The Policy Pulse, 8th August 2023

Hashkey Exchange Gets Green Light to Retail Offer Crypto Trading in Hong Kong

Legal Victory for Tether and Bitwise in the US

Tether and Bitfinex saw a class-action lawsuit against them dismissed by the U.S. District Court for the Southern District of New York. The court ruled that the plaintiffs’ claims lacked legal merit and failed to demonstrate any loss of value in Tether’s dollar-backed stablecoin, USDT. Tether also announced they had acquired another 1,529 Bitcoins, amounting to $45.4 million during the second quarter, reinforcing their strategic approach of diversifying their profits into Bitcoin.

Bitwise was also in the news over the past week for other reasons. Bitwise and Proshares both filed applications with the U.S. Securities and Exchange Commission for exchange-traded funds (ETFs) that offer exposure to both Bitcoin and Ether.

ProShares’ filing details its Bitcoin and Ether Equal Weight Strategy ETF, aiming to track the performance of the Bitcoin and Ether Equal Weight Index. Meanwhile, Bitwise’s Bitcoin and Ether Market Weight ETF seeks to provide investors with capital appreciation, offering exposure matching the market cap of the two cryptocurrencies.

Coinbase Apply for Motion to Dismiss SEC Case

The past week Coinbase also continued its fight against the SEC…

The second largest crypto exchange filed a motion to dismiss the SEC’s case against them, stating that they do not offer “investment contracts” as defined by Supreme Court precedent.

The SEC’s actions have been criticized for ignoring precedent, violating due process, and exceeding the regulatory authority set by Congress. 

Bad News for US Crypto Investors

There was some bad news for US investors regarding the taxation of staking rewards. The Internal Revenue Service issued Revenue Ruling 2023-14 on July 31st.

See Also

HashPack Users Can Now Stake their HBAR through D’CENT Hardware Wallet

In summary, the new IRS rules state that:

• U.S. crypto investors must now report crypto staking rewards as part of their total income for the year they were received.
• This rule covers various forms of income, such as money, assets, services, and staking rewards.
• The requirement applies to individuals who follow the cash-method approach for taxation and receive cryptocurrencies for confirming transactions on proof-of-stake blockchains.
• The regulation covers both cases of staking cryptocurrency directly and using centralized crypto exchanges for staking.

CBDC Updates

Over the past number of months, there’s been a marked increase in the number of countries and institutions testing CBDCs.

This week there were a number of notable developments:

• The Digital Dollar Project, in collaboration with Western Union, BDO Unibank, and Accenture, recently concluded a pilot study on Central Bank Digital Currencies (CBDCs) for cross-border remittances. The study unveiled four primary benefits of retail CBDCs in addressing existing challenges and improving user experiences in international money transfers. Distributed Ledger Technology (DLT) was also recognized for its potential in enhancing cross-border remittances through peer-to-peer transactions, atomic settlement, and transparency.

• Additionally, South Korea joins the growing list of countries exploring CBDC adoption. The Bank of Korea has chosen Jeju, Busan, and Incheon as candidates for its “private target CBDC test bed,” with the ultimate goal of selecting one region for further experimentation on a public level. The use of CBDCs for tourists visiting these regions is also under consideration.