Our weekly crypto newsletter is here! Learn more about the recently proposed crypto bill in the US and whether FTX and Goldman Sachs will soon be working together. Also, find out if Bitcoin is a good hedge against inflation and what is the difference between Proof-of-Work and Proof-of-Stake!
Responsible Financial Innovation Act: Time for the US to catch up
News shook the crypto industry earlier this week when Senators Cynthia Lummis (R) and Kirsten Gillibrand (D) introduced their comprehensive bipartisan crypto bill that aims to clear much of the uncertainty in the US. While this is a US bill, it will likely have a global impact, given the global nature of the industry.
So what’s in the bill? For starters, Bitcoin and Ethereum will be treated as commodities to be regulated by the Commodity Futures Trading Commission (CFTC). In contrast, other cryptos could be treated as SEC-regulated securities if they pass the Howey test. In addition, capital gains under $200 on payment for goods or services would be exempt from tax. Another great provision of this bill is that it clarifies that the lending of digital assets would not be considered a taxable event.
This bill also provides tax relief for miners and stakers as any rewards would not be taxable until the rewards are later sold – this is unlike Notice 2014-21 which states that mining rewards are taxable upon receipt. In addition to the above tax provisions, the bill also recognizes DAOs as legal entities and provides much more regulation for stablecoin issuers – especially relevant given the recent collapse of Terra LUNA.
While there are many great things in this bill, this is still a way away from becoming law. If this bill passes, it won’t be before 2023, and certainly not without much more scrutiny and revisions. Whatever happens, you can rest assured that ACCOINTING.com will keep you updated and ensure any new tax-saving strategies that come from this bill get into your hands.
Goldman Sachs and FTX: Potential for collaboration?
The founder and CEO of crypto exchange powerhouse FTX, Sam Bankman-Fried, allegedly met with Goldman Sachs CEO David Solomon in the Caribbean to discuss potential collaboration between the two companies. The topics included Goldman Sachs advising FTX on future funding rounds and helping them with a potential IPO, as Goldman Sachs led the IPO for FTX’s competitor Coinbase last year.
The Goldman Sachs CEO also offered advice in discussions with US regulators, which is relevant since FTX’s proposal to the Commodity Futures Trading Commission (CFTC) submitted in March. The proposal envisions that FTX should be allowed to directly settle deals for its customers in the derivatives market. Additionally, the two also discussed the possible introduction of crypto derivative trading for Goldman Sachs.
It’s still too soon to project if this partnership will ever see the light of day as regulators already voiced their concerns about the potential market domination of these two companies. However, this meeting illustrates the increasing interest from mainstream financial institutions in the crypto industry as a whole and could lead to further adoption (and regulation) of cryptocurrencies.
Bitcoin vs. Gold
Over the past few years, you’ve probably heard on more than one occasion that Bitcoin is a great hedge against inflation. But, just how true is that statement, and, moreover, how does it compare to a traditional hedge such as gold? After all, gold has been used as a reliable store of value for thousands of years. Is the digital age finally upon us? Does BTC come close to gold as a tool to fight inflation? Or has Peter Schiff been right all along? We hope not!
Indeed, Bitcoin and gold are quite different, but they also possess some similarities in how we typically use them as store-of-value assets. We’ve compared the two investment vehicles by pitting them against each other across various categories. It’s the ultimate physical vs. digital showdown, and it’s all in our in-depth Bitcoin vs. Gold blog post!
Crypto 101: Proof-of-work vs. Proof-of-stake
This year will be a special one in the history of cryptocurrencies because Ethereum will finally be switching to the proof-of-stake consensus mechanism. Criticism of the biggest smart contracts platform is often aimed at the vast energy consumption needed to keep the Ethereum blockchain running. Proof-of-work is the current mechanism used by Ethereum but that’s all about to change by the end of 2022.
But what’s the difference between proof-of-work and proof-of-stake, aside from their levels of energy consumption? Both use validators to secure transactions on the blockchain, and both have pros and cons. More importantly, there are fundamental differences between both consensus mechanisms that can have a decisive impact on their future. Learn more about the differences between the two mechanisms and much more in our Cryptocurrency 101 Beginner’s Guide. It’s the best way to kickstart your crypto research.