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Amid crypto’s Wild West, Binance says a sheriff is needed

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Amid crypto's Wild West, Binance says a sheriff is needed

The cryptocurrency market gets likened to the Wild West by critics, and now a key player is asking for sheriffs to come to town.

Binance, the world’s largest exchange for trading Bitcoin and other cryptocurrencies, says it’s time for global regulators to establish rules for crypto markets. It released a list of “10 fundamental rights for crypto users” this week that it wants to guide discussions with regulators, policymakers and other exchanges.

The company acknowledges that crypto platforms have an obligation to protect users and to implement processes to prevent financial crimes, along with the responsibility to work with regulators and policymakers to set standards to keep users safe.

The call for regulation might seem strange for an industry whose popularity exploded in some part precisely because it sought to operate outside the heavy hand of governments and other authorities. But Binance CEO Changpeng Zhao, who goes by “CZ,” says more regulation for the industry is inevitable, and this allows his company to play a role in the discussions. It may also help draw in people who are still hesitant to get into crypto.

“This year, most of the regulators around the world are looking at crypto intently, and many of them are communicating with us,” Zhao said. “So we feel this is the right time” to issue a call for a global framework.

“We feel that it is important for industry players to have a seat at the table,” he said. “And we also feel that some regulations, if they’re made in a vacuum, may not have practical considerations in how they are applied, and they don’t get applied very well.”

Regulatory scrutiny of cryptocurrencies has intensified as they’ve grown more mainstream. Big businesses, professional investors and even the government of El Salvador are all buying in, even if critics struggle to see the value of digital currencies created by non-governments. They’re broadening crypto’s base beyond its initial core of fanatics and sent Bitcoin last week to a record high of nearly $68,991, more than doubling in 2021.

Binance’s call for regulation reminds some on Wall Street of the playbook that companies have followed in other disruptive industries after becoming big winners.

“They’re doing what Uber and Lyft did,” said Gil Luria, technology strategist at D.A. Davidson. “Build a business ahead of regulations. When it gets to a certain scale, acknowledge that regulation will be helpful and then help shape it.”

Zhao said that Binance welcomes regulations “for many reasons. One of those minor reasons is a selfish reason: that in a regulated industry, the few larger players will remain. The smaller players do get cut off, which is unfortunate for those guys.”

The move could also prove to be wise if Binance’s U.S. business ultimately tries to sell stock on a U.S. exchange, something Zhao hopes will happen in the next few years. A competitor, Coinbase, has already fetched a nearly $74 billion market value on Wall Street following its initial public offering this spring.

Such opportunities for wealth have drawn more new investors into crypto, as well as the eyes of regulators.

“Right now, we just don’t have enough investor protection in crypto,” Gary Gensler, chair of the Securities and Exchange Commission, said in a speech this summer while calling it the “Wild West.”

“This asset class is rife with fraud, scams, and abuse in certain applications,” he said. “There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information.”

Analysts said they expect Binance to agree to report transactions to U.S. regulators looking for movements involved in the financing of terrorism, among other things. One of Binance’s “fundamental rights” also calls for strict regulations on marketplaces that offer “derivatives and leveraged instruments,” which can be lucrative but also very risky trades for investors.

Most regulators around the world are focusing on “know your customer” rules, where financial companies try to verify the identity of who’s using their services, Zhao said. They’re also keyed in on protections for consumers.

But even there, “different countries do have different interpretations and different meanings for these very simple words,” Zhao said. In the U.S., for example, the emphasis for anti-money laundering is on blocking financing for terrorism, while Chinese regulators are looking more for people moving money out of the country.

Campbell Harvey, a finance professor at Duke University who recently wrote a book titled “DeFi and the Future of Finance,” said regulators are playing catch-up with complicated and fast-moving technologies, while trying to find a balance between protecting investors and not squashing innovation or driving it to other countries.

The stakes are rising to get it right. The uncertainty now around what regulation will eventually look like is keeping some big institutional investors like pension funds out of crypto. And that’s where the opportunity for even bigger money for the industry lies.

Given all the complexities, Harvey said the best solution may be for the U.S. government to create a new agency to oversee cryptocurrencies and the ecosystem around them, rather than relying on a combination of regulatory bodies.

“It’s complex, and it just doesn’t fit many of the usual regulatory models,” he said.

Zhao, who said the only cryptocurrencies he owns are Bitcoin and Binance coin, said some parts of the cryptocurrency world look more like securities, while others look more like commodities or currencies. And the ecosystem is growing by the day as people can create new tokens with just a few clicks of a mouse and keyboard.

He likened it to the early days of the internet, when people were trying to figure out what kind of media it was. Is it radio? TV? Something else?

“People may have a tendency to view crypto as a single asset, which I think is a little bit misleading,” he said. “Crypto is a fundamental technology that can improve on many of the traditional asset types.”


NEW YORK (AP)

Cryptocurrency

Coinbase adds tax center to platforms to report crypto taxes

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Famous cryptocurrency exchange, Coinbase, uncovered plans to add its latest tax center on its platforms to assist U.S.-based customers in figuring out how much taxes they owe the IRS from their cryptocurrency transactions.

When tax day comes, the section will assemble every transaction made and put them all together into one space to facilitate their taxes.

While we might consider some of the leading cryptocurrencies on the market, such as Bitcoin and Ethereum, with the same monetary value as fiat money, the Internal Revenue Service (IRS) considers these decentralized assets as property with monetary value according to the federal agency’s FAQ.

Meaning, to the IRS, any type of cryptocurrency transaction will be considered as capital gains and losses and will be reported as such. In parallel, this also means keeping a record of the asset’s value when bought and sold throughout time.

Coinbase perceives that its new section will reveal “a personalized summary of [a customer’s] taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.”

Then, this data can be shared with an accountant specializing in cryptocurrency and taxes or can even be implemented into tax software, such as TurboTax. Coinbase also accentuated that in case users were transferring crypto to external exchanges, wallets, or other decentralized finance (DeFi) services, users will also be able to receive tax reports covering an estimate of 3,000 transactions with CoinTracker, for free.

Customers can access the cryptocurrency exchange’s tax section from their account’s profile icon at the top right-hand corner of the interface. Once the “Taxes” shows on the menu item, users can access it and receive reports.

As for the application, users can access the Taxes section from the “Profile & Settings” menu – accessed from the top left of the application’s interface. Moreover, Coinbase is in the works to deliver written guidelines and assistance videos in the upcoming weeks to elaborate on how cryptocurrency and digital assets taxes works.

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Swiss National Bank against issuing retail central bank digital currency

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The Swiss National Bank does not see any overall benefit from issuing a central bank digital currency (CBDC) to be used by the general public and used in day to day transactions, governing board member Andrea Maechler said on Tuesday.

“We believe the risks outweigh the benefits,” Maechler told a financial conference held in Frankfurt, saying a retail CBDC meant central banks taking on the risks carried by the private sector and increased the risk of bank runs.

There also needed to be a balance struck between safeguarding privacy and the potential misuse of retail CBDCs in criminal activity, Maechler said.

Financial inclusion was also not a sufficient argument for CBDCs in Switzerland, Maechler said, with almost 100% of the country’s working population having access to bank accounts, while cash was still widely used.

“This does not mean the SNB is not interested in CBDC, but our focus is to look at the role that wholesale CBDCs could play,” Maechler said, referring to their use in transactions between financial institutions like banks.

The SNB last week said it has successfully used digital currency to settle transactions involving five commercial banks, and has also looked into how the technology can be used to improve cross-border payments..

Still, Maechler remained cautious.

“None of these projects are an indication that the SNB is ready to issue a wholesale CBDC,” she said.


ZURICH (Reuters)

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Singapore bank issues guidelines to discourage crypto trading by public

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The Monetary Authority of Singapore (MAS) on Monday issued guidelines that limit cryptocurrency trading service providers from promoting their services to the general public, as part of a bid to shield retail investors from potential risks.

Singapore is a popular location for cryptocurrency companies due to a comparatively clear regulatory and operating environment and is among the forerunners globally in developing a formal licensing framework.

But the city-state’s authorities have repeatedly warned that trading in digital payment tokens (DPT), or cryptocurrency, is highly risky and not suitable for the general public, as they are subject to sharp speculative swings.

The new guidelines clarify the expectations of MAS that companies should not engage in marketing or advertising of DPT services in public areas in Singapore or through the engagement of third parties, such as social media influencers, to promote DPT services to the general public.

They can only market or advertise on their own corporate websites, mobile applications or official social media accounts.

“MAS strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases,” Loo Siew Yee, MAS Assistant Managing Director (Policy, Payments and Financial Crime), said in a statement.

“But the trading of cryptocurrencies is highly risky and not suitable for the general public. DPT service providers should therefore not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, nor engage in marketing activities that target the general public.”


SINGAPORE (Reuters)

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