white house press sec

The White House Press Secretary, Sarah H. Sanders, said on Thursday that bitcoin and other cryptocurrencies are “being monitored”, and did not explain further when asked about what specifically is being looked at. This past year, the IRS won a case to get information from Coinbase and the SEC has made its thoughts known on ICOs – the US government is certainly watching. It’s even possible that actions that could be taken include some bans and required registration of accounts – or just more clarifications as have been seen from the SEC and FINCEN.

View the footage here:

Are cryptocurrency bans still a possibility? Would it even matter?

Bitcoin and cryptocurrencies in general could be seen as ‘unregulated’ in the eyes of the White House – especially the Department of Homeland Security – and as such it is still a possibility in the future that they may decide that an outright ban is necessary. Obviously there is the question of whether or not banning a cryptocurrency is possible at all. The short answer is not really, the long answer is that cryptocurrencies are (usually) decentralised; and as such, this means that there is not any one place that could be closed down to stop the trade and use of cryptocurrencies. That being said, the one thing that is somewhat centralised is exchanges, and if the various US based exchanges were banned or otherwise forced to close down (at least towards customers in the US). This would cause both a drop in buying power and create uncertainty in the market about the actions of other nations where exchanges do business, as these nations may feel the same way the US does and as such decide to take the same action. Banning or otherwise closing exchanges with overly burdensome regulations will not remove all transactions using cryptocurrencies in a given nation though, as private transactions would still take place – assuming that the top 25 cryptocurrencies still have worth than the two (or more) parties involved in the transaction will be willing to transact.

 

The Barry Silbert-led investment firm Grayscale has submitted an official filing for the Zcash Investment Trust with the U.S. Securities and Exchange Commission (SEC).

As first uncovered by WhalePool, a prominent cryptocurrency trading group, Grayscale filed a “Notice of Exempt Offering of Securities” with the SEC earlier this week. The filing states the firm’s intent to sponsor a trust that will invest in Zcash, an anonymity-centric cryptocurrency that just celebrated its first birthday and currently holds the 16th spot in the market cap rankings with a total valuation of about $591 million.

The filing indicates that the trust already has nine investors who have contributed a combined total of more than $11.6 million, although the minimum investment threshold is much lower at $10,000. Initially, the trust will only be available to accredited investors.

Grayscale — a subsidiary of the Digital Currency Group — recently surpassed $1 billion in assets under management (AUM). Most of those assets are concentrated in the Bitcoin Investment Trust (OTC: GBTC), a publicly-listed security that is currently traded over-the-counter (OTC) and can be purchased through any brokerage account. Wall Street analyst and bitcoin bull Tom Lee recently called GBTC an “attractive” investment, predicting that it could triple in value over the course of the next five years.

Although many firms have filed to launch exchange-traded funds (ETFs) that either track the price of bitcoin or hold the asset directly, the SEC has yet to approve one. Consequently, GBTC remains the only U.S. exchange-listed vehicle that gives institutional investors exposure to crypto assets.

Grayscale has also sponsored the Ethereum Classic Trust, although, like the Zcash trust, this product is currently only available to accredited investors. Since launching in April of this year, the underlying assets represented by Ethereum Classic Trust shares have risen in value from $4.30 to $10.14 and the trust’s AUM has tripled to about $36 million.

The firm has not yet confirmed the news of the Zcash Investment Trust, but it did hint that it would announce “additional investment products” in a tweet posted two weeks ago.

The State Bank of Vietnam (SBV) has amended its monetary regulations to make Bitcoin and similar virtual currencies illegal. In an announcement revealed today – it is now illegal to issue, supply or otherwise use Bitcoin because it has been designated as an illegal means of payment. The SBV notice clarified that the only officially accepted means of payment in Vietnam are checks, payment orders, payment orders, collection orders, bank cards as well as any other payment instruments approved by the State Bank. The move against cryptocurrencies follows similar bans on centralized virtual currencies, often used for gaming or gambling, as well.

While no other altcoins like ZCash, Ethereum, Litecoin, Ripple, and others are specifically named, it’s pretty clear that Vietnam is also considering these other cryptocurrencies to be illegal means of payment, as well. What’s the penalty for using illegal means of payment? 150 million to 200 million VN – which translates to roughly $9,000 USD.

Editor’s Note: Dominik Weil from the bitcoin.vn has said that the ruling has been misunderstood:

In short: All status quo. You are not supposed to offer goods/services in other means than VND – same rules apply e.g. for USD/Gold etc.  Reason for the announcement now is the the news from the day before, that FPT university planned to start accepting BTC for tution fees.  Since those news got covered in all major VN media – SBV saw themselves forced to react with a clarification on the matter. Offering goods & services in VN needs to be done for VND. Status of Cryptocurrency Regulation in VN remains unchanged.

Vietnam: $9,000 fine for using cryptocurrency

The Vietnamese site that published the news about he update to Article 206 – nld.com.vn – is a state owned and operated media operation. So the rule has already been decreed – there is no comment period here.

“From 1-1-2018, the act of issuing, supplying and using illegal means of payment (including bitcoin and other similar virtual currency) may be subject to prosecution in accordance with the provisions of clause 1 (h) of Article 206 of the Penal Code 2015 (as amended and supplemented in 2017).”

It concluded:

“As such, Bitcoin and other similar virtual currencies are not legal means of payment in Vietnam. The issuance, supply, use of bitcoin and other similar virtual currency as a means of payment is prohibited in Vietnam.”

It isn’t yet clear if the declaration that virtual currencies are illegal means of payment affect the use of Bitcoin and similar currencies as a form of investment. Does the prohibition of issuing and supplying of Bitcoin also mean that mining is illegal in Vietnam? It’s entirely possible. Until the first user, or company, is fined for breaking this new decree, we won’t know exactly. However, don’t be surprised if other countries also decree that Bitcoin isn’t a legal means of payment as the fiat status quo continues to be disrupted. That means that virtual currencies have successfully ruffled some feathers and that they, the governments, have moved on from ignoring us to fighting us – and the next step is simply that we win.

The ZCash Foundation has been granted 501(c)3 status as a public charity by the United States government. The ZCash Foundation went through a long and arduous application process with the IRS to make sure that they received tax exempt status for public infrastructure – not public education (which is much much more common and usually referred to as the easy route). Furthermore – they are the first to do so in the name of privacy. Peter Van Valkenburgh explained the significance of the new tax designation on the ZCash Foundation blog:

You may not be particularly interested in non-profit tax law, but if you are passionate about the Internet, privacy, and the future of public infrastructure, then this is important news. So far as I know, the Zcash Foundation is now the first public charity dedicated to building internet payments and privacy infrastructure for the public good.

ZCash Foundation will still promote cryptocurrency education

Valkenburgh clarified that the ZCash Foundation’s previous work will continue, just be expanded to cover more:

The foundation will—still—engage in public education about cryptocurrencies, online privacy technology, and the computing networks that power these new tools. But the foundation will also support open, peer-reviewed scientific research into zero-knowledge proofs and associated cryptographic technologies, and, perhaps most importantly, it will help to build the Zcash decentralized network as open, public infrastructure.

ZCash was able to successfully justify the importance of privacy in public spaces – including those that are online – to the IRS. This is a big win for cryptocurrencies, privacy, and free and open source software in the United States and abroad.

Today, the LabCFTC, a fintech initiative within the Commodities Futures Trading Commission (CFTC), released a paper titled  “A CFTC Primer on Virtual Currencies.” The doc reveals the CFTC’s current stance on Initial CoinSale (ICO) tokens in relation with other agencies – though there is this disclaimer:

“This primer format is intended to be an educational tool regarding emerging FinTech innovations. It is not intended to describe the official policy orposition of the CFTC, or to limit the CFTC’s current or future positions oractions. The CFTC does not endorse the use or effectiveness of any of the financial products in this presentation.”

The CFTC is essentially saying that it has determined that virtual currencies and tokens are still commodities, but could also be securities – as the Securities Exchange Commission (SEC) has previously said this year. The CFTC’s newest thoughts on virtual currency add this SEC consideration without going back on previous designations. Back in 2015, the agency did declare that it would treat Bitcoin and other cryptographic assets as commodities. The CFTC clarified how their definition of cryptocurrency and tokens is consistent with the SEC’s:

“There is no inconsistency between the SEC’s analysis and the CFTC’s determination that virtual currencies are commodities and that virtual tokens may be commodities or derivatives contracts depending on the particular facts and circumstances.”

ICO tokens, like their underlying cryptocurrencies, are also commodities to the CFTC

Whether or not you agree with the designation of tokens or cryptocurrencies as a security and a commodity (and a property for tax purposes), the additional clarifications do somewhat clear the haze and allow bitcoin and blockchain based companies to charge forward.

Not all ICOs are dandy – and many ICOs are just straight up scams that do deserve multi-agency government crackdown. Take LangPie for example. The decision does give ICOs some additional validation and will undoubtedly be used to guide US-based ICOs, at least.

Full doc here.

What do you think about the CFTC’s suggestion that ICO tokens are both commodities and securities? Let us know in the comments below.