Coinbase Cuts Margin Trading, Binance Sweeps US Clients, OKEx Offers Rebates

The top stories in bitcoin, crypto and more – all in one place, delivered daily

November 25, 2020 The top stories in bitcoin, crypto and more – all in one place, delivered daily By Daniel Kuhn   HOLIDAY NOTICE: Blockchain Bites will publish next on Monday, Nov. 30. Happy Thanksgiving to our U.S. subscribers. If you were forwarded this newsletter and would like to receive it, sign up here.  Top shelf Coinbase cuts margin trading. Binance sweeps out U.S. customers. OKEx offers rebates to clients affected by its five-week pause.   Tax change Coinbase will no longer send customers 1099-Ks, the U.S. tax form that led the Internal Revenue Service (IRS) to mistakenly think traders had underreported their gains. The exchange will instead use the 1099-MISC form, at least for customers who earn interest on lending and similar products. However, the new form may come with its own issues. According to Shehan Chandrasekera, head of tax strategy at CoinTracker, "The threshold for getting a 1099-MISC is very low," only $600 in trades, meaning more customers may receive tax forms than strictly necessary. Customers who don't receive any forms from Coinbase and sold or converted crypto in 2020 are still responsible for reporting to the IRS and should consult a tax professional, Coinbase said. Binance sweeps Binance's flagship exchange will cancel services for all U.S. users in 14 days, according to emails sent to users alerting them to withdraw their funds. "As we constantly perform periodic sweeps of our existing controls, we noted that you are trying to access Binance while having identified yourself as a U.S. person," the notice reads. Binance also suggested current users open an account with the registered exchange Binance US. The Block noted the bans may be based on IP addresses, though that wasn't the case for at least one unverified, U.S.-based user, CoinDesk has learned. Bans, therefore, could be based on KYC data. Chained together IDEX, an Ethereum-based non-custodial cryptocurrency exchange, announced Tuesday it plans to expand to the Binance Smart Chain and Polkadot networks. Every holder of IDEX's Ethereum tokens will get an equivalent number of IDEX tokens for each of the new chains on Dec 7. CEO Alex Wearn said the measure is to "plant our flag early" in case either alternative smart contract platform eventually competes with Ethereum on a meaningful basis. Next up? Expansion to more chains, if and when that makes sense. However, Wearn notes, seamless cross-chain trading is still a ways off. Everything OK? OKEx will offer a mix of compensation and rewards to users who've suffered because of a five-weeks-long suspension in services. Users who have made deposits, held tokens or traded during the withdrawal suspension time period will receive 20% of OKEx's total income from futures and perpetual swap transaction fees over the last seven weeks. The exchange will also provide rebate cards to users with assets worth more than 10,000 tether within a certain window. Expected to come online before Nov. 27, OKEx remains in the top position for bitcoin futures open interest, currently worth $1.27 billion, according to data source Skew. Levy extension South Korea's National Assembly is pushing for a delay to the introduction of specific taxation for digital assets until January 2022. According to a report Wednesday by local news source DongA.com, a proposed legal amendment bringing in the tax regime is planned to come into effect from October 2021. However, the National Assembly said more time is needed to build the relevant tax infrastructure after cryptocurrency exchanges said they couldn't be ready by the deadline. The Ministry of Economy and Finance tabled the proposal in July, seeking to bring in a 20% levy – plus a 2% local income tax – on cryptocurrency trading profits above 2.5 million KRW (around $2,260). Introducing Valid Points, a CoinDesk Newsletter CoinDesk is staking 32 ETH in Ethereum's historic upgrade, and research analyst Christine Kim and tech reporter Will Foxley are breaking down Ethereum 2.0 and its sweeping impacts on crypto markets, weekly. Using data direct from CoinDesk's own Eth 2 validator node, Valid Points features original insights about what the future of Ethereum looks like for industry stakeholders and investors.   The Valid Points newsletter launches with Eth 2.0's launch. Learn why CoinDesk staked 32 ETH in the new blockchain protocol and follow our journey and insights by subscribing to Valid Points here. Quick bites HER WORDS: Here's What Janet Yellen Has Said About Bitcoin (CoinDesk) YEARNING FOR PICKLE? Two DeFi yield farming protocols merge. (CoinDesk) IN INDIA: Digital innovation clashes with internet censorship. (CoinDesk) GAB JIBJAB: "Free speech-focused social media platform Gab earned $100,000 in a month thanks to Bitcoin." (Decrypt) CAPITAL STORAGE: Huobi launches Filecoin incubator backed by $10 million fund. (The Block) Market intel Bulls bet Bitcoin is shy 2.8% from hitting a new record high, and options traders are betting it can get there. The one-month implied volatility in bitcoin markets has risen to 81%, the highest level since May, due to a recent uptick in call buying (a financial contract that gives traders the opportunity to buy at a later date), Alpha5's Vishal Shah said. Further, put-call skews, which measure the spread between the cost of bearish and bullish bets, are hovering near record lows. In other words, call options have been drawing more robust demand than puts, a sign of investor expectations being skewed to the bullish side. "Investors are positioning for a bull market continuation," Shah said. Webinar: How to Value Ethereum Transaction volumes on Ethereum represent the movement of a diverse array of crypto assets. In the fourth and final episode of How to Value Ethereum, CoinDesk Research explores unique insights about decentralized applications and their tokens based on volume data.   Register to join the final episode of How to Value Ethereum on Dec. 1. At stake Actual delivery? Coinbase announced an end to all margin trading as of Nov. 25, 2020, becoming the first high-profile exchange to cut the profitable business line. According to a report from CoinDesk's Nikhilesh De, the San-Francisco based trading platform is following recent Commodity Futures Trading Commission (CFTC) guidance. Margin trading is effectively a line of credit offered by an exchange or brokerage to allow users to place highly leveraged bets. Existing positions will be allowed to close out next month, though Coinbase will cancel any open limit order unfulfilled by 2 p.m. PT today.   In March, CFTC clarified the meaning of "actual delivery" of digital assets. According to the guidance, a customer has legal rights, or actual delivery, of a cryptocurrency if they control it after purchase, including if it was acquired via a margin or leveraged product. This also means that the seller has no control over the cryptocurrency in question.   This is where it gets tricky for Coinbase's margin trading business. Because the exchange uses cold storage and other custody solutions as part of this business line, it complicates the nature of actually delivering an asset in accordance with the updated rule.   At the time the guidance was first proposed, in 2018, then-Chief Legal and Risk Officer Mike Lempres, argued that affiliates and third parties should be able to hold crypto on behalf of Coinbase customers.   "Requiring unfettered ability to transfer digital assets would effectively mean that U.S. entities and regulated entities, or entities using cold storage or other asset protection methods, could not hold digital assets acquired through margined transactions," Lempres said at the time.   "Essentially, Coinbase would have to register with the CFTC as a commodities exchange if it wants to continue offering leveraged products," De writes. Who won #CryptoTwitter? ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. Blockchain Bites   A newsletter from CoinDesk   See Previous Editions Copyright © 2020 CoinDesk, All rights reserved.    250 Park Avenue South New York, NY 10003, USA You can manage your preferences here or unsubscribe from all CoinDesk email.

Madoff-level fraud at Cred / IMF negative, Xi positive on CBDCs / Clayton leaving the SEC

Plaintiffs say Cred's deception reached "Madoff level" fraud, leaving 6,000 customers, some of whom invested their life savings...

Inside.com Part of   Network November 25, 2020

Bitcoin $19,182 7 day: +7.6% Ethereum $594 7 day: +25.2% All crypto $578b 7 day: +17.7% Bitcoin dominance 61.6% 7 day: -4.9% Prices as of 10 a.m. EST

Bernie Madoff Two customers of crypto lending platform Cred Inc. have asked a Delaware judge to turn its Chapter 11 bankruptcy into a liquidation. The plaintiffs accuse Cred of "Madoff levels" of deception and fraud, stranding 6,000 customers, some of whom invested their life savings into what they believed were high-yield savings accounts. Cred operated a $35M cryptocurrency called Libra Credit (LBA), in addition to several hundred million dollars worth of "premium financial services," which are now mostly worthless. Cred's bankruptcy filing estimated assets at $50-$100M and outstanding liabilities at $100-500M. The two customers filed a motion in the United States Bankruptcy Court for the District of Delaware on Nov. 18, 2020. They want a judge to convert the case under Chapter 7 liquidation, dismiss Chapter 11 cases, or appoint a Chapter 11 trustee. We covered Cred's Chapter 11 filing here in a previous edition of Inside Cryptocurrency. Law360

Kristalina Georgieva, Chair and Managing Director of the IMF The International Monetary Fund (IMF) has suggested that CBDCs will not achieve currency status soon. The IMDF has released a new working paper on Nov. 20, focusing on central bank digital currencies (CBDCs) and its legal implications. The document includes arguments from the IMF's legal counsel that existing regulations do not allow for CBDC issuances. The IMF further suggests that most central banks are not authorized to issue CBDCs to the general public. CoinTelegraph

Xi Jinping Xi Jinping spoke during the G20 Leaders' Summit about China's digital yuan. He implored central bankers to approach policymaking with open minds regarding China's central bank digital currency (CBDC). Besides CBDC-friendly regulation, President Xi spoke about three COVID-19 topics: health information-sharing, international responses to emergencies, and promoting treatment protocols worldwide. Regardless of how accomodating G20 members will be to CBDCs internationally, China has already launched substantial pilots of its digital yuan. China's digital yuan is by far the world's most-transacted CBDC. Coindesk

Jay Clayton Securities and Exchange Commission Chairman Jay Clayton is expected to step down this year, several months prior to his normal term expiration in 2021. Here is a look back at his tenure and cryptocurrency policies.  Background: In 2017, President Donald Trump nominated Clayton to improve and promote American businesses without harming the working class. Before joining the SEC, Clayton was a partner at the law firm Sullivan & Cromwell LLP for more than 20 years. He managed private and public companies matters relating to securities offerings, acquisitions, and mergers. Regarding cryptocurrencies: Clayton has expressed concerns about securities regulations regarding cryptocurrencies, especially ICOs. Clayton has clarified that bitcoin is not a security, nor Ethereum (ETH) in its present state. Clayton was skeptical of the idea of raising capital involving cryptocurrencies. His most famous quote was, "Every ICO I've seen is a security," which was spoken amid the ICO mania of Feb. 2018. The SEC followed through with some of those threats, charging dozens of ICO operators with fraud and non-compliance. The Commission also halted many initial exchange offerings (IEOs). Other actions: Under Clayton's leadership, the SEC charged the fewest insider trading actions since the Reagan administration. He bemoaned the declining rate of public companies' initial public offerings (IPO) during his early days as SEC Chairman. In place of IPOs, many companies have opted for reverse takeovers (RTOs), Special Purpose Acquisition Companies (SPACs), and other merger deals to become public without needing to file onerous IPO paperwork. Clayton has allowed companies to submit draft registration statements regarding IPOs with regulators confidentially before going public. During Clayton's tenure, the SEC also expanded benefits provided to small businesses and announced modernized regulations for Exchange-Traded funds (ETFs). In August 2020, the SEC released an amended accredited investor definition to encourage public offerings in private markets. The new definition allows individuals who pass certain academic tests to participate in private company placements, even if their liquid net worth is less than $1M or their annual income is below $200,000. Succession: Clayton tapped William Hinman as his Director of the Division of Corporation Finance. (Hinman also announced his SEC departure this year.) Possible candidates to replace Clayton as SEC Chairman include Manhattan federal prosecutor Preet Bharara, Commissioner Allison Herren Lee, Commissioner Caroline Crenshaw; former Commissioner Kara Stein, or former Commissioner Robert Jackson Jr. Law360

QUICK HITS: An algorithm that analyzes Twitter comments and invests in crypto is beating the S&P. * Olaf Scholz, German Financial Minister, told delegates of the European Banking Congress on Nov. 20 that he does not support private digital currencies, as reported by Reuters. In Scholz's view, private cryptocurrencies are not essential for progressing the European and German banking systems. The Financial and Consumer Affairs Authority (FCAA) of Canada's Saskatchewan province warns of two unregistered cryptocurrency projects: MetroTrade and SunlightCrypto. The two almost-identical websites promise 30% weekly payouts. The Singapore Stock Exchange, London's Aquis Exchange, and Amazon (NASDAQ:AMZN) Web Services are testing a cloud-based asset exchange. [Writer's note: Although the reduction in fees looks promising, multi-billion-dollar High Frequency Trading (HFT) firms have vested interests in physical servers, colocation agreements, custom-built fiber optic networks, and ultra-low latency infrastructure. They will delay any cloud project for many years.] BlackRock's (NYSE:BLK) Managing Director and Chief Investment Officer of Global Fixed Income, Rick Rieder, endorsed bitcoin for its durability and compared it to gold during his appearance on CNBC's Squawk Box on Nov. 20. Reuters also reported on the multi-trillion-dollar asset manager's approach to bitcoin. The U.S. Comptroller of the Currency warns banks that they must provide fair access to financial services. Roger Ver's Bitcoin.com argues that this is favorable to cryptocurrency companies, despite no mention of cryptocurrencies in the cited notice. *This is a sponsored post.

Publishing note: Thursday is a national holiday and long weekend in the U.S. On Monday, Inside will resume normal weekday publications of Inside Cryptocurrency. Aaron

Written and curated by wide-eyed bitcoin watcher since $1, Aaron Wise. Streaming headline junkie, Associated Press fanboy, eye-strained news terminal watcher, 2017 founder of Cryptocurrency Newsfeed. Temporarily based in Florida while awaiting the construction of cryptopia.  Editor Alexander Huls is a Toronto-based journalist. He has contributed articles about true crime and pop culture to The New York Times, Men's Health, Popular Mechanics, and other fine publications. Follow him on Twitter @alxhuls.

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