Distributed Ledger: Some crypto companies frown on infrastructure law, while some financial advisors cheer for it
Hi there. Welcome to Distributed Ledger, our weekly crypto newsletter that will reach your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far.
Crypto in a snap
Major cryptocurrency prices have been retreating since Tuesday, after a controversial infrastructure bill was signed into law by President Biden on Monday. Bitcoin
was recently trading at around $58,250, down 7.5% over the past seven days, according to CoinDesk data. For the seven days ending Nov. 16, the cryptocurrency fell 10.7%, the largest seven-day decline since Sept. 25, according to Dow Jones data.
recorded a loss of about 12.8% over the past seven days, on pace for its largest seven-day decline on Sept. 25, according to Dow Jones data. Dogecoin
was down 13.2% over the past seven days, its largest seven-day decline since Sept. 29. Shiba Inu logged a loss of 20.8% over the past seven days.
% 7-day return
Source: CoinMarketCap.com as of Nov. 18
% 7-day return
Source: CoinMarketCap.com as of Nov.18
On Monday, President Joe Biden signed into law a $1 trillion infrastructure bill, which contains a provision that would require brokers of digital assets to record and report transactions to the Internal Revenue Service starting 2023.
Similar to what stock brokers do via tax form 1099, crypto brokers will be required to record their gross proceeds and capital gains or losses and track them for both IRS and customers. The brokers also need to disclose information including taxpayers’ names and addresses.
Meanwhile, the provision would require any business that receives more than $10,000 in digital assets to report the transactions to the IRS.
The provision has drawn controversy as the crypto community complained that the definition of “broker” is too broad, as it doesn’t explicitly rule out miners, node operators, stakers, software developers and wallet providers. According to the provision, brokers refer to anyone “responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
In response, the U.S. Treasury Department said in August that developers, miners and software providers in the crypto industry will not be targeted by the rules.
Some in the crypto industry also argued that the provision is not friendly on privacy grounds, especially as crypto people are usually privacy-conscious.
However, the new tax reporting requirements may benefit the crypto industry in the long term, according to James Angel, finance professor at Georgetown University.
“This is a step forward in the maturation of the crypto world,” Angel told MarketWatch in a phone interview. “In order for this technology to achieve its potential, it has to fit in with the regulated world,” Angel said.
“If you sell a stock and you make a profit on it, you have to pay tax on that,” according to Angel. “So if you sell the crypto and you profit from it, you should pay tax on that just as if you sold the Tesla shares that went up. It’s really a matter of fairness.”
Ben Cruikshank, head of Flourish, a company that offers financial advisors access to cryptocurrency investing, said that advisors are generally positive about the new tax reporting requirements for crypto.
“Advisors and their clients want their tax lives just like their financial lives to be simple,” Cruikshank said. “They want their transactions reported in 1099. They don’t want to have to worry about it that nobody tracked my basis over here or nobody’s even reporting to the government over here.”
Antoine Scalia, CEO of crypto accounting platform Cryptio, said that the rules may be hard to implement when it comes to decentralized crypto exchanges and on-chain activities.
“On centralized activities, it is pretty easy (to comply) in a sense that it is just about reporting the activity of your users whose activities are tracked in your database,” said Scalia.
“On the other side, you sometimes don’t know who the users are when it comes to on-chain activity. Identifying the users and putting in the data to fill that (form) is very complex,” Scalia added.
The crypto community has been closely watching an ongoing trial in Florida, where the family of David Kleiman, a deceased American computer expert, sued Craig Wright, an Australian programmer who claims to be Satoshi Nakamoto, the inventor of bitcoin. Wright’s claim has been repeatedly dismissed by the crypto community.
Kleiman’s family claimed that Kleiman and Wright developed and mined together more than 1.1 million bitcoin, worth $66 billion based on bitcoin’s recent price. Kleiman’s family argued that they are entitled to half of the bitcoin.
To prove Satoshi’s identity, one needs to show that they own the private keys of several addresses that are believed to belong to Satoshi, noted Georgetown University’s Angel.
“All Satoshi would have to do to prove their identity would be to basically move some fraction of bitcoin out of one of those addresses, and basically prove that they control the address,” Angel said. Wright has yet to provide such proof despite his promise.
The trial has now transitioned from the plaintiffs case to the defense.
Crypto companies, funds
In crypto-related company news, shares of Coinbase
went down 5% to $331.7 late morning New York time on Thursday. It was down 1.6% for the past five trading days. Michael Saylor’s MicroStrategy Inc.
dropped 3.3% to $728.3 Thursday morning. It was down 11% over the past five days.
Mining company Riot Blockchain Inc.
shares fell 8% to $32, contributing to an 18% loss over the past five days. Shares of Marathon Digital Holdings Inc.
plunged 4.4% to $48.7. It saw a loss of 31% over the past five days. Another miner Ebang International Holdings Inc.
dived 4.5% to $1.8, with an 11% loss over the past five days.
went up 2.5% to $107.1, contributing to an 8.7% gain over the past five days.
shares inched up 0.6% to $233, with a 3% gain for the past five days. Tesla Inc.’s
shares rose 1% to $1,098, with a 3% gain over the past five days.
PayPal Holdings Inc.
fell 2.3% to $201.5, logging a 0.3% loss over the past five days, while NVIDIA Corp.
rallied 9.5% to $320, with a 5.4% gain over the past five days.
Advanced Micro Devices Inc.
jumped 3.7% to $157 and notched a 7.5% return over the past five days.
In the fund space, ProShares Bitcoin Strategy ETF
dropped 4.9% to $36.8 Thursday morning, while Valkyrie Bitcoin Strategy ETF
declined 5.2% to $22.7. VanEck Bitcoin Strategy ETF
which debuted trading on Tuesday, dropped 5% to $57.5.
Grayscale Bitcoin Trust
went down 5% to $45.9, with a 12.1% loss over the past five days.
The worst of bitcoin pullback may be over, a technical analyst says (MarketWatch)
Crypto group raises over $40 million to bid on rare copy of the U.S. Constitution (MarketWatch)
Cathie Wood says institutional buys make bull case for bitcoin reaching $500,000 by 2026 (MarketWatch)
Gemini Crypto Exchange Seeks Funding at $7 Billion Valuation (Bloomberg)
US Congressmen Introduce Bill to Modify Crypto Tax Provision in Infrastructure Law (CoinDesk)
Q&A: Binance CEO on bubbles, meme coins and crypto’s swings (AP)
Twitter CFO Says Investing in Crypto ‘Doesn’t Make Sense Right Now’ (The Wall Street Journal)