Weekly Blockchain Focus

  • Zelenskyy Signs Virtual Assets Bill Into Law, Legalizing Crypto in Ukraine
  • Japan Sets Penalties on Crypto Exchanges in Case of Violations of Sanctions on Russia
  • SEC Rejects Spot Bitcoin ETF Proposals From NYDIG, Global X
  • Bipartisan Praise for Biden’s Executive Order on Crypto
  • Crypto Apps break 100M Downloads in Fourth Quarter
  • EU Parliament Committee Votes Against Proof-of-Work Ban and Supports Alternative Amendment on Crypto Assets

Further Reading

  • Andreessen Horowitz Hires Michele Korver, Former FinCEN Chief Currency Advisor
  • CNBC: Senate Banking Committee holds hearing on crypto and illicit finance
  • The Block: ConsenSys raises $450 million Series D at $7 billion valuation
  • The Washington Post: Sarah Bloom Raskin withdraws nomination for Fed vice chair for supervision

Continue Reading Blockchain Week in Review: Week of March 28, 2022

Weekly Fintech Focus

  • Treasury Releases National Risk Assessments
  • SEC Probing NFT Market
  • Russia/Ukraine Sanctions Overview
  • Summary of Industry Responses
  • BitConnect Founder Flees India After Being Indicted In $2B Ponzi Scheme
  • UK Government to Crackdown on Illegal Cryptocurrency Activity
  • Swiss City of Lugano to Make Bitcoin and Tether ‘De Facto’ Legal Tender

Continue Reading Blockchain Week in Review: Week of February 28, 2022

Blockchain Week In Review

United States

IRS offers Tennessee couple tax refund over unsold staking rewards

Last week, in a closely watched federal court case in the U.S. District Court for the Middle District of Tennessee, the IRS offered a taxpayer who had paid tax on staking rewards a refund, but the taxpayer has reportedly rejected the offer.

The plaintiff, Joshua Jarrett, obtained certain cryptocurrency tokens by staking in 2019 and paid taxes on 8,876 tokens within the Tezos blockchain. “Staking” is a way of earning rewards for holding certain cryptocurrencies. It is a process of actively participating in transaction validation (similar to mining), and by verifying transactions in a blockchain network, the staker can earn passive income. Jarrett staked the 8,000 tokens and did not sell them through 2020. After paying income taxes on the tokens he staked, he sought a refund from the IRS, but the agency declined his request. Jarrett then decided to pursue his case in federal court, filing a complaint on May 26, 2021. The question before the district court was whether the receipt of staking rewards generates taxable income at the date the rewards are received. Jarrett argued that the government didn’t have the right to tax tokens he staked before the tokens were sold or exchanged. In court filings, Jarrett analogized his position to that of a baker who bakes a cake or an author who writes a novel before the baker or the author actually sells their creations.

On February 3rd, it was reported that the IRS offered to refund Jarrett’s money for the taxes paid on the staking rewards, but Jarrett rejected the offer. Unless a judge finally rules on whether tokens obtained in staking constitute taxable income, the matter may remain unsolved for other stakers in the future. Although a judicial opinion in this case may provide some much-needed clarity for stakers, the case could take years to litigate and is only binding precedent for taxpayers in the Middle District of Tennessee.

A trial is set for March 2023. The case is Jarrett v. United States, Case No. 3:21-cv-00419 (M.D. Tenn.).

Recent letters exchanged between Jarret’s counsel and the IRS can be found here.

The complaint can be read here.

Continue Reading Blockchain Week in Review: Week of February 11, 2022

Perkins Coie LLP is pleased to bring you this updated Digital Asset SEC Timeline.

The Digital Asset SEC Timeline serves as an interactive compilation of select SEC guidance, enforcement actions, and speeches relating to the application of the federal securities laws to digital assets. Beginning with the release of the DAO Investigative Report in July 2017, the Timeline includes relevant information for analyzing the offering, issuance, and trading of certain digital assets in the context of the federal securities laws.

This Timeline is meant to be a resource for those following SEC actions and guidance related to digital assets and to assist experienced securities counsel in assessing the applicability of the federal securities laws. The Timeline is for informational purposes only and does not constitute legal advice. If you are, or are planning to engage in transactions involving digital assets, you may want to contact experienced securities counsel.

Information in the Timeline is provided “as-is,” and may not reflect the latest guidance from the SEC and/or other federal or state regulatory authorities. The Timeline contains links to third-party websites. Such links are only for the convenience of the reader or user. Use of and access to the Timeline, including the links contained within the Timeline, do not create an attorney-client relationship with Perkins Coie LLP.

Weekly Fintech Focus

  • U.S. Congress to Hold Oversight Hearing on the Mining of Cryptocurrency
  • NY DFS to Hire New Deputy Superintendent
  • Recent Federal Regulator Announcements Signal Changes in Senior Leadership at the SEC, CFTC, and FDIC
  • CFTC Fines Crypto Betting Service Polymarket $1.4M for Unregistered Swaps
  • Australian Open Offers NFT Sales Alongside 2022 Tournament
  • ESMA Releases Request for Evidence Regarding Regulation on Distributed Ledger Technology

Continue Reading Virtual Currency Legal Report: Week of January 7, 2022

Weekly Blockchain Focus

  • Senate Holds Hearing on Stablecoins
  • Senate Confirms New Commodities Futures Trading Commission Chair
  • U.S. National Credit Union Administration Clarifies Ability of Federally Insured Credit Unions to Partner With Third-Party Digital Asset Service Providers
  • IRS Revises Language on Form 1040
  • Ninety Percent of Bitcoin’s Total Supply Mined
  • Chinese Court Declares Mining Contract Void

Continue Reading Blockchain Legal Report: Week of December 17, 2021

Weekly Blockchain Focus

  • Securities and Exchange Commission announces judgments entered against BitConnect’s lead national promoter
  • Commissioner Stump calls for clarity before bringing any more enforcement actions
  • Cryptocurrency CEOs speak to the House Committee on Financial Services
  • Gibraltar to use blockchain for digital identification
  • India to ban cryptocurrencies as a form of payment
  • Bank for International Settlements discusses decentralized finance in its quarterly report

  Continue Reading Blockchain Week in Review: Week of December 10, 2021

Perkins Coie LLP, and Flourish, a platform which provides innovative access to financial products that help Registered Investment Advisers (RIAs) secure their clients’ financial futures, announce the release of a white paper that highlights key regulatory and compliance considerations for RIAs looking to engage with cryptocurrencies.

Flourish engaged Perkins Coie to author a white paper entitled Investing Client Assets in Bitcoin and Other Cryptocurrencies: A Regulatory and Compliance Primer for Registered Investment Advisers. The white paper draws from the Investment Advisers Act of 1940 and its related regulations, as well as recent guidance from the staff of the Securities and Exchange Commission on cryptocurrencies, to provide an overview of key regulatory and compliance considerations for RIAs looking to invest their clients’ assets in cryptocurrencies and other digital assets.

The white paper is available through a Flourish download site.

In a clear reference to cryptocurrencies and tokens, U.S. Securities and Exchange Commission Chair Gary Gensler outlined a vigorous enforcement approach in his keynote remarks at the annual Securities Enforcement Forum.

The following update provides analysis of the agency’s new enforcement approach and its implications.

Read the full client article here

The growth and adoption of secure digital identity systems, including digital health status systems containing health records, could provide a uniform and reliable response to calls for health credential verification. In this white paper, Perkins Coie authors examine the three pillars essential to successfully developing and deploying these technologies.

As these systems are forced to evolve to address challenges such as those posed by the COVID-19 pandemic, their success will depend upon the effective implementation of at least three digital identity pillars:

1) trust (i.e., confidence that an individual’s digital identity is what it purports to be and has not been altered);

2) user-centricity (i.e., an individual’s ability to exercise control over their digital identity, including protecting the privacy of their attributes); and

3) data security.

Together, these three pillars will form the foundational framework of a robust digital identity system and contribute to the growth and adoption of digital identity systems, as well as determine the systems’ utility in accurately identifying individuals and their attributes.