This Week in Focus: Headlines dominated by the IRS, the SEC, and the Global Task Force
This week’s crypto news headlines have been characterized mainly by global regulations and tax guidelines. With the recent volatility in crypto prices along with their bullish trend, these regulations and guidelines come at a crucial moment for the future development and maturity of the cryptocurrency industry.
Firstly, the Internal Revenue Service (IRS) Commissioner has quoted that his agency has “made it a priority” to issue more comprehensive crypto tax guidance “soon”. Next, new international standards for regulating cryptocurrency firms are reportedly being finalized by the Financial Action Task Force (FATF) by the upcoming month. Lastly, the US SEC (Securities & Exchange Commission) further delayed their verdict on the VanEck and SolidX Bitcoin exchange-traded fund (ETF) proposal.
All these three events are quite crucial in their own ways towards maintaining investors’ sentiments, regulating crypto enterprises, and encouraging or dissuading future developments in the space.
The IRS Commissioner prioritizes more detailed Crypto Tax Guidance
The decision by the IRS to overhaul their methods for determining the federal taxes on crypto payments arise due to the recent attempt by Minnesota Representative Tom Emmer to pass legislation reforming the way that hard forks and the resultant “fork coins” are viewed by tax agencies and the government.
Emmer and the Blockchain Caucus sent an open letter to Charles Rettig, the IRS Commissioner, to draw attention to their aforestated concerns on April 11, 2019. Rettig responded with an open letter of his own to Congressman Emmer thanking him for his same request on May 16, 2019, due to how it addressed the issue at hand of increasing the clarity of regulations.
Rettig was quoted:
“I share your belief that taxpayers deserve clarity on basic issues related to the taxation of virtual currency transactions and have made it a priority of the IRS to issue guidance,” Rettig wrote. “Specifically, your letter mentions (1) acceptable methods for calculating cost basis; (2) acceptable methods of cost basis assignment; and (3) tax treatment of forks. We have been considering these issues and intend to publish guidance addressing these and other issues soon.”
Crypto Firms Proposed to be Regulated Via Global Standards
Coindesk reported that the Financial Action Task Force (FATF) is set to finalize new international standards for regulating cryptocurrency firms next month which would go beyond the standardized “Know-Your-Customer” (KYC) regulations that exist today for such firms. They also advocate for the use of the ‘Travel Rule’, whereby, in addition to verifying and keeping records of their own users’ identities, exchanges and other service providers would have to pass customer information to each other when transferring funds.
However, this proposal has been met with huge backlash by industry representatives due to how it may have the potential to drive users away from such cryptocurrency platforms as an alternative to conventional platforms. The FATF’s consultative meeting in Vienna, Austria, was attended by around 200 to 300 people ranging from chief compliance officers of top exchanges to regional bitcoin brokers, to let their demands be heard for the same.
Yet, Sigal Mandelker, the U.S. Treasury’s Under Secretary for Terrorism and Financial Intelligence, seemed set on implementing these standards, as she was quoted in a speech last week at Consensus 2019 in New York:
“During its presidency of the FATF, the United States has worked with other countries to clarify how all countries should regulate and supervise activities and providers in the digital currency space. We anticipate that in June the FATF will adopt a final version of its Interpretative Note, along with updated guidance to further assist countries and industry with their obligations.”
SEC postpones the VanEck Bitcoin ETF…Yet Again
The US Securities & Exchange Commission (SEC) once again postponed its decision on the VanEck/SolidX bitcoin (BTC) exchange-traded fund (ETF) proposal yesterday, thus depicting their lack of readiness in the mainstream trading of crypto funds. The postponed ETF proposal was initially filed over a year ago.
A unique feature of their response is that the US investor is seeking opinions from the general public in relation to the proposed VanEck SolidX bitcoin ETF. They added a 35-day period for gathering more information and opinions on the proposal.
“The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,’ and ‘to protect investors and the public interest.’”
A lawyer, Jake Chervinsly, tweeted that the next deadline for the VanEck SolidX Bitcoin Trust proposal to be approved or rejected is August 18. However, the SEC will have the option to delay its decision to October 18.