Regulation
Bitnomial Sues SEC Over XRP Futures, Cites CFTC As Primary Regulator
Bitnomial, a cryptocurrency derivatives exchange, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) over the regulatory authority concerning XRP futures contracts. The lawsuit disputes the SEC’s claim that XRP futures are “security futures,” which would place them under the agency’s jurisdiction.
This legal action follows Ripple’s own ongoing battle with the SEC over the classification of XRP, with Bitnomial seeking clarity on which regulator has authority over crypto derivatives.
Bitnomial Sues US SEC Over XRP Futures Status
In its lawsuit, Bitnomial asserts that the SEC is overstepping its bounds by labeling XRP futures as “security futures,” which would subject them to joint regulation by both the SEC and the Commodity Futures Trading Commission (CFTC). The exchange had filed for the approval of an XRP-US Dollar futures contract in August, soon after a federal judge ruled that XRP sales on secondary markets did not constitute securities.
The SEC, however, contacted Bitnomial following the filing, stating that XRP futures fell under the purview of both regulatory bodies and that Bitnomial must comply with additional requirements. According to the lawsuit, the SEC insisted that the exchange would need to register as a national securities exchange before offering the futures contract.
Bitnomial disagrees with the SEC’s classification of XRP, maintaining that the digital asset is not an investment contract and should be regulated by the CFTC, not the SEC. The lawsuit asks the court to rule that XRP futures are not securities futures and prevent the SEC from enforcing its claim.
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Regulation
US IRS Faces New Lawsuit Over Crypto Staking Tax Policy
The US Internal Revenue Service (IRS) is again under legal pressure in relation to taxation of cryptocurrency staking rewards. On October 10, 2024, Josh Jarrett filed a new lawsuit with support of Coin Center and against the agency’s approach of taxing block rewards as income at the time of receipt.
US IRS Faces New Lawsuit Over Crypto Staking Tax
In a filing on Thursday, the IRS is in the spotlight over its position on block rewards, which are newly minted tokens of a cryptocurrency given to validators who add blocks to a blockchain. The agency currently considers these rewards taxable income at the moment they are received, a policy that Jarrett and Coin Center argue is unjust.
The lawsuit states that the block rewards should be considered new property and should not be taxed as income, and such income should only be taxed when sold or exchanged for cash.
According to Jarrett, the same should apply to other forms of newly created property, for example crops or minerals, which are taxed only when sold. The lawsuit alleges that taxing staking rewards before they are sold leads to overtaxation and places additional and unnecessary regulatory burdens on cryptocurrency node operators.
Previous Attempts to Challenge Policy
This lawsuit is Jarrett’s second shot at trying to sue the IRS for its position on the taxation of staking rewards. He filed another similar case in 2021 when the IRS failed to explain how staking rewards are taxed. The US IRS issued a refund to Jarrett for the previous year’s tax payment but offered no instruction for subsequent tax years.
Instead, in 2023, the agency came out with new guidelines stating that staking rewards would be considered as income when received, in contrast to the refund decision.
Jarrett relies on the Tezos network where validators receive new tokens for the purpose of validating transaction. By the end of the year 2020, he got around 13,000 Tezos tokens through staking. He points out that such tokens must not be considered as income at the moment they are received, as they are new property that cannot be considered as earnings until they are sold.
The current Internal Revenue Service stance on taxing staking rewards affects many bitcoin users and those using other cryptocurrencies that use the proof-of-stake system such as Tezos. The lawsuit points out that the policy is cumbersome to the taxpayers, who are forced to value every reward they acquire for the purpose of the policy regardless of their plans to sell it.
Legislative Efforts and IRS Policy Changes
Concerns have been raised that this treatment is anti-competitive and hinders the deployment of the decentralized networks and innovation. In the networks where a large number of users are engaged in staking, the revenue from staking is split among many stakeholders, thus it is less reasonable to tax the entire value of the newly created tokens as an income.
This move has been made at a time when there is still a debate on the correct legal framework that should govern taxation of digital currencies. In the first half of 2024, a bill that was proposed before the House of Representatives stated that taxes on staking rewards would only be applied when the tokens are sold.
The lawsuit will seek to make the US IRS change its policy before the legislative process to make it more reasonable.
Moreover, from 2025, the Internal Revenue Service will impose new information reporting obligations on crypto brokers, including exchanges, and other providers of wallets to report customer transactions and gains. These rules will encompass high-value non-fungible tokens (NFTs) and specific stablecoins transactions, which will extend the taxation of digital asset transactions.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Regulation
Ripple Files Cross Appeal In SEC Lawsuit
Ripple’s Chief Legal Officer has revealed that his company has filed a cross-appeal in its case against the US Securities and Exchange Commission (SEC). This provides a new twist to the legal battle that has been ongoing since December 2022.
Ripple Files Cross-Appeal Against SEC
Alderoty revealed in an X post that they filed a cross-appeal against the US SEC today. He stated that they took this step to ensure that “nothing’s left on the table,” including the argument that an investment contract cannot exist without essential rights and obligations.
The Ripple CLO noted that the SEC had already said they weren’t appealing the ruling that XRP isn’t a security. Therefore, their cross-appeal won’t border on this issue. He added that this remains the law and that an appeal on other issues doesn’t change it.
Meanwhile, Stuart Alderoty mentioned how the US SEC unsuccessfully tried to take an early appeal of Judge Analisa Torres’ rulings on Ripple’s XRP sales on exchanges and other distributions not being securities. He added that the Commission will likely appeal this ruling again. However, he is confident that they will lose again on both rulings.
Alderoty concluded by saying,
We look forward to the federal court of appeals finally putting a stake in the heart of Gensler’s misguided attack on our industry.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Regulation
Dubai’s VARA Crackdowns On 7 Firms After Tightening Crypto Rules
Dubai’s Virtual Assets Regulatory Authority (VARA) has recently taken decisive enforcement action against seven entities operating within the emirate’s cryptocurrency sector. This move comes as a direct response to breaches of newly established licensing and marketing regulations.
Dubai Enforces Crypto Regulations, Fines 7 Firms
Dubai’s Virtual Assets Regulatory Authority (VARA) has imposed strict penalties on seven crypto entities for operating without the necessary licenses and violating marketing regulations. These enforcement actions come after Dubai’s efforts to tighten its regulatory framework to ensure transparency and compliance in its crypto sector.
The regulator fined the entities 50,000 to 100,000 dirhams (approximately $13,600 to $27,000) and issued immediate cease-and-desist orders.
Additionally, the seven firms, which were not identified by name, are under investigation in collaboration with local authorities. Dubai has made it clear that all activities from these firms must cease immediately. This move highlights Dubai’s determination to enforce its updated crypto regulations, safeguarding the market from unregulated operations.
VARA Strengthens Oversight and Public Awareness
The recent crackdown is part of a broader regulatory push by VARA to ensure that all virtual asset service providers (VASPs) operating in the country comply with the newly implemented crypto regulations. These rules mandate that firms obtain the necessary licensing before providing any services related to virtual assets.
Additionally, VARA has emphasized that all firms must ensure their marketing efforts align with the guidelines. This will prevent misleading or incomplete information from reaching potential investors.
Concurrently, the public has been warned not to engage with unlicensed VASPs as Dubai continues to protect its reputation as a regulated environment for crypto investments. This enforcement action signals Dubai’s commitment to maintaining the integrity of its financial markets.
Despite the enforcement actions, the UAE City continues to project itself as a global leader in the crypto industry. In the first quarter of this year, two major crypto exchanges, Binance and Crypto.com, secured full regulatory approval from VARA, allowing them to expand their services within the emirate. This move reinforces the Emirates City ambition to become a key player in the global crypto market while ensuring compliance with regulations.
Meanwhile, these developments come even as the global crypto regulatory landscape continues to face challenges. For instance, various countries are struggling with implementing comprehensive frameworks that promote innovation while ensuring stability. In the U.S., the lack of clear guidelines from the SEC has been a point of contention for industry leaders. Internationally, regions like Europe and Asia are also refining their approaches to digital assets, highlighting the ongoing need for transparent regulations.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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