Crypto Shuttle News

Tag: proposal

  • Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership

    Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership

    [ad_1]

    By Faryar Shirzad, Chief Policy Officer

    Today, we’re pleased to introduce our new regulatory framework, entitled Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership (dApp). We hope this document will animate an open and constructive discussion regarding the role of digital assets in our shared economic future. Our goal is to thoughtfully and respectfully engage in the debate, and to offer good-faith suggestions for how the U.S. financial regulatory framework should adapt to two critical developments:

    1. The blockchain-driven and decentralized evolution of the internet

    2. The emergence of a distinctive asset class that is digitally native and empowers unique economic use cases

    We understand that high-level proposals don’t become law overnight — nor should they. But what they can do is evolve the debate in ways that are helpful for everyone, including members of Congress who are increasingly focusing on this area.

    A number of us have been working diligently on this for some time, consulting with experts, crypto builders, opinion leaders, and policymakers from across the country. We’ve also studiously read the commentary produced by our peers and others who are pushing the debate forward in thought-provoking and creative ways. This process of investigation and discovery has been remarkably eye-opening and invaluable to help us think deeply about the potential of these new and uniquely democratizing financial innovations.

    Here are three consistent themes that surfaced from the past few weeks of intensive meetings:

    • A broad awareness is emerging on blockchain and distributed ledger technology’s potential; one that recognizes crypto could be an important catalyst of innovation, economic growth and financial inclusion in an increasingly digital world
    • The adoption rate of crypto is growing rapidly, and regulation has a vital role to play in protecting the consumer and providing certainty to market participants
    • American geopolitical strength and leadership is inextricably tied to the United States maintaining its technological leadership

    We’d like to personally thank everyone we met with for their feedback, their candor, and their willingness to engage on some of the most profound and complex economic and societal questions we face. Let’s dive in.

    The Market Context

    Digital assets like Bitcoin, Ether, stablecoins, and other cryptocurrencies are now a mainstream part of the financial market ecosystem. In 2013, the market cap for the entire cryptocurrency market was around $1.5 billion. In 2021, that market cap has grown to $2 trillion. Adoption rates have seen a similarly astounding rate of growth with an estimated 1 million crypto users in 2013 to an estimated 330 million users worldwide today, with tens of millions in the United States alone.

    But like the early days of the internet, the use cases for crypto are still in a nascent stage of development and adoption. However, what we’re seeing is societally powerful. Blockchain and distributed ledger technologies have accelerated the democratization of finance that began with the emergence of mobile payments. Whether factors such as lack of wealth, inaccessible infrastructure, or a range of societal factors have historically contributed to the 1.7 billion adults who remain unbanked today, the evolution of decentralized protocols and peer-to-peer marketplaces have the potential to resolve deep disparities and inequities.

    Marketplaces for digital assets have emerged to offer a platform that facilitates the demand from Americans to access certain innovations in the way financial assets are transferred and traded. Retail and institutional traders have direct access to platforms that execute transactions 24 hours a day, seven days a week. Transactions settle in real time. A multitude of intermediaries is no longer needed as the digital asset market infrastructure has developed so that exchange and trading services, clearing, settlement, and custody can be provided effectively and more efficiently by the same entity.

    We are seeing the beginning of more efficient, transparent, and cost-effective processes compared to those in traditional financial markets. These developments, in turn, will empower market participants with greater and more direct control over their trading decisions, increasing accessibility to financial services, reducing excess costs of the current system — costs too often borne by retail customers, and creating more transparency for regulators, who are already benefiting from new ways to engage in market surveillance and combat illicit finance.

    Laws drafted in the 1930s to facilitate effective oversight of our financial system could not contemplate this technological revolution. Elements of those laws do not have room for the transformational potential that digital assets and crypto innovation make possible. They do not accommodate the efficiency, seamlessness, and transparency of digital asset markets, and thus risk serving as an unintended barrier to current innovations in the digital asset economy. For example, digital assets that are well established, broadly recognized, and fully decentralized, like Bitcoin and Ether, have technical characteristics that are well understood by the public. There is no information vacuum that immediately needs to be resolved. Not only are some of the financial rules of a paper-based system obsolete, but they are also an encumbrance to innovation, inclusion, and social welfare.

    Forcing the full spectrum of digital assets into supervisory categories codified before the use of computers risks stifling the development of this transformational technology, thus pushing offshore the innovative center of gravity that currently sits in the United States. Doing this will have profoundly harmful economic implications and undermine the United States’ leadership at a time when technology is so critical to this country’s geopolitical strengths. We are seeing some legislatures at the state-level take important steps to give their residents access to these innovations, but there is still more work to be done.

    Fostering this innovation is also critical because there are too many people in our society who do not see a place for themselves in our current financial system. According to the Federal Reserve, up to 22% of American households could be unbanked or underbanked. This could mean up to 55 million American adults don’t have access to key functions of our critical financial and societal architecture. Furthermore, even for those with a bank account and recognizing the dramatic advances in financial technologies, payments remain slow and cumbersome. Millions continue to pay too much and wait too long to transfer funds to loved ones overseas or to invest their money directly in projects and ideas they care about.

    This exclusion of millions from the financial system is occurring as more and more Americans look for alternatives to traditional finance. Surveys show that a diverse group of Americans are availing of the unique and empowering financial opportunities that crypto affords. To help the public and the businesses that will provide the services for this new, thriving financial ecosystem, regulatory certainty for everyone is required.

    Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership (dApp)

    Pillar One: Regulate Digital Assets Under a Separate Framework

    As mentioned at the outset, the cryptoeconomy is defined by two concurrent innovations, both of which have manifold impacts on our financial system. The changes made possible by these two innovations are transformational, but do not easily fit within the existing financial system, which assumes that the structure of our financial markets will remain largely as they have been in the past. Our financial regulatory system is predicated on the ongoing existence of a series of separate financial market intermediaries — exchanges, transfer agents, clearing houses, custodians, and traditional brokers — because it never contemplated that distributed ledger and blockchain technology could exist. A new framework for how we regulate digital assets will ensure that innovation can occur in ways that are not hampered by the difficulty of transitioning from our legacy market structure.

    Pillar Two: Designate One Regulator for Digital Asset Markets

    To avoid fragmented and inconsistent regulatory oversight of these unique and concurrent innovations, responsibility over digital asset markets should be assigned to a single federal regulator. Its authority would include a new registration process established for entities that serve as marketplaces for digital assets (MDAs) and an appropriate disclosure regime to inform purchasers of digital assets. Platforms and services that do not custody or otherwise control the assets of a customer — including miners, stakers and developers — would need to be treated differently. Additionally, in the tradition of other markets, a dedicated self-regulatory organization (SRO) should be established to strengthen the oversight regime and provide more granular oversight of MDAs. Together, they should formulate new rules that permit the full range of digital asset services within a single entity: digital asset trading, transfer, custody, clearing, settlement, money payment, staking, borrowing and lending, and related incidental services. This two-tier regulatory structure will ensure efficient and streamlined regulation and oversight, and evolve elements of the existing frameworks to meet the requirements of our new technologically-driven financial system.

    Pillar Three: Protect and Empower Holders of Digital Assets

    This new framework should have three goals to ensure holders of digital assets are empowered and protected:

    • Enhance transparency through appropriate disclosure requirements,
    • Protect against fraud and market manipulation, and
    • Promote efficiency and strengthen market resiliency.

    Each of these goals should be accomplished in recognition of the unique characteristics and risks of the underlying functionalities of digital assets.

    Pillar Four: Promote Interoperability and Fair Competition

    Innovation in decentralized protocol development and the peer-to-peer marketplace continues to produce novel approaches that allow greater financial access across all facets of society. To realize the full potential of digital assets, MDAs must be interoperable with products and services across the cryptoeconomy. If fully realized, this can enshrine fair competition, responsible innovation, and promote a thriving consumer and developer ecosystem.

    What’s Next

    We hope you take the time to evaluate our proposal. And if you do, consider sharing your thoughts. We’re also open-sourcing the framework through GitHub, so tell us what you think there, express your views directly to your elected officials, and be part of the conversation that will shape our shared financial future. We will also be convening a number of opportunities to hear from others who have made thoughtful contributions to the debate that we are hoping to advance today.

    Thank you for reading.

    Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

    [ad_2]

    Source link

  • Our response to a recent editorial from Bloomberg on Congress’s crypto tax proposal

    Our response to a recent editorial from Bloomberg on Congress’s crypto tax proposal

    [ad_1]

    By: Lawrence Zlatkin, Global VP of Tax, Coinbase

    As Global Head of Tax for one of the largest crypto exchanges, while I appreciate the Bloomberg Editorial Board’s perspective on the crypto tax provision in the Senate infrastructure bill, I would like to respectfully offer the following critique from a real-world actor in the crypto space. I disagree with the timing and need for the unexpected and new crypto tax provision in the bill and how it was drafted. The best first step would be to issue regulations so that digital asset brokers would be permitted to issue the same third-party reporting that brokerage firms, like Fidelity and Charles Schwab, issue today. It is not a good first step, and certainly not good tax policy, to require non-brokers to report on transactions for people who are not even their customers.

    First, some facts —

    The IRS already has the authority to require crypto brokers to provide regular reporting of the gains and losses of their customers’ accounts. But they haven’t. For years, the crypto industry has asked for those regulations, and we are still waiting.

    The Editorial Board cites the IRS Commissioner’s estimate of the tax gap as $1T to underscore the urgency for including the crypto tax requirement in the infrastructure bill. Meanwhile, Congress’ Joint Committee on Taxation estimates that the crypto tax gap is approximately $28B over 10 years. In effect, crypto is a drop in the bucket when it comes to the tax gap. The Editorial Board neglects to mention this discrepancy, or that neither figure has ever been accompanied with further explanation or additional data. Without supporting data, both figures only serve to create hype and drama.

    And while it’s true that the Senate infrastructure bill’s overbroad and unworkable language alarmed us, it also roused a public outcry well beyond the crypto industry. According to public reports, Senate offices were “swamped” with phone calls and emails, with almost 80 thousand people contacting their senators in just a few days. This wave of public advocacy was diverse, ranging from civil liberties organizations like the Electronic Frontier Foundation (EFF) to the Americans for Tax Reform. Social media lit up with citizens from all walks of life protesting this threat to crypto’s future, including non-apparent champions such as TikTok influencers and rock stars.

    The Bloomberg Editorial Board says that the IRS needs a broad statute to include non-brokers right now because we don’t know what we don’t know. But why would we impose reporting requirements on intermediaries who are wholly unrelated to brokering a transaction and have no customer relationship? The IRS doesn’t do that outside of crypto and it shouldn’t do that here.

    It is disingenuous to suggest that the IRS will take time to issue these regulations and that non-brokers should have no fear of the law until then. Tax policy should be thoughtful and deliberate. Broad overreach is a regulatory mistake. As long as the statute says that software developers, miners, stakers must do the impossible, there is no lawyer who would advise them to risk operating in violation of laws whose penalties for non-compliance would easily bankrupt them. This will harm innovation and stifle the potential of a hugely important technology at its earliest stages of development.

    The one thing on which I do agree with the Editorial Board is that the requirements should “apply to entities that can provide the necessary information.” The Editorial Board also should have acknowledged that crypto brokers, like Coinbase, are currently precluded from reporting sales and exchange related information to the IRS. Without a specific legal mandate (such as the IRS regulations), we cannot compromise or disclose customer information to the government.

    Now, some suggestions-

    1. “Brokers” of digital assets should be defined as it is understood in the real world today. It is well established that the predominant number of crypto transactions occur with brokers. If Congress decides that it must create a new definition of “broker” within the infrastructure bill for “digital assets,” then it should define brokers as persons who act as middlemen for compensation, with customers as counterparties. This is a traditional definition of broker and would cover entities like Coinbase.
    2. Propose regulations to define the parameters of tax information reporting for crypto. We would welcome the rules of the road so that we can have a meaningful discussion on how it should be introduced and applied in the real world. The IRS has this authority today.
    3. Hold hearings in Congress on tax oversight for crypto so that there is robust debate on the issue. Today, around 60 million Americans own crypto — roughly one-fifth of the entire U.S. population. Those Americans, and the entire crypto ecosystem, deserve more dialogue than midnight provisions inserted at the last minute.
    4. We should not draft legislation that focuses on crypto ghosts that don’t exist now and have no roadmap to exist in the future. If we focus our laws on problems that don’t actually exist, we will erode America’s leadership in crypto. Why chill the industry in its infancy and send it (and the taxes associated with it) offshore?

    Coinbase, as the largest U.S. exchange, agrees with the need for information reporting of crypto. We want people to pay all taxes required under the law. We are building systems and protocols for information reporting in response. While we continue to wait on Congress and the IRS to act, we will do our best to provide our customers with the information they need to comply with their personal reporting obligations.

    We are rolling out a Tax Center for our customers in the coming month, with the goal of providing education, guidance, support, data, and historical transactional information. It’s hard to do this in practice, and it can’t be done overnight, but we are confident that we will get there and be best in class. Our customers want to be compliant with their tax obligations and have asked for this guidance and support.

    We invite meaningful dialogue and discussion to set the appropriate regulatory parameters for our industry. We have offered this at every turn to both legislators and the IRS. The bipartisan leadership demonstrated by Senators Wyden, Lummis, and Toomey in offering their amendment to help resolve this unnecessary confusion underscores exactly how impactful meaningful dialogue can be.

    Our response to a recent editorial from Bloomberg on Congress’s crypto tax proposal was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.



    [ad_2]

    Source link