Coinbase Selling User Transaction Data to ICE and Russia Gives Tax Breaks for Crypto
Key Stat: 143 (The Number of Legislation Proposed/Updated this year) and long with much!
Tracking the most important developments of the past week for policy, regulation, compliance, and legalities, related to web3. Are you an expert in in Compliance, HR, Legal, Tokenomics, Governance, Accounting, Tax, Policy or Regulation? Apply here!
TL;DR:
Key Stats: +7 new U.S. Legislative proposals/updates this month - 143 this year
Key Reads: Russia’s gold-backed crypto, You’re hiring wrong, and Crypto’s role in the future of work
Regulation and Policy: Coinbase makes a deal with ICE, SEC says BTC is commodity, Russia provides crypto tax breaks, and the EU passes anti-money laundering package
Legal: AC3 ordered liquidation and Celsius pushback on bankruptcy recommendation
Crypto Political Profiles: New York Governor Edition Lee Zeldin and Kathy Hochul
Key Stats of the Week
+7 new U.S. Legislative proposals/updates this month - 143 this year
Key Reads
Russia’s Ministry of Finance proposes a framework for circumventing sanctions with a gold backed cryptocurrency — exclusively for imports and exports.
Why it matters: The report implies mounting collaboration with China, India and other BRICS (acronym for five major developing economies) countries, Brazil and South Africa — including the creation of a blockchain-based settlement system.
You’re Hiring Wrong says Flipside Crypto — Invert hiring from the traditional “inclusion via exclusion” to “exclusion via inclusion.”
Some tips:
Shift your mindset: Instead of a gated community, think of your entry-level talent pool as a community garden where anyone can come and contribute.
Build it, and they will come: Implement programs (of course they should have adequate guardrails) that create a safe space for this type of open talent acquisition to flourish.
Stay vigilant: Many of these practices are experimental and will require constant iteration. Stay on it, the juice is worth the squeeze.
Payroll, Web3 and the $62B Opportunity - New Web3 payment stacks could cut lending costs down almost to zero.
Some advantages are:
Streaming payments so that workers are accruing their earnings in real time.
Faster, cheaper cross-border payments.
Ease of integration with investment and benefits products.
In Government — (Regulation & Policy)
🇺🇸 - Coinbase is reportedly selling user transaction data to ICE
What this means. A newly obtained and released contract between Coinbase and Immigrations and Customs Enforcement (ICE) reveals a $1.37 million dollar deal in which ICE will have access to Coinbase users’ transaction data, accessed through Coinbase Tracer.
🇺🇸 - Gensler labels Bitcoin a commodity
What this means. By labeling bitcoin a commodity, Gensler has essentially bestowed regulatory overreach of Bitcoin to the Commodities Futures Trading Commission. The SEC, however, has not publicly commented on whether other cryptocurrencies are commodities, though it has hinted that many are securities.
🇷🇺 - Approved: drafted law on tax breaks for cryptocurrency issuers
What this means. The drafted legislation marks a shift in Russia’s stance on crypto, and does two major things:
Cryptocurrency issuers would not have to pay a value-added tax (VAT), and
Tax rates on income earned from digital assets sales would decrease from 20% to 13% for Russian companies, and 15% for foreign companies.
🇫🇷 - European Union passes anti-money laundering package
This packages requires crypto-assets service providers to collect and store information identifying people involved in cryptocurrency transactions, and requires providers to share such information with authorities who are conducting investigations.
It should be noted: However, this only applies to service providers, and not to private, unhosted wallets (i.e., between two MetaMask wallets).
From the Courtroom — (Legal news in web3)
🇺🇸 - Cryptocurrency hedge fund ordered to liquidate
What this means. Three Arrows Capital received a court order for liquidation following substantial losses in recent weeks. Previously holding ~$3 billion in assets in April, the hedge fund must pay creditors for failing to repay debts.
🇺🇸 - Celsius pushes bankruptcy recommendation
What this means. Lawyers have reportedly recommended that Celsius Network should file for bankruptcy in the face of legal backlash from freezing withdrawals. However, Celsius is pushing back, activating HODL Mode for account holders as they believe their users would rather the company not make this filing.
Crypto Candidates in the Upcoming Primaries or with Strong Support for Crypto
Up to midterms, Twali Wrapped will be profiling two crypto-friendly candidates either from the nearest, upcoming primaries or politicians with significant support of crypto.
Lee Zeldin (Republican, New York)
Lee Zeldin is a lawyer and military veteran running for governor of New York.
About
Zeldin was previously elected to represent New York’s 1st Congressional district in the House of Representatives. He won the Republican primary for the governor’s race on June 28, 2022.
Zeldin is a member of the House Financial Services Committee, which plays a key oversight role for the cryptocurrency and decentralized finance sector.
Noteworthy: The CEO of the Association of Digital Asset Markets is running to replace Zeldin in the 1st district.
Policy Goals and Stance on Crypto
Economic Growth and Job Creation
He has criticized high levels of inflation.
Why it matters: In Congress, Rep. Zeldin has shown curiousity and willingness to engage on cryptocurrency policy topics which in regards to inflation, cryptocurrency such as Bitcoin ultimately hopes to address.
In Congress, Representative Zeldin demonstrated a desire to spur economic growth and create “good-paying, private sector jobs.”
Looking to the future: While he did not focus on crypto or decentralized finance specifically, the sector’s potential to create new jobs and spawn new forms of economic growth and participation should appeal to Rep. Zeldin.
New York City leaders, including Mayor Eric Adams, are actively trying to position New York as a crypto-friendly hub for innovation.
Looking to the future: Zeldin may face calls to demonstrate his openness to the sector as his campaign moves forward. His campaign website makes no mention of cryptocurrency currently.
Legislation
Stress Test Improvement Act (H.R.4293)
The Stress Test Improvement Act would amend Dodd-Frank in several ways, with the overall goal of making legally-required stress tests less onerous for bank holding companies and certain nonbank financial companies. It is not clear how the crypto sector would fit into the Dodd-Frank regulatory scheme, but the bill is evidence of Zeldin’s support for the finance industry more broadly. Zeldin has also expressed a desire to not hamper financial sector innovation (while still maintaining critical consumer protections).
“New Era of American Strength” Framework
Now somewhat dated, Zeldin released his New Era of American Strength platform in 2016. The platform is a laundry list of policy goals and actions that Zeldin sought to achieve in Congress. The web3 community may be particularly interested in Zeldin’s commitment to simplifying the tax code and passing a balanced federal budget.
Kathy Hochul (Democratic, New York)
Governor Hochul is the 57th and first female governor of New York State, having assumed office in August 2021.
About
Gov. Hochul served as NY State Lieutenant Governor from 2015-2021, and prior to that served in the U.S. House of Representatives from 2011-2013.
As Lieutenant Governor, Gov. Hochul focused on economic development and job creation, serving as chair of the state’s Regional Economic Development Councils. Economic development has been a mainstay throughout her career: in Congress working on job creation and skills development, and in her early career working for local economic development agencies.
So far, Gov. Hochul has not made any public statements related to her stance on crypto policy.
Policy Goals and Possible Stance on Crypto
Economic Growth
In her policy goals to support New York’s economic growth, Gov. Hochul has placed financial inclusion and empowerment at the heart of her economic policy.
To do so, Hochul plans to expand access to safe and affordable banking services and financial products by supporting research and innovation, fostering inclusive financial services, and educating and empowering consumers. Given crypto’s guiding role in the self-banking movement, a technology such as crypto wallets could be well aligned with Gov. Hochul’s goal to improve NY residents’ access to banking services.
Environment
Hochul is positioning NY as a leader in the nation’s efforts against climate change, as well as a leader in spearheading the clean energy economy.
She has already announced several renewable energy projects for 2022, from establishing wind, solar, and hydro power projects, improving energy storage, phasing out fossil fuel usage instate, and protecting NY’s natural environment.
As an advocate for climate action, anti-crypto arguments from environmentalists could sway Hochul into taking a harder stance on crypto-related energy policies, such as proof-of-work mining practices.
Legislation
Proof-of-Work Moratorium (New York S6486)
A two-year moratorium on proof-of-work (PoW) mining operations (looking at you, bitcoin) was recently sent to Gov. Hochul’s desk. Blockchain industry leaders are pushing Hochul to veto the legislation, saying they will have to move to more crypto-friendly regions if the bill passes, while environmental activists have been pushing Hochul to pass said moratorium as it could curb energy consumption and carbon emissions.
Gov. Hochul has been extremely quiet in regards to her plans for this bill, hinting she may leave it until the end of the year to decide. While she may remain silent on her decision, Hochul has received many outside opinions. Several officials of Democratic county committees from the Finger Lakes and Southern Tier regions of upstate New York (where Hochul is from) have urged her to sign the PoW moratorium, while New York City Mayor Eric Adams plans on asking Gov. Hochul to veto the bill.