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Companies offering crypto services to residents of the European Union will need to comply with tax reporting rules to close tax evasion gaps.

A new proposal from the European Commission will require crypto asset service providers of all sizes and geographical locations to report on the transactions of EU-based clients to tax authorities.

“Tax authorities currently lack the necessary information to monitor proceeds obtained by using crypto-assets, which are easily traded across borders,” the European Commission wrote in a statement. “This severely limits their ability to ensure that taxes are effectively paid, which means European citizens lose important tax revenues.”

The gap in expected and collected tax on taxable goods and services within the bloc was €93 billion ($98 billion) in 2020, according to statistics released by the Commission. That makes up 9.1% of the total expected revenue. Collecting taxation on crypto activity in the EU could bolster an additional €2.4 billion ($2.5 billion) of revenue, The Block reported earlier this week.

The scope of the legislation covers crypto assets “issued in a decentralized manner,” including stablecoins and non-fungible tokens. The Commission also suggested monitoring the cross-border activity of high-net-worth individuals as means to expand the data used by tax authorities to prevent opportunities to hide wealth from tax officials.

Now, the proposal will make its way onto the desks of policymakers in the European Parliament. A stamp of unanimous approval from state representatives in the European Council will also be needed before new rules come into force. The European Commission is hoping for enforcement starting in 2026.

The crypto tax reporting proposal, formally the eighth in a series of directives on administrative cooperation, sits in the EU’s 2020 package of 25 initiatives to adapt the process of taxation to new technologies. DAC8 forms another pillar of the EU’s growing crypto-asset legislation, alongside the framework in the Markets in Crypto-Assets regulation and anti-money laundering rules.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cross-chain bridge protocol Nomad is getting set to relaunch and partially reimburse those that lost funds in its $190 million hack earlier this year.

“Since the Nomad Token Bridge hack, the team has been working hard on recovering funds and making the necessary updates to safely relaunch the Nomad Token Bridge,” the team noted, in a Medium post. 

Nomad has asked affected users to go through Know Your Customer (KYC) verification via CoinList, a centralized exchange and launchpad platform, to receive their reimbursements. The team at Nomad said the KYC process was essential to ensure the payments were in line with compliance norms.

This verification process is now open. Once it has been completed, users will receive a special non-fungible token (NFT), granting them access to a proportional share of the recovered funds on the Ethereum blockchain. These NFTs will be non-transferable and will allow them to receive any additional funds that are recovered in the future.

On Aug. 1, an estimated 300 crypto users took funds from Nomad’s cross-chain bridge, a tool that lets users move tokens across Ethereum, Moonbeam, Evmos and Avalanche blockchains. The incident occurred after a faulty software update from Nomad developers allowed anyone to drain funds from it. 

The total funds stolen in the incident amounted to $190 million, making it one of the largest crypto hacks of 2022. Of this amount, ethical hackers saved and returned more than $22 million. The team hopes to reopen the bridge to return these recovered funds after months of halt.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Hong Kong’s Legislative Council passed an Anti-Money Laundering and Counter-Terrorist Financing amendment primarily introducing a licensing regime for virtual asset service providers (VASPs).

Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 also applies traditional customer due diligence and record-keeping requirements to VASPs when conducting certain transactions.

The Hong Kong Monetary Authority confirmed the news in a letter on Dec. 7.

The new rules for VASPs are scheduled to commence on June 1, 2023.

The amendment does not exclusively deal with VASPs. It also establishes a registration regime for precious metals and stones dealers. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto derivatives exchange Bitmex is now letting traders bet on the daily value of staking rewards on the Ethereum blockchain.

The exchange has introduced a derivative called the ETH staking yield swap (ETHYLD), according to a blog post. It lets traders go long or short on the daily staking yield emitted by the liquid staking protocol Lido Finance. Traders can take positions with up to 2x leverage.

The Ethereum staking yield is the number of tokens paid out to validators in exchange for running the blockchain. Lido Finance is a liquid staking solution that allows immediate access to this liquidity through its derivative token.

Bitmex said the derivative could be useful on both sides of the trade. It said that people running validators might want to short the asset — taking a receiving position — in order to lock in future yields. Those expecting to pay large fees might want to long the asset, known as taking a payer position.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

One of Japan’s largest financial institutions, Sumitomo Mitsui Financial Group, is planning a trial of soulbound tokens for identity verification via a business partnership with HashPort Group.

Firstly, SMBC will issue soulbound tokens on a trial basis, according to a release, with technical support from HashPort, through the end of March 2023.

Secondly, it may look into testing soulbound tokens to prove behavior or claims about careers. Case studies may also be produced with companies interested in creating and marketing “fan communities using tokens.”

Going beyond soulbound tokens, SMBC and HashPort may also look at NFTs and web3 infrastructure development for domestic and overseas business penetration.

Today’s announcement has been in the works for months. SMBC and HashPort have been in talks to launch a collaborative business effort to develop a web3 economic zone since July 2022.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

U.S. prosecutors are probing into whether FTX founder and former CEO Sam Bankman-Fried could have manipulated the prices of TerraUSD and Luna cryptocurrencies earlier this year to benefit his businesses, the New York Times reported. 

The prosecutors are looking into whether Bankman-Fried could have “steered” the prices of algorithmic stablecoin TerraUSD (UST) and its associated token Luna (LUNA), the report said, citing two people familiar with the matter.

Those two cryptocurrencies collapsed in May, about six months before Bankman-Fried’s crypto exchange FTX and more than 100 related entities filed for Chapter 11 bankruptcy protection. One of those entities was FTX’s sister trading firm Alameda Research, which was forced to wind down trading and is now the subject of scrutiny after The Wall Street Journal and Reuters reported that FTX had lent the firm billions in client funds.

The investigation into Bankman-Fried’s TerraUSD and Luna trading activity is still young, The New York Times reported, noting that it is “not clear whether prosecutors have determined any wrongdoing” by SBF or when investigators started looking into his company’s TerraUSD and Luna trades.

The report cites a statement from Bankman-Fried saying he was “not aware of any market manipulation and certainly never intended to engage in market manipulation.”

The probe into whether Bankman-Fried could have manipulated these cryptocurrency markets is just one aspect of ongoing investigations targeted toward his web of companies by authorities in the U.S. and beyond. The Wall Street Journal revealed that the The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are also examining FTX in the days ahead of its collapse, and Bloomberg reported that federal prosecutors were looking into the firm months before it filed for bankruptcy. Authorities in The Bahamas are also investigating the FTX Digital Markets subsidiary that was headquartered there.

Meanwhile, U.S. lawmakers also want Bankman-Fried to testify about how the bankruptcy of his companies unfolded before the year’s end. The U.S. Senate Banking Committee on Wednesday asked Bankman-Fried to present himself on Dec. 14. Meanwhile, senior members of the House Financial Services Committee are considering issuing a subpoena that would require him to testify.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

How do you sue a DAO? The question has been at the heart of the case the Commodity Futures Trading Commission is bringing against Ooki DAO, a decentralized autonomous organization that the agency alleges was just feigning decentralization in order to facilitate old-fashioned commodities violations.

Controversially, the CFTC distributed legal service to DAO users via the DAO’s chat box. Most legal proceedings require physical, in-person delivery, but the CFTC got the court on board with a special exemption in October, as the case was kicking off. DeFi advocates reacted heatedly.

On Wednesday night, a San Francisco court heard virtual arguments over the mechanism of service. Arguing with the CFTC’s lawyers were not Ooki DAO’s lawyers.

Ooki DAO has not yet responded in a cohesive way to the suit by, for example, hiring an attorney to represent it in the case. Its architects, Tom Bean and Kyle Kistner, did. The CFTC settled with them in September.

Instead, four attorneys enlisted by outside crypto firms and allies a16z, LeXpunK, Paradigm and the DeFi Education Fund argued with the CFTC’s methods. The four had filed amici curiae briefs in the case before the U.S. District Court for the Northern District of California.

“We have really cool technology,” said LeXpunK’s representative council Stephen Palley. “But you still have to accept the concept of due process.”

Ooki’s erstwhile defenders did not deny that the platform had been used to facilitate unlawful trading. Instead, they argued that the mechanism of service was to target anyone who had ever used the platform.

“Because the stakes are so high and the novelty of the case — which I think we’ve all recognized here — we think it’s all the more important that the government be required to turn square corners on service here,” said James McDonald, representing advocacy group the DeFi Education Fund.

The judge, William Orrick, for his part, would not allow that Ooki DAO’s decentralization spares it from legal service – a hot topic in other active lawsuits. “Seems to me the CFTC is suing an entity, not a technology, Orrick said, continuing: “It seems to me the Ooki DAO is an unincorporated association under California law.”

The CFTC’s representatives pushed on the point that they didn’t need to prove that each member of the association served was criminally liable in order to serve them collectively. “So long as we can demonstrate that the association exists then that is sufficient to trigger the service provisions we have relied on,” said Anthony Biagioli, a trial attorney for the CFTC.  

Orrick now has to determine whether to overturn his prior motion to allow service, as the crypto advocates want, or allow the CFTC to proceed. “I’ll get an order out at some point relatively soon, I hope,” he concluded.  

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

One new company may have come up with our best hope of preventing AI bots from ushering in an apocalypse: Give them pets to play with.

That’s the concept behind augmented reality start-up Anima’s new project called Onlybots, a platform where bots — or humans masquerading as bots — can obtain AR-powered virtual pets. The pets, which are also NFTs minted on Ethereum, are now trading on OpenSea.

Wednesday’s initial drop of unique AR creatures sold out almost immediately, according to Anima, causing the newly minted group of digital assets to crack OpenSea’s top 10 trending collections on its first day of availability. The company said the first two batches of about 500 pets sold out in less than an hour. At the time of writing, Openbots ranked fifth on OpenSea’s trending collections list.

“[Bots] are very much in the zeitgeist right now. Elon Musk was obsessed with them. ChatGPT is probably the biggest story in tech this week,” said Anima cofounder Alex Herrity. “But we don’t really think about ‘What do bots want? What would make them happy?’”

Kidding aside, Anima’s Onlybots project is the latest example of a company attaching added value and functionality to digital collectibles in an effort to spur wider adoption. While the current downturn across crypto has caused NFT trading volumes to plummet, the number of transactions has been steadily rising as more mainstream consumers embrace the buying and selling of digital assets with the advent of new web3 games and social media companies like Reddit, Instagram and Twitter rolling out initiatives aimed at introducing newcomers to the world of crypto.

Herrity believes the trend will continue and adoption and ownership will spread as use cases proliferate.

“We founded Anima really noticing that digital ownership and digital collectibles is exploding and will change, and continue to change, as a whole generation grows up used to owning digital goods from the beginning they’re interacting with products they care about,” said Herrity. “We wanted to bring that into AR because up until now AR has really been filters on SnapChat. It’s a distraction, it’s not something you can own.”

After having previously worked on Fortnite, Herrity founded Anima last year with $500,000 in pre-seed financing led by Coinbase. He’s joined by cofounder Neil Voss, who worked at Nintendo in the 1990s.

With Onlybots, human users capable of pretending to be AI bots by failing a questionnaire and reCAPTCHA can acquire chunky Lego-like, augmented-reality digital creatures that can then be superimposed over the real world using a smartphone. While technically Amina has created the pets for humans to enjoy, AI bots can also acquire the digital creatures, according to Herrity.

Although Wednesday’s initial launch quickly sold out, Anima plans to release more on top of adding additional functionality and animation based in part on what people choose to do with the virtual pets.

“This initial batch is aimed at the collectors,” said Herrity, adding that Anima’s long-term plan extends far beyond creating virtual NFT pets. He says Anima wants to build a platform people can use to create their own AR-powered digital assets.

Whether Anima’s virtual pets can save the world from a bot apocalypse remains to be seen.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The U.S. Senate Banking Committee wants Sam Bankman-Fried to testify on the collapse of his crypto exchange, FTX and linked trading firm, Alameda Research. 

“As the Founder and CEO of FTX Trading Ltd. at the time of its collapse and the founder, principal owner, and former CEO of Alameda Research, you must answer for the failure of both entities that was caused, at least in part, by the clear misuse of client funds and wiped out billions of dollars owed to over a million creditors,” reads a letter from Senate Banking Committee Chair Sherrod Brown, D-Ohio.

The letter requests Bankman-Fried’s presence on Dec. 14, the day after a scheduled House hearing where members of Congress also want the embattled former crypto CEO to testify. Brown sent the letter to Bankman-Fried through his attorney, New York-based Mark Cohen, and says he has the cooperation of Sen. Pat Toomey, R-Pa., the committee’s top Republican.

“Traditionally, witnesses who are invited to appear before the Committee make themselves available voluntarily,” the letter continues. “If you chose not to appear, I am prepared, along with Ranking Member Pat Toomey, to issue a subpoena to compel your testimony.”

Brown gives Bankman-Fried until 5 p.m. EST on Thursday, Dec. 8, to decide whether to willingly appear or face a congressional subpoena and potential referral for contempt of Congress if he fails to cooperate. 

The House Financial Services Committee is already weighing a subpoena of Bankman-Fried, whom they have publicly called on to testify. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Marathon Digital Holdings Inc. has hired advisers to help navigate a potential bid for its partner Compute North, a troubled crypto miner currently going through bankruptcy, according to Bloomberg.

Marathon CEO Fred Thiel told Bloomberg his company had hired Guggenheim Partners and law firm Weil Gotshal & Manges to advise on both its exposure to Compute’s bankruptcy and a potential bid for the bankrupt data center.

Marathon utilizes an “asset-light strategy,” which requires it to use third-party companies that possess the machinery and infrastructure to mine cryptocurrency, Bloomberg said.

The Las Vegas-based miner recorded a loss for the third quarter thanks in part to an impairment charge of $39 million linked to Compute North’s bankruptcy, the report also said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.