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On May 28, the Biden administration released its budget proposal for 2022. Alongside the new budget, the Treasury released explanations for the administration’s revenue proposals.  

As the administration has been saying for months now, the new spending package is big, and the Biden team’s ambitions for expanding the IRS to pay for the new spending are proportionate.

Notably, the Treasury spotlighted new goals of expanded crypto reporting requirements to combat tax evasion. 

“Tax evasion using crypto assets is a rapidly growing problem,” the Treasury’s explanation contends. “The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.”

The Treasury proposes to expand requirements of crypto brokers, including exchanges and custodial wallets, to report the beneficial owners of accounts, which would then go into the automated international reporting networks to which the U.S. is already a party. The proposal aims to make this mandatory for tax returns filed starting in 2023. 

As the proposal is outlined in full:

“The proposal would expand the scope of information reporting by brokers who report on crypto assets to include reporting on certain beneficial owners of entities holding accounts with the broker. This would allow the United States to share such information on an automatic basis with appropriate partner jurisdictions, in order to reciprocally receive information on U.S. taxpayers that directly or through passive entities engage in crypto asset transactions outside the United States pursuant to a global automatic exchange of information framework. The proposal would require brokers, including entities such as U.S. crypto asset exchanges and hosted wallet providers, to report information relating to certain passive entities and their substantial foreign owners when reporting with respect to crypto assets held by those entities in an account with the broker. The proposal, if adopted, and combined with existing law, would require a broker to report gross proceeds and such other information as the Secretary may require with respect to sales of crypto assets with respect to customers, and in the case of certain passive entities, their substantial foreign owners.”

The broad aims of identifying underlying beneficial ownership of businesses and legal entities have grown enormously in prominence over the past decade. At the beginning of 2021, the U.S. passed legislation to restrict anonymous ownership of corporations nationwide, part of combatting the same problem of money laundering. 

The Treasury has already begun targeting crypto as another front of this same war. The Financial Crimes Enforcement Network has been mulling over rules on knowing counterparty information on self-hosted wallets transacting with exchanges, to the dismay of the crypto industry. 

Crypto exchanges operating in the U.S. are already expected to keep information on their clients, so the real shift the Treasury anticipates appears to be in the exchange of that information between exchanges internationally.

At the same time, in its breakdown of estimated revenue from the shifts, the Treasury estimated that the expanded reporting requirements for crypto brokers will have a “negligible revenue effect.”

© 2021 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.

JPMorgan CEO Jamie Dimon’s views on bitcoin haven’t changed much over the past few years. For his part, Dimon still thinks one shouldn’t invest in bitcoin.

At a virtual hearing hosted by the U.S. House Committee on Financial Services on Thursday, Dimon said bitcoin is not supported by any assets and “something that’s not supported by anything I do not believe has much value.”

“My own personal advice to people is to stay away from it,” said Dimon. He was responding to a question by Ohio Representative Warren Davidson, a crypto-friendly congressman.

While Dimon’s personal views on bitcoin haven’t changed, there seems to be a notable change in his tone about it. Dimon said his opinion doesn’t mean JPMorgan clients don’t want exposure to bitcoin.

This goes back to how one has to run a business, said Dimon, giving the example of marijuana.

“I don’t smoke marijuana, but if you make it nationally legal, I’m not going to stop our people from banking it and etc.,” said Dimon. “I don’t tell people how to spend their money regardless of how I might personally feel about some of the items that people might buy with their money.”

To that end, JPMorgan is “debating” whether it should make bitcoin available in some “safe” way, said Dimon.

Eventually, Dimon thinks that regulators should step in and regulate industries such as crypto. “I do think the regulators who are a day late and a dollar short should be paying more attention to the future, payment for order flow, high-frequency trading, cryptocurrency, and put a legal, regulatory framework around it.”

Goldman and other bankers 

Goldman Sachs CEO David Solomon also said at the hearing that there is demand for crypto from clients.

“There is no question both institutions and individuals are looking for exposure to bitcoin,” said Solomon, responding to a question from New Jersey Representative Josh Gottheimer.

Goldman Sachs, therefore, tries to provide information to clients around this “potential asset class,” said Solomon.

Earlier this month, Goldman Sachs formed a cryptocurrency trading team. And as part of its initial launch, the bank executed bitcoin non-deliverable forwards and CME bitcoin futures trades on a principal basis, all cash-settling.

But similar to JPMorgan’s Dimon, Solomon is also “extremely cautious” about bitcoin.

He said if lots of people believe in something, it can sustain value for a period of time, but bitcoin’s use cases and regulatory oversight are unclear. “There’s still a lot of work to do around this,” said Solomon.

There were other mega bankers also present at the hearing, including Bank of America CEO Brian Moynihan, Citigroup CEO Jane Fraser, and Wells Fargo CEO Charles Scharf. They all shared a similar view on crypto, saying that they are proceeding cautiously.

To that, Minnesota Representative Tom Emmer, a crypto-friendly congressman, said, “it seems to be a theme” among the bankers in attendance.

© 2021 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.

Circle, the company behind the fast-growing dollar-pegged coin USDC, has raised $440 million in fresh capital.

The sizeable funding deal comes ahead of a potential special purpose acquisition vehicle (SPAC) deal, according to two sources familiar with the matter. Among those taking part in the $440 million round were Fidelity, FTX, Digital Currency Group, Marshall Wace, Valor Capital Group, Pillar VC, Intersection Fintech Ventures, Atlas Merchant Capital and Willett Advisors, among others.

The firm’s target valuation for the SPAC is said to be $4 billion. Companies have raised tens of billions of dollars via SPACs this year, but the market has come under recent pressure. As reported by The Wall Street Journal, the Defiance Next Gen SPAC Derived Exchange-Traded Fund, which tracks the performance of companies that have tapped the public markets via a SPAC, hit a six-month low earlier this month. 

Circle’s business has grown alongside the supply of USDC, having built out API services to help businesses engage with the stablecoin business. The total supply of USDC recently surpassed $20 billion. Circle makes money from the dollar reserves that underpin the stablecoin. 

The new funding round follows a strategic raise of $25 million led by Digital Currency Group in 2020. Circle also raised $110 million in a 2018 round that valued the company at $3 billion.

Circle’s funding round joins the growing list of big-ticket capital raises for 2021. These include Paxos’s $300 million Series D funding round in April and BlockFi’s $350 million round in March. Both raises gave these firms valuations above $1 billion. FTX is also nearly finished closing a funding round that is set to value the company at $20 billion. 

Circle announced the fundraise completion a few hours after The Block reached out to the firm for comment. 

© 2021 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 West Midlands Police had expected to uncover a farm of cannabis, which is illegal to grow, possess, and sell in the United Kingdom. Officers found a bitcoin mining operation instead.

It would have been legal had the owners not been stealing “thousands of pounds” worth of electricity from the main supply to operate it, according to a Thursday news story from the West Midlands Police. 

The police report that the rig showed “classic cannabis factory signs:” substantial heat production, visible wiring and ducts, and numerous people popping in throughout the day. Officers had secured a drug warrant before discovering the operation’s true nature.

“It’s certainly not what we were expecting!” Sandwell Police Sergeant Jennifer Griffin was reported saying. “I believe it’s only the second such crypto mine we’ve encountered in the West Midlands.”

Based on pictures presented by the West Midland Police, in which one of the computers had “S9 2016” labeled on it, the bitcoin mining operation appeared to be using the popular AntMiner S9 supercomputers. 

While it’s unclear how long the illegal bitcoin mine had been operating, a single S9 miner produces an estimated $1.55 (1.09 GBP) per day without the cost of electricity. Therefore, the 100 miners could have been producing $155 (109 GBP) per day, or about $4,800 (3,300 GBP) per month.

© 2021 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.

Quick Take

• During the period starting from May 12th, many DeFi tokens dropped 70%+ in prices. The Block’s DeFi index dropped from 914% to 416% in 1-year performance.
• Unlike in March 2020, when there was a similar drop in prices, many of the largest DeFi protocols performed better thanks to increased liquidity and scalability.
• DeFi protocols have highly reflexive valuations — i.e. P/S ratios and other metrics can look better when prices are increasing — because the primary use case is speculation on the success of crypto.

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The widely circulated news that Dubai had launched its own cryptocurrency, dubbed DubaiCoin, is a scam, the Dubai government has said.

DubaiCoin was “never approved by any official authority,” the government of Dubai tweeted on Friday, adding that the website promoting the coin “is an elaborate phishing campaign that is designed to steal personal information from its visitors.”

How it all started

On May 24, a fake press release was published on PR Newswire in the name of Arabian Chain Technology, which appears to be a legitimate blockchain firm based in Dubai and has its own coin named DubaiCoin (DBIX).

The fake press release, now unpublished, said Dubai is “making its own digital currency,” and its circulation “will be controlled by both the city itself and authorized brokers,” a record available on the Internet Archive shows.

The release went on to claim that DubaiCoin would become the city’s “De-Facto Digital Currency” and that the “up-and-coming” coin is available to buy at a starting price of $0.17 per coin, via a website called “dub-pay.com.”

The website is also now inaccessible, but a record on the Internet Archive shows that people could invest in the coin in three steps: First, they were required to fill a form with details such as name, email address, and phone number. Then an agent would call them and change their local money to DubaiCoin (DBIX).

The news quickly spread across media, and the price of ArabianChain Technology’s real DubaiCoin (DBIX), which is only listed on the HitBTC crypto exchange, shot up more than 1,000% to nearly $1.50 in 24 hours. The price has since declined sharply, and the coin is currently trading at $0.32, according to TradingView.

ArabianChain Technology also tweeted on May 26, two days after the fake press release was published, that the company hadn’t made any such announcement and the website dub-pay.com “is fake and [a] scam.”

It is not clear how many people ended up investing in the fake DubaiCoin, but the trading volume of the real DubaiCoin (although not government-backed) was around $592,000 in the last 24 hours, according to data from Crypto.com.

© 2021 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.

Yet another DeFi platform has been exploited for millions of dollars. This time, it’s BurgerSwap, a decentralized exchange (DEX) based on Binance Smart Chain. 

According to The Block Research’s Igor Igamberdiev, an attacker used flash loans to exploit the protocol for $7.2 million. Flash loans are blockchain-based loans where large amounts of tokens are borrowed, used for some purpose and repaid — all in the same transaction.

But the attack was only possible because the exchange was missing a key line of code, one that it should have had, according to Hayden Adams, founder of the decentralized exchange Uniswap. Adams tweeted today that BurgerSwap was based on Uniswap’s V2 code but a specific line of code had been removed, “so core could very trivially be drained.“

As a result, the perpetrator was able to use the protocol to make two transactions when they should only have been able to make one. So, in one example, when they borrowed 6,000 wrapped BNB (WBNB), they were able to use the tokens to turn them into 8,800 WBNB (something the protocol should have prevented). After repaying the loan, they were left with a stash of remaining tokens.

This same attack was used multiple times in 14 transactions to steal a range of tokens, including WBNB, ether (ETH), two stablecoins and a large stash of Burger Swap tokens (BURGER).

“The current total loss is around $7 million and we will strive to cover all your loss,” BurgerSwap tweeted today, adding, “We understand what the community cares about the most. Detailed compensation plan is on the way.”

According to Igamberdiev, the hacker has started using the Nerve protocol to sell the tokens and transfer them across to the Ethereum blockchain.

© 2021 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.

John Glen, economic secretary to the Treasury and City minister, has issued a statement claiming that a large number of crypto startups have failed to meet anti-money laundering (AML) standards set by regulators in the United Kingdom.

“A significant number of firms have failed to implement appropriately robust AML control frameworks, and to employ fit and proper personnel,” said Glen in a written reply to Philip Davies, Conservative member of Parliament (MP) for Shipley, West Yorkshire.

Davies put a series of written questions to chancellor Rishi Sunak earlier this week over continued delays to the Financial Conduct Authority (FCA)’s crypto register.

Glen’s statement comes as hundreds of crypto startups are in limbo over whether they will be able to continue to operate beyond July 9, the revised deadline by which they must either be included in the FCA’s cryptoasset register or cease trading.

Glen said that five crypto firms had been registered as of May 24. Those companies are Ziglu, Archax, Digivault and two Gemini entities.

“Of the firms assessed to date over 90% have withdrawn their application following FCA intervention,” he added. According to Glen, there are currently 167 U.K. crypto firms awaiting registration. There are also 77 new crypto startups which have applications that are pending a full assessment.

The questions put to Sunak by Davies earlier this week focused on whether the logjam around the crypto register might harm the U.K.’s reputation as a hub for financial innovation — a fear that has been echoed by both lobby groups and Davies’s fellow MPs.

“The U.K. is committed to having a robust AML regime for cryptoassets which will help to bolster confidence in the U.K. as a safe and reputable place to start and grow a cryptoasset business,” said Glen.

© 2021 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.

WisdomTree has filed for an exchange-traded fund (ETF) based on ether, according to a new S-1 filed with the Securities and Exchange Commission. 

The so-called WisdomTree Ethereum Trust plans to list on Cboe BZX Exchange, the same venue it plans to list shares of its proposed bitcoin ETF. The proposal will be updated as it goes forward, but so far it’s yet to settle on a ticker or a custodian. Delaware Trust Company is the proposed trustee.

The ETF is a vehicle for gaining exposure to the price of ether with shares priced by the CF-Ether-Dollar US Settlement Price. As the filing notes:

“As the Shares are listed on the Exchange, investors can indirectly invest in a portfolio comprised of ether through a traditional brokerage account. The Trust provides investors with the opportunity to access the market for ether through a traditional brokerage account without the potential barriers to entry or risks involved with holding or transferring ether directly, acquiring it from an ether exchange, or mining it.”

WisdomTree is the second to apply for an ETH ETF, following VanEck’s submission earlier this month. Both entities plan to list on Cboe and have bitcoin ETF proposals before the regulator that they also plan to list on Cboe. Still, the SEC has yet to approve any crypto ETF offering, and many bitcoin ETFs have been stopped short of approval by the agency. 

But multiple ETH ETFs have already gone live in Canada. Those approvals came just weeks after Canadian regulators first gave bitcoin ETFs the green light. 

© 2021 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.

Bank of Korea Governor Lee Ju-yeol has said that leveraged cryptocurrency trading threatens the country’s banking and financial system.

Speaking at a press conference on Thursday, Lee said that “an excessive level of leveraged cryptocurrency trading puts households at risk of financial damages considering the instability of (cryptocurrency),” as reported by the Korea Herald.

“We expect (the increasing amount of crypto trading) to have a negative impact on the financial system in any respect,” said Lee.

Leveraged trading involves trading with the borrowed amount. If more borrowers default on payments, it could negatively affect a country’s banking system.

Lee reportedly pledged to closely monitor the financial transactions of Korean banks and other financial institutions associated with leveraged crypto trading, hinting at possible measures to curtail new loans.

South Korean crypto exchanges are currently already on a deadline to win business licenses. They need to partner with local banks by September 24 to open real-name bank accounts for customers. But banks are reportedly concerned that this could leave them liable for any crypto money laundering.

While bigger exchanges such as Upbit, Bithumb, Korbit, and Coinone could meet the requirements, smaller exchanges in the country could reportedly shut down.

© 2021 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.