treasury - Pwim.Net

White House Budget Urges Legislation to Return Secret Service to Treasury Due to Crypto Crime Surge

‘A Budget for America’s Future’ has been published by the White House, which indicates the budget of the United States government of the fiscal year 2021. The document also states the information on the President’s priorities.

President Trump’s ‘New Foundation for American Greatness’ aimed to balance the books by 2027, by pushing for an annual economic growth rate of three percent. The new budget proposes $4.829 trillion for the fiscal year of 2021, with annual spending expected to top $6 trillion by 2028.

In the Department of the Treasury section, the document highlights that the department manages the US government finances, and promotes conditions that enable stable economic growth while protecting the integrity of the financial system and combating financial crimes and terrorist financing.

Cryptocurrencies, and other technological advancements, projected as a threat to the international financial marketplace, the department believes has contributed to more groups of criminal organizations and more links between financial and electronic crimes combined.

The budget read, “Technological advancements in the recent decades, such as cryptocurrencies and the increasing inter-connectedness of the international financial marketplace, have resulted in more complex criminal organizations revealed strong links between financial and electronic crimes and the financing of terrorists and rogue state actors.”

The budget concludes that the US Secret Service be returned to Treasury to “create efficiencies in the investigation of these crimes and prepare the Nation to face the threats of tomorrow.” The US Secret Services was established first within the Department of Treasury and was transferred to the Department of Homeland to enable the protection of the nation from terrorism and other threats to US citizens.

Image via Shutterstock

US Treasury Sanctions Two Men Accused of Laundering Crypto for North Korean Cyber Crime Syndicate

The US Treasury’s Office of Foreign Asset Control (OFAC) has sanctioned two men believed to be involved in laundering stolen cryptocurrency from a 2018 cyberattack against a cryptocurrency exchange.

The Chinese nationals, Jiadong Li and Yinyin Tian have been added to the OFAC’s Specially Designated Nationals List according to an update by the US Treasury earlier today. The two men are believed to be a part of the Lazarus group, a cybercrime syndicate alleged to be working in collusion with the North Korean government and OFAC has blacklisted 20 Bitcoin addresses associated with the pair.

Sanctioned Chinese Nationals

According to a press release on March 2, Tian and Li received roughly $91 million that had been stolen in an April 2018 hack of an unnamed cryptocurrency exchange from DPRK-controlled accounts and an additional $9.5 million from a hack of another exchange.

It has been deduced by OFAC that Tian and Li transferred the currency among a series of addresses, siphoning off a small portion to an alternate address with each transfer. This process of laundering the US treasury describes as a “peel chain.”

As a result of today’s action, all property and interests in property of these individuals that are in the United States or in the possession or control of US persons, including the 20 BTC accounts, must be blocked and reported to OFAC.

North Korea’s Ties to Cyber Crime

The Democratic People’s Republic of Korea (DPRK) has reportedly been training cybercriminals to target and launder stolen funds from financial institutions, with a series of attacks leading to a subsequent UN investigation last year.

On Sep. 13, 2019, the US Treasury identified the Lazarus Group, along with Bluenoroff and Andariel, as North Korean hacking entities based on their relationship to the DPRK’s primary intelligence agency, the Reconnaissance General Bureau (RCB).

As reported by Blockchain.News, the Lazarus group also made headlines in December 2019 when security researcher Dinesh Devadoss, encountered a newly designed piece of cryptocurrency-focused macOS malware software on a website called—unioncrypto.vip—that advertised a trading platform for “smart cryptocurrency arbitrage”. All evidence pointed to the work of the North Korean cyber group.

The Treasury strongly believes that North Korea’s malicious cyber activity is a key revenue generator for its totalitarian regime often targeting cryptocurrency exchanges.

The release does not name either of the exchanges hacked, however, last November the South Korean exchange Upbit was the subject of an attack with a total of 342,000 ETH, a value of $50 million at the time, stolen from the Upbit Ethereum Hot Wallet.

Image via Shutterstock

US Court Indicts Alleged Lazarus Group Members in $250 Million Crypto Exchange Theft

While blockchain is promoted as being cryptographically secured as the underlying technology for cryptocurrency, exchanges that hold them are still prone to cyberattacks.

Two Chinese nationals, Tian YinYin and Li Jiadong were sanctioned yesterday by the US Government for their alleged involvement in laundering stolen cryptocurrency from a 2018 cyberattack against a cryptocurrency exchange.

Grand Jury Indictment

Court documents released via Twitter by Seamus Hughes at Program on Extremism reveal that the United States District Court for the District of Columbia issued an indictment against the two individuals in a massive cryptocurrency theft against an unnamed exchange. The grand jury for the case was sworn in on May 7, 2019.

Tian and Li who also go by their GOT inspired online aliases, Snowsjohn and Khaleesi respectively, have been charged with stealing nearly $250 million worth of virtual assets between July 2018 and April 2019.

According to the court documents, Tian and Li both held accounts at two different unnamed cryptocurrency exchanges. The pair violated legal requirements set out by the Financial Crimes Enforcement Network (FinCEN) by converting virtual currency into fiat currency in exchange for fees; the pair effectively operated as an unlicensed money transmitting business.

Tian and Li transferred over $100 million worth of Bitcoin between each other’s US accounts and China accounts engaging in a form of cryptocurrency laundering know as a “peel chain” before the hack occurred. Other forms of laundering mainly consisted of converting Bitcoin to USD, Chinese Yuan, and iTunes gift cards.

Tian and Li Linked to Lazarus Group

As announced by the US Treasury on March 2, Tian and Li have been identified for their connection to the North Korean state-sponsored cyber-crime syndicate known as the Lazarus group.

The court documents do not name either of the exchanges hacked, however, last November the South Korean exchange Upbit was the subject of an attack with a total of 342,000 ETH, a value of $50 million at the time, stolen from the Upbit Ethereum Hot Wallet.

Image via Shutterstock

Hong Kong Fintechs Embrace Blockchain and DLT

Blockchain firms make up nearly 40% of all new Hong Kong financial technology (fintech) companies launched in 2019.

Nearly 40% of new fintech firms to launch in Hong Kong over the past year are operating in the blockchain sector.

According to Hong Kong’s Financial Services and Treasury Bureau (FSTB), 39% of new fintech firms, established in 2019 within the HKSAR, are operating with blockchain or some form of distributed ledger technology (DLT).

Hong Kong’s treasury department reports that the increase of DLT and blockchain in the country’s new fintech firms is up 12% from 2018.

Blockchain Accelerates Within Hong Kong FinTech Space

A report published on June 1 by the FTSB provides an overview of the accelerated growth of blockchain and DLT within Hong Kong.

The report states that out of 57 fintech firms that launched in Hong Kong last year, 22 are operating with DLT, making blockchain the fastest emerging technology being adopted and integrated by fintech’s within the territory.

Source : FTSB – Development of Financial Technologies

According to the FTSB, the number of fintech businesses operating in Hong Kong has exceeded 600 since April 2019, including the issuance of 4 virtual insurance licenses and eight virtual bank licenses.

COVID Accelerates FinTech adoption

The Hong Kong treasury report finds that enterprise DLT solutions comprise 45% of the blockchain industry within the territory.

Hong Kong’s blockchain sector can be further segmented into cryptocurrency exchange platforms at 27%, virtual asset and digital custodians at 14%, and trade finance settlement accounting for a further 9%.

The FTSB asserts that the coronavirus outbreak has accelerated the drive for fintech solutions, as the restrictions on industry and supply chain disruption caused by the pandemic has served to highlight the efficiency and use cases for DLT and blockchain technology.

New South Wales Treasury Proposes Flexible Regulatory Reform For Blockchain

The Australian state of New South Wales is exploring a “flexible” regulatory reform for blockchain and other emerging technologies in the state.

The proposed blockchain regulation reform is being pushed by New South Wales’ Department of Treasury and the proposals were published in a research paper released by the department on Tuesday, July 28.

As described in the research paper, the rising global traction blockchain and digital currencies are gaining has necessitated the need to revise New South Wales regulations in order to be well-positioned to accommodate the growth. Such regulatory models will help provide a “flexibility” that will not hamper the growth potentials of firms with the yearnings to grow.

“The COVID-19 pandemic has demonstrated how rapidly circumstances can change. It has presented significant and unprecedented challenges to people, organizations, and markets globally. Governments had to quickly respond with more flexible regulation to address the health, social and economic impacts of the pandemic. The NSW Government responded with a raft of temporary regulatory changes to protect citizens while allowing businesses to flexibly deliver their products and services and enabling ongoing legal and administrative requirements to be met through digital solutions,” New South Wales Treasury Secretary Michael Pratt AM said in a statement.

Australia is Pushing More Inclusive Regulations

Digital currencies are becoming a commonplace in Australia as the acceptance of cryptocurrencies as a payment means is contributing to the obvious transition to a digital economy. As much as there are positive upticks in the country, so are there cases of fraud as possible in crypto-centric economies. With these developments, Australian blockchain stakeholders are calling for an inclusive blockchain regulatory supervision.

The New South Wales regulatory proposal which will be employing a co-regulation, where the industry develops its own arrangements, which would subsequently be underpinned by government legislation will serve as a viable template for which other Australian states can model.

Microstrategy CEO Reveals BTC Purchase is Corporate Strategy to Adopt Bitcoin Standard

CEO Michael Saylor revealed in a recent interview that MicroStrategy’s $425 million Bitcoin investment was part of its corporate 100-year outlook and the firm’s strategy to adopt the Bitcoin Standard.

Microstrategy CEO Michael Saylor said the company will hold onto its Bitcoin holdings for the next 100 years—with absolutely no plans to sell.

Since its purchase of 21,454 BTC on Aug 11, Microstrategy’s initial Bitcoin investment has gained close to $30 million in just over two months. The firm also made a $175 million second BTC investment in September.

Speaking to Real Vision CEO Raoul Pal on Oct. 21, Saylor confirmed his BTC strategy had been the result of planning and discussion amongst the business intelligence firm’s board of directors, investors, auditor and executives.

Saylor revealed that Microstrategy began to explore assets that could act as a safe haven or long-term store of wealth after a decision had been reached by the firm to restructure its treasury—in response to the uncertainty created by the COVID-19 economy.

According to the Microstrategy CEO, Bitcoin was the only asset that provided a strong 100-year outlook. Saylor argued that other assets they explored were all vulnerable to taxation and fees or too centrally controlled by governments or corporations.

Saylor said during the interview:

“This is not a speculation, nor a hedge. It is a deliberate corporate strategy to adopt the Bitcoin Standard.”

Saylor was also critical of other cryptocurrencies, claiming that Bitcoin was proven while Ethereum is not yet done with its functional architecture. The Microstrategy CEO said that when comparing BTC with other cryptos, the choice is obvious. He said, “the market screaming to you there is a winner.”

It’s not just cryptos that Bitcoin trumps, according to Saylor BTC also easily bests traditional stores of value like cash and gold. He said:

“Bitcoin, if it’s not a hundred times better than gold, it is a million times better than gold, and there is nothing close to it.”

When comparing Bitcoin to gold, Saylor cited the crypto assets history of increasing in value, its scarcity and limited supply and its functionality in terms of storage and transport of wealth as features gold could not match.

Saylor also adamantly expressed to Pal that contrary to speculation in the crypto market that the business intelligence firm is trying to capitalize on a fast pump and dump, Microstrategy is thinking long-term on Bitcoin. He said:

“I’m buying it for the dude that’s going to work for the dude that’s going to get hired by the guy who takes over my job in 100 years.”

Institutional Bitcoin Pays Off

While Microstrategy is no doubt feeling pretty pleased with their decision to invest in Bitcoin as the crypto made its bull run this week, but they aren’t the only company celebration.

Grayscale Investments is also sure to cause Bitcoin FOMO among institutions still afraid to venture into BTC, as CEO Barry Silbert announced a breathtaking increase of $300 million in AUM after a single day this week—as BTC price surged to new highs for the year.

The Bitcoin price is $12,933.05 at the time of writing.

UK Treasury Drafting Private Stablecoin Regulations and Researching CBDC with BoE

The United Kingdom’s Treasury Department has announced it is drafting private stablecoin regulation while it continues central bank digital currency (CBDC) research alongside the Bank of England.

The UK Treasury has announced plans to regulate privately-issued digital currencies as well as continuing research into whether CBDC’s present a viable alternative to cash.

In the announcement on Nov.9, the Treasury’s Chancellor Rishi Sunak highlighted the incoming stablecoin regulatory proposals while discussing the new chapter in the United Kingdom’s financial services industry.

Rishi Sunak, Chancellor of the Exchequer, said:

“We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre […] New technologies such as stablecoins – privately-issued digital currencies – could transform the way people store and exchange their money, making payments cheaper and faster.”

Chancellor Sunak wants the UK’s financial industry to lead the global conversation and believes the Treasury’s “plans will ensure the UK moves forward as an open, attractive and well-regulated market.”

The draft offers little in terms of a concrete regulatory framework but mentions that the incoming draft guidelines will obligate stablecoins issuers to comply with the minimum standards placed open traditional payment entities in the country.

The announcement also reveals that both the Bank of England (BoE) and Her Majesty’s Treasury are currently researching a CBDC. Per the announcement:

“As the UK takes a leading role in the global conversation on Central Bank Digital Currencies, the Chancellor welcomed work by HM Treasury and the Bank of England to consider whether and how central banks can issue their own digital currencies as a complement to cash.”

Central Bank Digital Currency Race

Central banks around the world are competing to be the first to release their central bank digital currencies (CBDC) as the world economy is being reshaped by the challenges of the COVID-19 pandemic.

CBDC’s represent the digital form of a nation’s fiat money (currency backed by trust or faith in the regulating government). As such, it is controlled directly by the country’s central bank and is backed by national credit and government power.

Despite being influenced by decentralized cryptocurrencies like Bitcoin, CBDC is more of a reaction to than an embrace of cryptocurrency, which central banks see more as a threat to be managed.

With the immense popularity of Bitcoin and the announcement of the launch of Facebook’s Libra last year, governments are beginning to realize the importance of protecting against these threats to the existing banking and finance industry.

The European Union and its central bank have made consistent calls for the development of clear regulatory guidelines to foster private stablecoin developments—but concerns around the sovereignty of money still remain as well as protection for consumers.

Treasury Chancellor Rishi Sunak announced in a tweet earlier today:

“We’ll publish a consultation to ensure new privately-issued currencies, stablecoins, meet the high standards we expect of other payment methods […] And the Bank of England & Treasury are considering if central banks can issue their own digital currencies, as a complement to cash.”

US Treasury Official says IRS is Assessing Models for Crypto Tax Reporting Rules

The United States Internal Revenue Service (IRS) is developing domestic reporting rules for cryptocurrency taxation—assessing the pros and cons of different crypto tax models, according to a Treasury Department official on Thursday.

According to Senior Counsel for the Treasury Department’s Office of Tax Policy, Erika Nijenhaus at a blockchain-focused OECD event on Nov.19—the IRS faces a choice between a risk-focused approach to crypto taxation, similar to the international Common Reporting Standard, and another approach focuses on tax liabilities.

As reported by Bloomberg Law, speaking at the OECD’s 2020 Global Blockchain Policy Forum, Nijenhaus said:

“None of those are easy questions […] There are trade-offs among all of them and we are hard at work thinking about all of those issues.”

The Treasury’s Tax Policy Senior Counsel also highlighted that the burden each approach to crypto taxation puts on cryptocurrency parties like exchanges will bring a range of benefits, like enhanced regulatory compliance.

At the event, a major cryptocurrency exchange official, Lawrence Zlatkin, VP for tax at Coinbase rebutted these comments. He argued that the US should not create reporting rules that focus on transactions as large amounts of aggregate data will put an enormous burden on exchanges and may not necessarily be helpful for enforcing tax laws.

“You get tons of information, but more isn’t always better,” said Zlatkin who added that the United States tends to create rely on its own interpretation of global financial reporting rules with little regard to how they are applied elsewhere. The Coinbase VP argued that the lack of symmetry also tends to create pressure for exchanges.

According to Bloomberg Law, the Organization for Economic Cooperation and Development (OECD) plans on releasing its own crypto tax reporting framework by 2021, to ensure an adequate and effective level of reporting and exchange of information.

There have been increasing calls for clarity on crypto tax throughout the year and the IRS has been enhancing its means to investigate and pursue crypto tax issues. The further development of formal domestic reporting rules is the next stage in the Treasury’s formal regulation on the taxation process.

Joe Biden Considers Crypto-Friendly Former CFTC Chair Gary Gensler For Deputy Treasury Secretary

President-elect Joe Biden is considering Gary Gensler, the former Commodity Futures Trading Commission chairman, to become Deputy Treasury Secretary. Gensler has a crypto-friendly history and notably defined Bitcoin as a catalyst for change while his colleagues dismissed the cryptocurrency as a Ponzi Scheme.

Biden’s transition team is fast being filled with alumni from key federal agencies to prepare policies and staff for the new administration. President-elect Joe Biden is currently considering Gary Gensler, former Commodity Futures Trading Commission Chairman (CFTC) under Obama, to be the Deputy Treasury Secretary. Gensler’s selection to rein in Wall Street is set to bear fruits because he understands that world, having spent almost 20 years at Goldman Sachs in the 80s and 90s before he joined the Clinton administration as Assistant Secretary of the Treasury. Biden’s move to add Gensler to his roster indicates that pro-cryptocurrency regulation could be on the cards.

Gensler is currently leading Biden’s transition agency review team that is reviewing the Federal Reserve and securities and banking regulators. Gensler would report to Janet Yellen, the former Federal Reserve Chairperson, who Biden is reportedly set to select as Treasury Secretary. Despite her past warning against Bitcoin, Yellen has shown an interest in blockchain technology. The crypto community has even welcomed Yellen’s selection as Treasury Secretary.

Gensler served under President Obama’s administration as a key financial regulator (CFTC chairman) who assisted in spearheading new rules after the 2008 financial crisis. He also served during the Clinton administration in the Treasury Department.

Gensler was a professor at MIT Sloan School of Management, teaching a course about how blockchain and bitcoin could be used in finance. In 2018, he testified before Congress about blockchain and cryptocurrencies on several occasions, advocating against comparisons between Ponzi schemes and cryptocurrencies and saying that the much-awaited Libra cryptocurrency met the requirements of being security under the U.S law. In December 2019, Gensler called Bitcoin a “catalyst for change,” despite being prone to manipulation and scams. He further said that blockchain and crypto assets have already promoted real change.

Biden Administration Seen as A Good Thing for Cryptocurrencies

As Biden is set to become the U.S president in January next year, the crypto community is optimistic that the new White House would have a friendlier tone toward cryptocurrencies than what Trump’s administration did. Trump previously declared that he’s “not a fan of Bitcoin and other cryptocurrencies” and he even hired other crypto skeptics like Treasury Secretary Steven Mnuchin.

Although Biden’s team has not clarified how its administration would feel about crypto assets, the involvement of crypto-minded advisers like Gary Gensler is a positive indication and hope in the crypto world. Gensler understands blockchain and cryptocurrencies and can put the right team of regulators together that would be willing to work together towards advancing crypto policies.

What Coinbase CEO’s Crypto Regulation Rumors Mean for Bitcoin if Pushed by US Treasury?

Brian Armstrong, the CEO of leading US crypto exchange Coinbase, warned that the Trump Administration may be targeting Bitcoin on its way out of office through crypto wallet regulation. Should the rumors be true, what could the regulation mean for Bitcoin and the BTC price?

Coinbase CEO Brian Armstrong dropped a bombshell on the Bitcoin community yesterday when he shared on Twitter that he had heard rumors of new self-hosted crypto wallet regulations due to be rushed through by the exiting Trump administration and the United States Treasury.

While the exact effect the Coinbase CEO’s announcement had on the crypto market is unclear, Armstrong’s Twitter post coincided with a drastic BTC price plunge from around $18,600 to $16,100 before the price recovered to consolidate around the $17,000 level.

Armstrong alleges that the impending crypto wallet regulation will require all digital asset exchanges to prove users own the address they want to withdraw to which he believes will have an extremely negative effect on the crypto space.

The Coinbase CEO goes on to explain that while the rumored process sounds like a reasonable idea on the surface, “it is a bad idea in practice” because it is often impractical to collect identifying information on a recipient in the crypto-economy.

Armstrong specifically highlighted how the regulation could broaden the growing divide between how Bitcoin is treated in the United States by regulators as opposed to Europe and Asia.

The Coinbase CEO wrote:

“Given these barriers, we’re likely to see fewer transactions from crypto financial institutions to self-hosted wallets. This would effectively create a walled garden for crypto financial services in the U.S., cutting us off from innovation happening in the rest of the world.”

Reportedly, Coinbase and along with several companies and prominent investors in the crypto space sent a joint letter to the US Treasury to share their concerns about this potential regulatory measure and ask for further clarification.

What does it mean for Bitcoin?

As stated above, the Bitcoin price underwent a huge correction which coincided almost immediately with the Coinbase CEO’s warning—the BTC price is $17,285 at the time of writing. But what long term effects could the crypto wallet requirements have on Bitcoin if they come into play?

Should Coinbase CEO Armstrong’s fears be realized, the Trump Administration’s parting crypto wallet regulation many expect it would have widespread impact for any crypto services that use a non-custodial wallet.

However, debate raged on Twitter as to the tangible effects on the crypto market in the long run, with some analysts arguing that further regulation is what macro buyers are asking for as Bitcoin becomes more widely accepted as a safe haven hedge in the mainstream markets.

Managing partner at Multicoin Capital, Kyle Samani says argued:

“For the current BTC bull market (next 12-36 months), it doesn’t matter. Why? Next wave of buyers—macro buyers want regulation. For them, 21M cap is a feature, and censorship resistance is (kind of) a bug They don’t want self custody. Just inflation hedge.”

Samani was joined by others in the space, who re-stated that Bitcoin is regarded as much more of an inflation hedge as opposed to a form of money that can bypass all government barriers.

In the world of crypto and Bitcoin, the investor base is made up of a large libertarian contingent and BTC is seen by many as a rebellion against a monolithic central bank financial system.

Prominent podcaster and Bitcoin Twitter personality Peter McCormack chimed into the arguments stating, “If you don’t need censorship resistance you don’t need decentralization,” he later explained, “If you don’t have censorship resistance then you don’t have seizure resistance, therefore your hedge isn’t guaranteed. You might as well have a promise in a spreadsheet.”