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.
Regulation
Ex FTX Exec Ryan Salame Asks For Two Months Sentence Delay
Ryan Salame, the former co-CEO of FTX Digital Markets, has asked for one more extension of time before he has to start serving his jail term stating that he still needs medical attention. Salame’s lawyer filed the most recent motion with the court to delay the surrender date to December 7, 2024, from October 11. The request comes after Salame was attacked by a dog in June and his doctor has recommended further treatment.
Ex FTX Exec Ryan Salame Asks For Another Sentence Delay
Ryan Salame had requested his first continuance in August after he suffered a dog bite on the face in late June. As stated in the court documents, he needed emergency surgery and the court agreed by allowing him to surrender in October 11 instead of the original date in August.
The Ex FTX exec legal representatives said that the extension is necessary for medical rehabilitation and treatment.
The new request submitted this week claims that Salame continues to require further medical attention and is not in a state to begin his imprisonment. Salame’s attorney added,
“Salame’s treating physician has advised that Salame needs to be under further treatment to fully recover.”
Government Opposes the Request
The government has, however, protested the second delay, which means that the government has not supported Salame’s request to extend his time of joining prison. The parties had agreed in August to postpone his surrender until October, and the current motion is to have another two months extension.
The Ex FTX exec latest filing was made only days before Ryan Salame is due to start serving a 7.5-year sentence for embezzlement.
Salame entered a plea agreement in September 2023 when he was convicted of several criminal offenses related to the unlawful provision of political contributions and running an unlicensed money transmitting business. His legal issues are just a part of the consequences of the crypto exchange’s failure, a crypto exchange that was created by Sam Bankman-Fried.
Sentencing and Connection to FTX Scandal
Salame was an important member of the FTX Digital Markets team, which is the core of FTX’s business across the world. He partnered with Bankman-Fried who was given a nearly 25-year jail sentence earlier this year following a fraud conviction. Salame and other executives that including Caroline Ellison and Nishad Singh among others had some legal charges to face as the investigation into the crypto exchange’s collapse unfolded.
While some executives, including Ellison and Singh, await sentencing, Salame’s prison term is set to begin soon unless the court grants his latest request.Concurrently, while Ryan Salame tries to delay the execution of his sentence, the FTX bankruptcy situation remains a topic of discussion.
Subsequently, Salame’s legal battles are part of the larger context of FTX’s collapse, which has left customers and creditors seeking to recover billions in lost funds. However, the US bankruptcy judge John Dorsey has recently sanctioned a bankruptcy plan whereby the crypto exchange’s creditors are set to receive about $6.6 billion. The first payouts are expected to be made in the next couple of weeks.
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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