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Coinbase CEO explains why they sell your crypto data to the IRS

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Coinbase was in the crosshairs over the weekend after SEC filings revealed the business licensed transactional information software to regulators. For most, this was contrary to the ethos of decentralization and cryptocurrencies.

The firm’s Analytics software won a four-year contract offered by the Secret Service this year; pegged at over $180,000 and ending in May 2024.

Yesterday, CEO Brian Armstrong took to Twitter explaining the exchange’s decision—but critics weren’t impressed.

The anti-government government club

Armstrong said such software was nothing new. Crypto firms like Chainalysis (he didn’t name any firms) have been around a long time and use publicly available blockchain data to weed out bad actors.

It’s all for KYC/AML purposes. User information, in his view, is used by (crypto) exchanges to connect into the existing financial system, i.e. ability to connect one’s bank account, do wires, and convert fiat to crypto. This needs AML laws and the use of blockchain analytics software for transaction monitoring, he noted.

Coinbase used third-party vendors in the past to maintain the AML service required for a legal crypto operation. 

But Armstrong reveals the business did not “like sharing data with third parties when we can avoid it,” presumably leading to establishing its in-house Analytics software.

This was done via an acquisition, which did face some tussles within the team:

He added:

“Blockchain analytics software is essentially just compiling publicly available data that is already out there on the blockchain, trying to organize it to make it more useful.”

Strangely enough, Armstrong said users seeking complete privacy must stick to private currencies, because “that’s what they are for.”

Critics blast Coinbase’s response

Critics were not pleased with Armstrong’s explanation. Coinbase has been a compliance-first crypto exchange historically, but some felt this move was taking it too far.

“How can you call yourself pro-privacy coins and still have not listed Monero, the original and most widely used “privacy coin”?” said Seth Simmons, an information security engineer.

Thread commenter @dka218 said Bitcoin nodes are publicly readable but that isn’t controversial. Combining that data with identifiable user information is.

Meanwhile, Amber co-founder Aleks Svetski was a bit more forthcoming. He said Armstrong was “a fool of randomness who got lucky finding Bitcoin early.”

“You never have & never will understand why it exists. But that’s also why it will make your entire business obsolete,” ended Svetski.

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Source: https://cryptoslate.com/coinbase-ceo-explains-why-they-sell-your-crypto-data-to-the-irs/

Blockchain

Swiss Government Starts Discussions on Local Blockchain Regulations

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A new consultation process on blockchain laws is set to begin in Switzerland. Initiated by the country’s Federal Department of Finance, the operation is focused on initiating a blanket ordinance in the local blockchain and distributed ledger technology environment.

For Better Laws In Blockchain Industry

A number of parties, individuals, and other interested groups are set to be included in the upcoming consultations in the blockchain spectrum. The project is planned to go on for three months, ending on February 2 next year.

As per a recent report by Switzerland’s Federal Department of Finance, the blanket ordinance is set to help legislative amendments, recently voted by Parliament, turn into law at the federal ordinance level. The grand plan is that the Federal Council will bring amendments to the acts and ordinates into force on August 1, 2021.

The news appears a month after the Swiss Parliament unanimously adopted a Federal Act on the Adaptation of Federal Law do Developments in Distributed Ledger Technology (DLT). With it, the government amended several active finance and corporate laws, re-shaping them with additions in favor of blockchain technology and DLT.

According to the report, the act has improved the framework conditions for the country to turn into a significant, innovative, and sustainable place for blockchain and DLT firms to settle.

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A Further Leap Into The Crypto Means Of Payment

The recent news comes shortly after the Swiss government announced that soon cryptocurrency would be operable for tax payments. As CryptoPotato recently reported, Bitcoin and Ethereum will become acceptable assets for the purpose, as Zug, a canton in Switzerland, announced its partnership with cryptocurrency broker Bitcoin Suisse. Both sides declared their readiness to realize the acceptance of cryptocurrency for tax payments, starting from February 2021. 

Individuals using the crypto option for tax payments would be able to notify authorities and, thereafter, get a QR code through email.

According to the announcement, Bitcoin Suisse will assist in converting crypto to francs, this way avoiding state incurring losses due to price volatility.

The option will give taxpayers, both individuals, and companies the opportunity to pay their taxes with cryptocurrency up to about CHF 100,000 ($110,000).

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Source: https://cryptopotato.com/swiss-government-starts-discussions-on-local-blockchain-regulations/

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Kik and The SEC Reach a $5 Million Agreement to End Their Long-Lasting Legal Battle

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The story of the legal battle between Kik and the SEC seems to be coming to an end. Today, the SEC filed a motion with the Southern District Court of New York to close the case with a $5 million fine.

Kik was sued for issuing and selling unregistered securities through the ICO of its KIN token. The accusation came just in the same time the SEC tried similar proceedings against Telegram’s ICO, TON.

However, the agreement with Canada’s Kik is much softer than what the SEC pursued with Telegram: The latter was prohibited from keeping up with the project, whereas Kik is required to notify the SEC of any action involving sale or exchange of assets.

Kik and The SEC Agree to Disagree

Kik accepted the settlement, which has not yet been approved by the New York court. If the litigation goes forward, the parties would be disputing close to $100 million plus the related administrative expenses and miscellaneous legal fees.

The parties agreed to this amount as a one-time payment under a civil penalty:

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IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for a civil penalty in the amount of $5,000,000 pursuant to Section 20(d) of the Securities Act [15 USC § 77t(d)]. Defendant shall satisfy this obligation by paying $5,000,000 to the Securities and Exchange Commission within 30 days after entry of this Final Judgment.

This marks the end of a dark chapter in the history of the crypto ecosystem. In one year the SEC went through  a long period of hard litigations, criticism, and resources. On the other hand, KIK lost $10 million in fees, had to sell its messaging app, and lay off nearly 80% of its staff.

What happened?

It all started with the Canadian startup’s decision to venture into the crypto-verse in the middle of the ICO hype.

The company announced the issuance of one trillion KIN tokens as part of an ICO for a blockchain that promised to natively increase the features of several social media apps (people could vote, tip, pay, and participate in contest all within their apps).

The SEC quickly tried to put its hands on the project, claiming that by offering KIN tokens, Kik was taking part in an unregistered securities sale scheme. In general terms, the SEC demanded the suspension of such action and the seizure of the funds obtained from this allegedly illegal activity.

Kik objected. Its fundamental argument was that users bought the KIN tokens for their potential use at the time of the network’s launch instead of merely being interested in speculating on its price.

This was key to the controversy. The Howey test —a standard procedure for determining whether or not something is a security— concludes that a product is considered a security if its primary objective was to make a profit through price speculation. But it was impossible to know the company’s intentions —let alone the investors’— so a meticulous analysis of the issue was required, and Kik was willing to fight to the end.

So, now that the legal fight is about to end, crypto enthusiasts can only hope the legal fight didn’t end Kik

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Source: https://cryptopotato.com/kik-sec-reach-millionaire-agreement/

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Bitcoin Dominance at 2-Month High: Disaster for Altcoins

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August was a bullish month for altcoin traders as they ranked in profits, forcing Bitcoin dominance to drop below 60% for the first time since the start of the year. However, the altcoin euphoria was shortlived as September brought along the bears.

The end of Q3 wasn’t great for Bitcoin traders, but that was expected as September is usually not a profitable month for Bitcoin. In fact, data shows that Bitcoin has lost more in September than in any other month.

As expected, the Bitcoin effect was seen across boards in the market. Altcoins suffered the most, shredding almost all of the profits accumulated in the previous month.

Bitcoin Eyes $12K

Bitcoin is pushing hard towards the $12k mark. It traded as high as $11,942 for the first time since mid-August.

Analysts believe the trend is the start of a new bull cycle for the leading cryptocurrency considering the coin shielded itself and recovered quickly from the recent negative news, including BitMEX’s charges and OKEx’s withdrawal saga.

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Although October has been impressive for Bitcoin, and the coin has since recovered from the bearish move in September, altcoins continue to live in the terrible nightmare from the past month.

October: Another Nightmare For Altcoins

Bitcoin dominance started rising in mid-September after it went as low as 55%. At the time of writing, the cryptocurrency maintains a 60.3% dominance of the entire crypto market while the altcoins struggle with 39.7%.

btc_dominance
Bitcoin Dominance. Source: CoinMarketCap

Even Ether (ETH), the second-largest cryptocurrency, was not spared. In August, the coin traded near the $500 mark, reaching $485 for the first time in two years. In the last two months, Ether lost over 20% of its value, and market dominance dropped from above 15% to 11%.

Now, ETH is exchanging hands at $369 with a 2% loss on the daily chart. However, speculation in the market is that the upcoming ETH 2.0 Phase 0 could provide the needed boost for Ether bulls.

Looking at the top 100, a handful of altcoins have shredded at least 15% of their value on today’s trading session. Some of the most significant losers include Uniswap (-17%), Crypto.com (-25%), Balancer (-19%). Meanwhile, Flexacoin saw a big boost with over 258.11% gains in the last 24 hours.

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Source: https://cryptopotato.com/bitcoin-dominance-at-2-month-high-disaster-for-altcoins/

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