, honestly, it’s just not a huge part of the business demand for our clients. That may evolve and will evolve with it, but certainly it’s not what’s driving our economics one way or the other.

Shares of Morgan Stanley (MS) are up 44% since the start of 2021.

The bank’s investment revenue crushed analysts’ estimations in the third quarter of 2021, reaching $2.85 billion.

Not siding with Dimon

Gorman’s views on Bitcoin diverge from those of JPMorgan CEO Jamie Dimon. While the Morgan Stanley head refrained from making specific price predictions, he opined that the largest cryptocurrency would be here to stay:

I don’t know what the value of Bitcoin should or shouldn’t be. These things aren’t going away.

As reported by U.Today, Dimon caused quite a stir by claiming that Bitcoin is worthless.

While the Bitcoin price is already immune to Dimon’s oft-repeated critiques, his caustic comment certainly did not go unnoticed by the crypto community and market observers.

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A divisive comment

There are some powerful Wall Streeters who share Dimon’s sentiment. Larry Fink, CEO of asset management juggernaut BlackRock, recently said that he was more in the Dimon camp.

Gorman is not the only banker who disagrees with Dimon on Bitcoin. Bill Winters, CEO of Standard Chartered, recently opined that cryptocurrency assets could serve as a hedge against inflation:

There’s a role for non-fiat currencies, especially when parts of the market are concerned about inflation—and there’s good reasons to be concerned about inflation.

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China Crypto Ban: World’s largest Bitcoin mining pool to block IP access from mainland China

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The latest update in the Chinese crypto ban saw the world’s largest Bitcoin mining pool, Ant Pool give in to the regulatory crackdown and announced blocking IP access in mainland China, effective from 15th October. Additionally, amid a global crypto takedown, Ant Pool has also revealed the upcoming launch of its exclusive KYC verification system to further comply with crypto regulations of various countries.

Since the reveal about the Chinese government’s tracking of IP addresses to filter out illicit crypto mining activities in the country, there have been several shutdowns of unregistered mining farms along with registered giants taking steps to comply with the authorities. Earlier this week, the largest Bitcoin mining equipment manufacturer in China, Bitmain announced that it will stop shipping any more Antimers to the country from October 11, in lieu of the ongoing crypto crackdown, that is specially focused on Bitcoin mining.

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“Actively responding to the local government policies of the company’s entities has been Bitmain’s business strategy all along…Strictly abide by the laws and regulations of the locations of the company’s entities is the operating principle that Bitmain has always adhered to. From October 11, 2021, Antminer will stop shipping to mainland China (excluding Hong Kong and Taiwan). For customers in mainland China who have purchased long-term products, our staff will contact them to provide alternative solutions.”, stated the Press Release.

China Crypto Ban nears end as government succeeds shutdown of crypto businesses

However, the Chinese government has no plans to stop unless the crypto industry has completely vanished from the face of China. According to CoinGape’s recent coverage, China’s authoritarian government is now planning to add crypto mining to the “Negative List” of industries. This would mean that the crypto mining industry will be banned or restricted from any investment from both, mainland China investors as well as foreign investors.

The Chinese crypto ban appears to be near the end as more than 20 crypto firms and exchanges announced the suspension of crypto services in the country. Furthermore, foreign crypto exchange giants including Huobi, OKEx, and Binance have also announced the closure of all services by December.

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IMF Says Banking Sector Under Pressure From Crypto Adoption, Warns Against Meme Tokens: Report

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The International Monetary Fund (IMF) thinks crypto has the potential to put pressure on the banking sector.

In a new report, the IMF says technological innovation is changing financial services. The report notes that the banking sector could lose market share if the crypto ecosystem grows to become a mainstream alternative to bank deposits or current lending options.

The IMF explains,

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“Stronger competition for bank deposits through stablecoins held on crypto exchanges or private wallets may push local banks toward less stable and more expensive funding sources to maintain similar levels of loan growth.

Beyond the direct loss in net interest income, a loss of customer relationships and data on transactions would also undermine credit risk assessment for clients and their ability to offer targeted products to clients.”

The IMF also warns that the crypto ecosystem comes with “consumer fraud and market integrity risks,” specifically cautioning against “meme tokens” such as Shiba Inu (SHIB).

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“Most crypto assets are highly volatile, speculative assets. One notable recent example was the increased investor interest in ‘meme tokens’… Some of these tokens were created for speculation purposes, and their price was highly influenced by social media trends.

Relatedly, investors are also likely to face losses from tokens ceasing to exist – something that is less common in regulated securities markets. For example, more than 16,000 tokens have been listed on various exchanges over time, but [only] around 9,000 exist today.”

The IMF isn’t the only institution issuing warnings about crypto’s potential impact on legacy finance. Last week, researchers at the Federal Reserve said digital assets could pose a threat to the supremacy of the US dollar.

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