The Biden administration is reportedly considering a new legal framework for stablecoin issuers that would put them in the same category as banks, raising questions about the future of crypto regulation in the country.
Citing people familiar with the matter, The Wall Street Journal reported Friday that the administration is looking to convince Congress to create a new “special-purpose charter” for stablecoin issuers and other companies that fall within the same category. Although it’s not entirely clear how the legislation will look, it’s expected to be tailored specifically to these types of business models.
Policymakers have been sounding the alarm over stablecoins in recent months because they believe these dollar-pegged assets aren’t properly regulated. Earlier this week, Federal Reserve Chairman Jerome Powell told the Financial Services Committee that stablecoins like Tether (USDT) and USDC Coin (USDC) should be regulated within the same parameters as money market funds like bank deposits. Nevertheless, he remained steadfast in stating that no blanket ban on Bitcoin (BTC) or other digital assets was in the cards.
As Cointelegraph reported in July, joint research by the Fed and Yale University outlined two regulatory frameworks for stablecoins in a 49-page paper called, “Taming Wildcat Stablecoins.” In that paper, the authors argued that policymakers have only two choices with respect to stablecoin regulations: make them equivalent to public money or tax them out of existence via central bank digital currency.
Stablecoins — digital currencies that are wholly or in part pegged to a form of fiat money like the U.S. dollar — have swelled to become a $128 billion market, according to the latest market capitalization figures. Tether accounts for over half of the total market, though competitors such as USDC and Binance USD (BUSD) have made significant headway this year. As these markets have grown, concerns over the liquidity and reserve status of stablecoin issuers have made eye-grabbing headlines.
After reaching a settlement with the Office of the New York Attorney General, Tether Holdings Ltd. agreed to publish periodic reports proving its currency reserves. In May of this year, the company disclosed its full reserve breakdown for the first time.
‘New Blow’ as Large Crypto Exchanges Are Told to Pay British Tech Tax
Crypto exchanges operating in the United Kingdom â€“ including the likes of Coinbase â€“ will be forced to pay a recently created tech tax â€“ with the British tax body, HM Revenue and Customs (HMRC), declaring that cryptoassets â€œare not financial instruments.â€
The British Treasury last year announced the launch of a new 2% sales charge on online vendors, search engines and social media providers with global revenue of over USD 666.4m and domestic sales above the USD 33.3m mark.
Per the Telegraph, the tax office has informed crypto exchanges that they are subject to the levy, which was created in a bid to make sure the likes of Google and Amazon â€“ who have been criticized for finding tax workarounds in the UK â€“ contribute more to the Treasuryâ€™s coffers.
The same media outlet noted that although Coinbaseâ€™s UK operations had reported sales worth just under USD 24m, â€œthe company recently reported that global revenues had quadrupled, meaning it is likely to pass the UK threshold in 2021.â€
However, the tax may be short-lived, at least in its current form: earlier this year, the G20 agreed to create a streamlined tax essentially aimed at global tax giants. The measure will force some of the world’s biggest companies to cough up some USD 150bn in extra tax revenue each year.
Last month, the BBC reported that G20 chiefs had agreed to create a global minimum tax rate of 15% for large companies, and would enforce the measure starting in 2023.
In the meantime, however, the British â€œtech taxâ€ is still in place â€“ and Coinbase is likely to have to pay it.
HMRCâ€™s ruling that cryptoassets â€œare not financial instrumentsâ€ is key. Financial providers are exempt from the tax, but the tax bodyâ€™s insistence that tokens â€œdo not qualify as commodities or moneyâ€ means that crypto trading platforms cannot slip through the net.
The same media outlet quoted the crypto pressure group CryptoUK as claiming that it was â€œunfairâ€ to classify crypto â€œdifferently to other financial assetsâ€ â€“ particularly as the UK tax bodyâ€™s American counterparts largely consider coins to be commodities.
CryptoUK director Ian Taylor was quoted as calling the move â€œa new blowâ€ to crypto exchanges, who were already reeling from â€œarduousâ€ licensing measures announced by the regulatory Financial Conduct Authority â€“ ultimately leading to higher fees for exchange customers.
Crypto Exchanges Facing “Digital Tax” Blow in U.K.
Cryptocurrencies are neither currencies nor commodities, according to Her Majesty’s Revenue and Customs
Cryptocurrency exchanges have to pay a 2% digital services tax in the U.K., according to a Sunday report by The Daily Telegraph.
They do not qualify for an exemption granted to financial marketplaces since the Her Majesty’s Revenue and Customs office doesn’t recognize cryptocurrencies as “financial instruments.”
The tax on the local revenues of large tech companies was introduced in April 2020.
CryptoUK, a crypto lobbying group, is not happy about the lack of the exemption since it would further stifle the industry.
The U.K. arm of the Coinbase exchange is expected to easily surpass the revenue threshold of £25 million ($33 million) due to the crypto trading boom in 2021.
However, HMRC is adamant that crypto assets cannot be classified as either commodities or currencies.
In October, European governments forged a deal with the U.S. to establish a new global tax regime to eschew America’s retaliatory tariffs.
Bitpanda New Partner Lydia’s 5.5M Users Will be Able to Invest in Crypto
Major French mobile financial services app Lydia is slated to offer its 5.5m users exposure to a wide range of crypto assets after a partnership with the Austrian crypto exchange Bitpanda.
As part of the deal, Lydia will integrate Bitpanda’s digital asset investment product, dubbed ‘White Label Solution,’ to allow its customers to invest 24/7 in more than 100 digital assets, including cryptocurrencies, fractional stocks, exchange-traded funds (ETF), and precious metals.
Founded in 2013, Lydia is a daily financial “super-app” said to be used by a third of the French 18 to 35 year olds. The app has raised a total of USD 131m in two funding rounds in 2020, though it did not disclose valuation.
“With Lydia trading, our ambition is to widen access to investment assets, to make it accessible to everyone whether they are simply curious, beginner investors or experts,” said Cyril Chiche, the app’s CEO and co-founder.
“Our goal is to reimagine what it means to invest, by making simple, easy-to-use financial products for everyone,” Eric Demuth, Bitpanda co-founder and CEO, was quoted saying.
Bitpanda raised USD 170m earlier this year in a Series B funding round and earned a valuation of USD 1.2bn, becoming Austria’s first tech unicorn. In its Series C funding round, however, the exchange raised USD 263m, earning a valuation of USD 4.1bn.
Meanwhile, the exchange has been aggressively expanding its presence across Europe. Just recently, Bitpanda unveiled a partnership with Fabrick, an Italian open finance provider, that will offer digital asset trading services to Italian banks and fintechs.
The exchange has also hired former JPMorgan executive Joshua Barraclough as CEO of its advanced trading platform Bitpanda Pro.
“We are confident that this is just the beginning: we are committed to offering everyone investment options for any budget and risk appetite,” Demuth added.