Crypto Infrastructure Bill Updates: Why the US Must Act Now

The new crypto infrastructure bill created uproar in the crypto community over the last several weeks, as the bill introduced reporting requirements for the vaguely defined crypto “brokers.” The bill’s broad definition of brokers could include not only reporting requirements from websites that enable decentralized finance, or DeFi, but could be interpreted to include those same requirements for cryptocurrency hardware storage providers, such as cold storage wallets. 

DeFi is the fastest growing segment of the crypto industry, as developers are building cutting-edge solutions to decentralizing the financial services industry. Within the DeFi space, users can find decentralized solutions to lending, swaps, insurance, derivatives, synthetic traditional assets, and hopefully much more in the future.

Sarson Funds Chief Marketing Officer Jahon Jamali shared his thoughts on the infrastructure bill on an NTD news segment covering the crypto infrastructure bill, noting, “What we want to have here in the United States is regulation that promotes innovation. The United States is the home of fintech innovation, and that’s where we want to keep it.” In recognition of the pace of global crypto innovation, it is critical that the United States establishes itself as a benchmark for the world to follow, however, if the current proposed bill makes its way through legislation, the US risks surrendering its position as the standard for global finance and economics. With the future of finance leaning toward crypto, the United States must course correct to strengthen its position as the leader of global finance.

Stay tuned for updates as the proposed bill faces the House of Representatives this fall.

Market Update: Crypto Market Cap Breaks Past $1 Trillion

Crypto Market Cap Reaches 1 Trillion

Crypto Market Cap Reaches 1 Trillion

BREAKING: Last night, the entire crypto market cap broke past USD $1 Trillion. This escalation is indicative of the global pace of crypto adoption as Bitcoin, Ethereum, and crypto tokens around the ecosystem break past all time highs as the world is awakened to the true utility of digital assets. Fueled by the economic uncertainty posed by the COVID-19 pandemic and the macroeconomic response of countries worldwide, we expect this momentum to continue as regulation strengthens, Wall Street and global institutions validate the utility of crypto, and the world leans more and more on digital commerce. 

As global sentiment shifts to embrace crypto, we are here to educate the world on the power of the blockchain ecosystem and enable true financial sovereignty. Please reach out to us for educational inquiries and our recommendations on how to get involved in the next great shift in global finance.

By Liam McDonald

A Breakdown of the Crypto-Currency Act of 2020: What Investors Need to Know

Introduced in draft form to the House of Representatives on Friday, December 20, 2019, the much anticipated Crypto-Currency Act of 2020 makes significant progress towards clarifying the regulatory framework surrounding Digital Assets.

You can read the entire bill here and find our analysis below.

Click here to download the Sarson Funds Crypto-Currency Act of 2020 Investor Infographic (above).

Crypto-Currency Act of 2020 Summary:

The legislation does not create any new regulatory agencies.  It separates Digital Assets into three broad categories and assigns an existing regulatory body to each of the below categories:

Crypto-currencies: These tokens are defined as representations of US currency and are “reserve-backed digital assets” such as “stablecoins” that are collateralized by synthetic or physical assets held in a “correspondent banking account.” This category would be the smallest of the three categories.

Regulator: Financial Crimes Enforcement Network (FinCEN)

Coins Included:  TrueUSD (TUSD), USD Tether (USDT), Paxos Standard, (PAX),  USD Coin, (USDC)

Crypto-commodities: These tokens are based on commodities or other “economic goods or services.”  This category encompasses the majority of existing cryptocurrencies and would include smart contract platforms such as Ethereum, EOS, Tron as well as “value transfer” cryptocurrencies like Bitcoin, Ripple’s XRP & Litecoin.

RegulatorCommodity Futures Trading Commission (CFTC)

Coins Included: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash

Crypto-securities: These tokens represent “debt, equity, & derivative instruments that rest on a blockchain,” including those governed by “smart contracts and collateralized by other [digital assets].”  This includes securities, real estate, investment funds or other capital assets with fractioinalized ownership. Projects supporting this protocol include Tezos, tZero, Bancor, and Vertalo.

RegulatorSecurities and Exchange Commission (SEC)

Coins Included: Tezos, tZero, Bancor, and Vertalo

A Rapidly Closing Door for Privacy Coins:  

The Act requires that, “each agency shall issue rules to require each crypto-currency (including synthetic stablecoins) to allow for the tracing of transactions [emphasis added] in the crypto-currency and persons engaging in such transactions in a manner similar to that required of financial institutions with respect to currency transactions.

Regulator:                   Financial Crimes Enforcement Network (FinCEN)

Top Coins Included:      Monero,  Zcash, Dash, Verge, Horizon

The proposed legislation is a welcomed move forward as it provides a protective framework for businesses and institutions seeking to grow their engagement with cryptocurrency technology.  The Act’s final provision regarding “transaction traceability” provides long-awaited  safeguards against money laundering and criminal financial activity – the enabling of which was a criticism that cryptocurrency proponents have heard from the likes of Bill Gates and Donald Trump and have long sought to shed.  This requirement would bring the United States into cohesion with Europe’s FATF’s new“travel rule” which requires reporting on crypto transactions greater than $1000 and would effectively be a death-blow for privacy-centric cryptocurrencies in the United States.

Speaking on behalf of ourselves and other firms building businesses around cryptocurrencies, we applaud Representative Paul Gosar (R-AZ) and his team for the well written legislation.  It is in line with recommendations that we have been offering since 2017 and that we believe are the foundation upon which crypto-businesses in the United States will be built.

You can learn more about how regulation is shaping the adoption of Cryptocurrency by checking us out at www.sarsonfunds.com/education.

Christmas Comes Early to Cryptocurrency Firms: The Crypto-Currency Act of 2020

Cryptocurrency Act of 2020

The much anticipated Crypto-Currency Act of 2020 was introduced in draft form to the House of Representatives on Friday, Dec 20, 2019.

Hardly six pages in length, the proposed Bill makes significant progress towards clarifying the regulatory framework surrounding Digital Assets, though we hope lawmakers remove the atrocious hyphen within “Crypto-Currency” prior to a vote by the full House floor.

Speaking on behalf of ourselves and other firms building businesses around cryptocurrencies, we applaud Representative Paul Gosar (R-AZ) and his team for the well written legislation.

You can read the bill here and find our analysis below.Cryptocurrency Act of 2020

Crypto-Currency Act of 2020 Summary:

The legislation will not create any new agencies, but rather assigns an existing regulatory body for oversight based on a newly proposed federal classification of Digital Assets into three broad categories. Those categories and their corresponding federal regulator are below:

    • Crypto-commodities: These tokens are based on commodities or other “economic goods or services. We believe this would encompass “Utility Token” blockchain projects such as those related to medical records, identity, webservices etc.Regulator: Commodity Futures Trading Commission (CFTC)
    • Crypto-securities: These are tokens that represent “debt, equity, and derivative instruments that rest on a blockchain,” including those governed by “smart contracts and collateralized by other [digital assets].”  We believe that this would include smart contract platforms such as Ethereum, EOS, and others, especially when used to transact value (as opposed to record data). Bitcoin and other “value transfer” cryptocurrencies would fall into this category.Regulator: Securities and Exchange Commission (SEC)
    • Crypto-currencies:  These tokens are defined as representations of US currency and are “reserve-backed digital assets” such as “stablecoins” that are collateralized by synthetic or physical assets held in a “correspondent banking account.” This category would be the smallest of the three unless expanded to include tokenized real assets such as Gold and Real Estate based cryptocurrencies.Regulator: Financial Crimes Enforcement Network (FinCEN)

The Bill continues saying, “each agency shall issue rules to require each crypto-currency (including synthetic stablecoins) to allow for the tracing of transactions in the crypto-currency and persons engaging in such transactions in a manner similar to that required of financial institutions with respect to currency transactions.

The proposed legislation is a welcomed move forward, as it provides a protective framework for institutional allocation as well as safeguards against money-laundering and criminal financial activity – a cloud that cryptocurrency proponents have long sought to shed.

We anticipate this to be the official (and long anticipated) death-blow for privacy-centric cryptocurrencies such as Monero and Zcash that had historically run afoul of regulators with their claims of anonymous financial transactions.

 

China Lands First Blow in Global Blockchain Wars

As lawmakers jockey to chastise technology leaders like Facebook’s Mark Zuckerberg (for the dastardly future crime of earning potential profits by providing a payment service to millions of people), America’s greatest economic foe, China, has quietly built a substantial lead in the race for leadership in technology’s newest battleground: Blockchain Technology.

This was an exciting week for cryptocurrency holders. Bitcoin prices surged as much as 40% Friday after China’s Xi Jinping urged his fellow citizens to “seize the opportunity” afforded by blockchain technology. The Chinese leader’s statements on blockchain are believed to be his first in-depth remarks on the technology. His comments stressed the importance of stepping-up research on the standardization of blockchain to increase China’s influence and rule-making power in the global arena.

2019 has been a busy year for China. While the United States bemused itself with bipartisan bickering, China quietly pursued global leadership in blockchain technology. During the year, China successfully moved nearly their entire population off of paper money and onto digital currency solutions. This change affected Chinese citizens of all economic levels. Even panhandlers on the streets of Beijing no longer solicit coins and bills, they instead display their QR code for donations to their digital bank accounts.

China’s central bank also announced a verification system this week called the Certification of FinTech Products that will certify 11 types of financial technology hardware and software widely used for digital payments and blockchain services. This initiative follows a year-long public education campaign where China’s central bank published and disseminated pamphlets and other educational materials heralding the benefits of digital currencies and explaining the capabilities of blockchain technology to streamline commerce and fight corruption.

China’s intention of dominating this new technology has been made clear – first with covert foundational initiatives and now overtly with President Xi’s announcements and the sponsoring of these programs. This is all advantageous for a command economy like China, which can now recapture lost innovation through streamlined implementation, a phenomenon now materializing. Washington’s struggles with endless equivocation and ineffectiveness reflects the Western world’s general indecisiveness, allowing China to establish itself as the global blockchain technology and cryptocurrency leader.

Blockchain technology stands poised to rebuild the way that data, digital assets and currencies move around the globe. The global financial landscape will be restructured to reflect the immutability and instant transferability of blockchain-based assets and currencies. Gone are the days of waiting for third-party transaction validations. Goldman Sachs, Fidelity, IBM, The Bank of England, The Bank of Japan, the ECB, the Federal Reserve and the IMF have all commented on the inevitability of this changing paradigm, but no operator has gone as far as the Bank of China to position itself as a leader for this coming reality.

The Chinese government has moved forward with formal policy to ready itself and its population for a digital economy, passing a new law (effective January 1st) aimed at “facilitating the development of the cryptography business and ensuring the security of cyberspace and information”. Among other things, this law also makes it illegal to falsely claim that blockchain technology is fraudulent. The new legislation, and indeed President Xi’s comments, were anticipated by many as China readies the country for the launch of its state-backed cryptocurrency – which is expected as soon as December.

When we finally see the inner workings of China’s national cryptocurrency, we can be certain that its blockchain architecture will likely be a long way from the decentralized, trust-less principles upon which Bitcoin, Ethereum and other public blockchains are based.

China’s interest in the space appears to have had a positive impact on already established cryptocurrencies like Bitcoin, by adding global legitimacy to the cryptocurrency industry overall. Only time will tell the true cost of America’s war on its innovators. China has taken the first steps toward dominating the future of the internet and of finance. The first shots in the “Blockchain Wars” have been fired and America barely noticed.

John Sarson

Managing Partner & CIO

Institutional Cryptocurrency Adoption Grows as CME Bitcoin Futures See Record Growth

CME Group Inc, the world’s largest futures exchange, continues to see record growth in Bitcoin Futures.

According to the recently released CME Report, greater Bitcoin market adoption led to robust volume of 5,534 contracts traded per day in Q3, +10% vs. Q3 2018 and higher than all previous quarters except Q2 2019.

Importantly, the report noted, institutional flow remained strong with 454 new accounts added, compared with 231 added in Q3 2018 (+97% growth).

CME noted that this means Bitcoin futures can provide right-sized liquidity when your need it, allowing market participants globally to efficiently hedge bitcoin risk on a trusted platform.

These were some of the notable highlights from CME’s report:

  • Average daily volume (ADV) was 27,670 equivalent bitcoin or ~$289M notional value
  • Record OI of 6,128 contracts (30,640 equivalent bitcoin) achieved on July 1
  • Record number of LOIH, or entities that hold 25+ BTC, hit a record high of 56 on July 9.
  • ~50% of BTC volume was traded outside the U.S., with ~26% coming from APAC and ~21% from EMEA.
  • 3,400+ unique, active accounts have traded since launch

*CME Reports that’s data is accurate as of 09/30/2019.

These New IRS Tax Guidelines Are a Must-Read for Cryptocurrency Investors

The Internal Revenue Service continued its discovery and adoption of cryptocurrencies and digital assets into the United States financial system by issuing long awaited updates on the treatment of “hard forks” and “air drops.”

With the release of IRS Ruling 2019-4, the agency provides guidance on how cryptocurrency holders can account for their digital asset holdings.

Read the full IRS Guidance (Rul. 2019-4) here.

Holochain gets HOT: Blockchain Momentum Update

What Worked

  • Doge (DOGE) has continued it’s run from last week reaching a height of 170% gain over 8 days before a pullback.

  • Holochain (HOT) is up 56% this week as one of the cheapest coins relative to Bitcoin on Binance.

Upcoming Catalysts

  • LTC- Global Litecoin Summit will be taking place in San Francisco on September 14th. Charlie Lee will be in attendance and speaking at the event.

  • ZCL- Anonymous Bitcoin will be forked from Zclassic on September 10th. Holders of Zclassic at the time of the fork will receive a 2:1 ratio of Anonymous Bitcoin.

  • WAVES- Waves decentralized exchange will be the next project to enable smart contracts on their platform September 10th.

  • Goldman Sachs Trading Desk- Goldman Sachs noted that the development of a Cryptocurrency Trading Desk was based on fake news. However, they are focusing on custody solutions for cryptocurrencies.

  • Mt Gox Bitcoin Whale- There has been a Bitcoin wallet with $844 Million in USD moving funds to exchanges. $100 Million worth of Bitcoin was moved to Binance and Bitfinex over a 10-day period before this week’s selloff occurred.

  • Volkswagen Using Iota DAG Technology- Volkswagen will be releasing a digital carpass in Q1 of 2019 to track data for evaluating car performance using Iota’s Tangle technology.

BTC Market Activity

We saw 4 rejections in Bitcoin from the $7400 price level before massive selling pressure on September 5th caused a 15% decline in price. This rapid selling occurred over a 24-hour period with Bitcoin finding support at $6300. The drop came after Bitcoin had been grinding higher over a 2-week period establishing that sellers are still in control almost 9 months into this bear market. Shorts on Bitfinex are back up near all-time highs after an initial jump of 50% last Saturday. The movement of over $100 Million in Bitcoin to exchanges from a Mt Gox wallet holding $844 Million caused concern days before the sell-off occurred. Focus is shifting back to the $5700-$6000 support zone with concerns Bitcoin could move into that range for a 7th retest in the last 8 months.

Technical Indicators

  • DOGE– Doge had a major breakout this week from a long-term down-sloping trendline. This 170% run-up occurred after it was listed on yahoo finance. It is worth noting that Doge has remained strong during the bitcoin sell-off this week.

  • XRP- Ripple has broken down from a symmetrical triangle that was forming on the 4-hr timeframe. Long-term support was tested for a 2nd time and held at 25 cents. 33 cents is the next level of resistance we are watching.

  • ADA- Cardano was rejected from the 10.8 cent price level 4 times before testing support at 8.5 cents for a 3rd time. It is living below this support now and if it fails to break back above this level, we are looking at the final line of support at 7.8 cents. There is the possibility that a double bottom is forming on the 4-hr time frame. A break above 9 cents would confirm this.

    #career #consulting

Boston area Digital Asset Discovery: 12.13.18 4pm-6pm

BOSTON AREA FINANCIAL ADVISORS AND INVESTMENT PROFESSIONALS, JOIN US FOR AN INTERACTIVE DISCUSSION ON CRYPTOCURRENCIES AND DIGITAL ASSETS.

When: Thursday December 13th, 2018 | 4pm-6pm

Where: SarsonFunds’ Office | 132 Chief Justice Cushing Hwy, Cohasset, MA 02025

RSVP Here

Gain insights on navigating client questions and developing adoption strategies for this growing asset class into client portfolios.

This discussion aims to clarify the opportunities in the digital asset market for investment advisors and their clients. Topics will include:

  • Digital asset security

  • Cryptocurrency markets

  • Future of cryptocurrencies

Wall Street is rapidly adopting digital assets into their universe. Goldman Sachs, Morgan Stanley, and the NASDAQ have dedicated resources into building a robust Wall Street-grade infrastructure for the mass adoption of digital asset investing. Don’t delay in planning on how to effectively incorporate cryptocurrencies into your strategy.