The cryptocurrency business is thriving, but a lot of things are happening, including Goldman Sachs spending ‘Tens of Millions’ on discounted Crypto investments, the EU making Crypto companies report tax details to authorities, the SEC requiring listed companies to disclose cryptocurrency information, and much more!
In this issue:
- Goldman Sachs to spend ‘Tens of Millions’ on discounted Crypto investments after FTX implosion.
- EU to make Crypto companies report tax details to authorities.
- SEC requires listed companies to disclose cryptocurrency information.
- Bank of America says regulation is key for mainstream adoption of Crypto.
- NFT sales plummet to a 16-month low after the FTX blowup.
- Kazakhstan adopts regulation of Crypto and mining bill.
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Goldman Sachs to spend ‘Tens of Millions’ on discounted Crypto investments after FTX implosion
Goldman Sachs hasn’t pulled back on its digital asset plans despite the catastrophic downfall of one of crypto’s biggest players. The Wall Street giant plans to spend “tens of millions” on investments in crypto companies even after FTX’s implosion, Reuters reported on Tuesday, Dec 6.
FTX, the once $32 billion crypto empire that imploded after a “run on the bank”, leaving the exchange bankrupt and thousands of customers with lost deposits, left a huge dent in the industry. Crypto’s market cap has plunged more than two-thirds since its all-time high in November of 2021, according to Messari.
The firm’s downfall not only took a toll on token prices but pulled down company valuations. Goldman Sach’s head of digital assets, Mathew McDermott, says this could be the right time to snatch up or invest in crypto companies at a discount.
“We do see some really interesting opportunities, priced much more sensibly,” he told the outlet, adding that Goldman’s doing its due diligence on several firms. McDermott says client interest is still very high.
The FTX fiasco has boosted Goldman’s trading volumes and left investors wanting to trade with more regulated and trustworthy counterparties. “What’s increased is the number of financial institutions wanting to trade with us,” the exec added. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.” Goldman has invested in 11 crypto companies and is developing its own distributed ledger.
EU to make Crypto companies report tax details to authorities
The European Union proposed new rules on Thursday, Dec 8 to combat tax fraud and evasion in the crypto sector by requiring all digital asset service providers to report transactions involving customers in the bloc.
The initiative by the EU’s executive arm, part of a package to increase the transparency in the tax system, aims to ensure that the bloc’s residents pay taxes on gains from trading or investing in crypto assets. It would establish a standard minimum level of penalties for serious non-compliance, including the absence of reporting despite reminders.
In a statement, the EU Commissioner for tax, Paolo Gentiloni said, “Anonymity means that many crypto-asset users making significant profits fall under the radar of national tax authorities. This is not acceptable.”
The enforcement of the measures was not made entirely clear, as the cryptocurrency industry has various entities and actors residing in various jurisdictions, including some who claim no base of operations.
There have been various cases of documented data leaks in and outside of the crypto industry: and these are simply the ones that surface. Forcing companies to provide European tax authorities including companies based outside of the EU once again forces firms to collect copious amounts of data exposing user holdings, and then transmit them to tax authorities in Europe whom they must trust to keep them safe.
SEC requires listed companies to disclose cryptocurrency information
The Securities and Exchange Commission released new guidance Thursday, requiring companies that issue securities to disclose to investors their exposure and risk to the cryptocurrency market.
The guidance comes about a month after FTX, one of the world’s largest cryptocurrency exchanges, filed for bankruptcy after loan customer funds to a risky trading company that was founded by FTX’s former CEO Sam Bankman-Fried. Over 100,000 customers were affected by the exchange’s failure.
On Wednesday, SEC Chair Gary Gensler fended off accusations that the agency has failed to prevent crypto firms from misusing customer funds. Gensler also said the SEC would take more enforcement actions if the firms fail to comply with existing rules.
Under the new guidance, companies will have to include crypto asset holdings as well as their risk exposure to the FTX bankruptcy and other market developments in their public filings. The company’s bankruptcy filings indicate the company has over 1 million creditors.
The SEC’s Division of Corporation Finance developed a sample letter after a selective review of findings made under the Securities Act of 1933 and the Securities Exchange Act of 1934, which directs companies to disclose “such further material information if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading,” according to the guidance.
Bank of America says regulation is key for mainstream adoption of Crypto
The bankruptcies of crypto exchange FTX and its affiliated trading firm, Alameda Research, are major blows to the cryptocurrency industry’s credibility, but there are silver linings, Bank of America (BAC) said in a research report Friday.
“An increased urgency for regulation may enable greater institutional engagement, and a shift in focus (and capital) from speculative trading to projects with real-world functionality and companies with road maps to profitability may accelerate industry maturity,” analysts Alkesh Shah and Andrew Moss wrote.
Regulatory frameworks for the crypto industry are critical for mainstream adoption, the report said, and a coordinated global effort is required to discourage regulatory arbitrage and safeguard consumers and investors.
FTX’s collapse has refocused attention on the need for regulation that “creates a transparent legal framework for digital assets; fosters technological innovation; provides consumer and investor protections and mitigates financial stability risks,” the note said.
The bank noted that the top 100 crypto tokens have fallen 64% year to date, but pointed out they are still up 2,175% since the end of 2016. The cost of ignoring digital assets is high, it said.
The development of blockchains that are smart contract-enabled and applications with real-world use has accelerated this year, the report said. Speculative trading may be widespread, but it’s the “underlying blockchain technology driving this speculation that could be revolutionary.”
NFT sales plummet to a 16-month low after the FTX blowup
Nonfungible Token (NFT) sales are still in the gutter since their boom in popularity last year – and FTX’s bankruptcy has done nothing to help their prospects.
Weeks after the exchange’s collapse, NFT volumes have plummeted to a 16-month low. According to data provided by Dappradar, NFT trading activity hasn’t seen such lows since July 2021, when OpenSea – the world’s largest NFT marketplace – was the only major trading venue in town. Volumes soared close to $4 billion in the following month, with most volume still driven by OpenSea.
While LooksRare began gaining traction in early 2022, it quickly fell out of favor as it competed for market share with multiple rivals in a rapidly shrinking market. In November, Magic Eden was the only NFT marketplace tracked by Dappradar to see increased sales, netting $94 million in volumes in November compared to $58 million in October.
Meanwhile, OpenSea volumes declined from $226 million to $174 million, and X2Y2 fell from $145 million to just $69 million. OpenSea was forced to lay off 20% of its workforce in July due to a combination of macroeconomic pressures and crypto’s cyclical bear market. Its monopoly in the NFT market has largely diminished since that time.
Kazakhstan adopts regulation of Crypto and mining bill
Kazakhstan lawmakers have passed the “On Digital Assets of the Republic of Kazakhstan” crypto assets bill and other bills regulating crypto mining in Kazakhstan. The changes include regulations requiring miners to purchase only surplus electricity from the public grid, new tax rules governing crypto, and plans to ban cryptocurrency transactions advertising.
The Mäjilis, the lower house of Parliament of Kazakhstan, has approved several cryptocurrency-related bills including the “On Digital Assets of the Republic of Kazakhstan” and four bills to regulate crypto mining in Kazakhstan.
Miners can purchase electricity from the common power grid only in case of availability of surplus. Moreover, miners can exclusively buy through the Kazakhstan Electricity and Power Market Operator (KOREM) exchange in an auction for electricity in which a higher bidder wins.
Furthermore, mining licensing is proposed to be divided into two categories. Digital miners who own the infrastructure such as data processing centers with appropriate requirements for equipment, location, and security comes under the first category. The second category is digital miners who rent cells in data processing centers and do not claim an energy quota.
Moreover, new crypto taxes have been introduced including miners’ tax, mining pool commission, value-added tax, and tax on crypto exchanges as business entities.
Closing
That’s it for now! Thanks for reading today’s newsletter! Be sure to have a look at the Blog section to read our previous editions as well! Have a look at our Guides section if you’re interested in learning more about crypto! And finally, don’t forget to follow us on Twitter!
