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Good morning, good reader, and welcome to Tokengraph, where we bring you Web3 news faster than Bitcoin’s 8% price drop yesterday. It has been a crazy 24 hours — let’s get right into the news.
Coming up today…
- Is KuCoin the next Gemini and Kraken?
- Biden’s New Taxes Bad for Crypto
- Starbucks Launches $100 NFT Series
- Cathie Wood Still Buying Coinbase
- CoinTracker + H&R Block Tax Prep
Wild things have happened in crypto over the past 24 hours, one of them being that the New York Attorney General has officially filed a lawsuit against crypto exchange KuCoin for alleged securities and commodities violations.
JUST IN: 🇺🇸 Kucoin #crypto exchange sued by New York's Attorney General.
— Watcher.Guru (@WatcherGuru)
Mar 9, 2023
What’s more, the lawsuit specifically refers to Ethereum as a security, adding fuel to the flame of discussion around financial laws in the crypto industry and whether the SEC has regulatory control over digital assets like ETH or not.
🚨🚨New York Attorney General claims that Ethereum is a security in Kucoin lawsuit🚨🚨
— Dylan LeClair 🟠 (@DylanLeClair_)
Mar 9, 2023
The official announcement of the suit filed by Attorney General Letitia James goes like this: “The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH.”
The Attorney General’s argument is that KuCoin “falsely represented” itself as an exchange, when really it was a “securities and commodities broker-dealer” that wasn’t registered with the SEC.
The announcement of this suit was just one of many potentially (or probably) harmful events for crypto that took place just over the past 24 hours:
In the last 24 hours:
• Stocks + crypto shed $2T in value
• New York Attorney labels $ETH a security
• KuCoin hit with lawsuit
• Silicon Valley bank crash
• Huobi flash crash
• Biden proposes tax on $BTC mining
• Voyager liquidating assets
Just another day in crypto..
— Miles Deutscher (@milesdeutscher)
Mar 10, 2023
The Ethereum Network switched to a Proof-of-Stake consensus mechanism last year, enabling users to gain rewards from staking ETH with validators. This has led regulators to crack down on the digital currency as a security — because users can now earn profit from their holdings.
This lawsuit is much bigger than just KuCoin — it could determine the nature of all Proof-of-Stake currencies (in terms of whether they’re securities or not), and it could also seal the fate of many similar exchanges if KuCoin goes down.
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Adding to the regulatory rain that’s been downpouring on the crypto industry over the past few months, US President Joe Biden has announced that his administration wants to seriously increase the amount of taxes that crypto investors (and all investors) have to pay:
- 2x capital gains taxes for certain investors
- Removing the ability to harvest tax losses through wash sales
- 30% tax on crypto mining electricity
BREAKING: Biden is proposing changing the tax treatment of cryptocurrency transactions, to tax "wash-sale" underwater crypto investments that have taken a tax-deductible loss, per WSJ.
— unusual_whales (@unusual_whales)
Mar 8, 2023
Wash-sales of this nature aren’t allowed in stock trading, but they’ve been permissible in crypto because the assets aren’t legally considered securities — at least yet.
JUST IN: 🇺🇸 Biden admin proposes 30% tax on electricity used for #Bitcoin & crypto mining - NY Times
It’s “hindering the transition to a low-emission energy future,” the White House says. twitter.com/i/web/status/1…
— Bitcoin Magazine (@BitcoinMagazine)
Mar 9, 2023
As for the proposed tax on electricity used for crypto mining, the reasoning that the US Treasury provided was that crypto mining “has negative environmental effects,” and that increasing taxes on it will decrease “uncertainty and risks to local utilities and communities.”
The Biden administration is joining Gensler, the NY Attorney General, and others in their crusade against crypto:
Crypto Twitter is understandably alarmed and upset over these proposed taxes. It seems that the US government wants to make it as difficult as possible for individuals to build wealth with crypto, an asset that has historically been outside of their control.
Make no mistake, the new rules Joe Biden is proposing on crypto and capital gains will only make it even more difficult for low and middle income families to create or pass down any kind of wealth at all, that’s the point.
— Mises Caucus (@LPMisesCaucus)
Mar 9, 2023
How much money was the IRS “missing out on” before crypto gains were not taxable?
A. 5 million/year
B. 5 billion/year
C. 10 billion/year
B. 50 billion/year
Scroll down to the bottom to see if you're right!
Other Top Stories Today 📢
After its very successful free NFT test launch (where some of the digital assets sold for as much as $1000), Starbucks is launching its first official non-free NFT collection: a series of 2,000 mermaid NFTs inspired by the brand’s logo. The collection will be available to mint for users of the coffee giant’s rewards app, which is still in beta.
The bear market isn’t scaring Cathie Wood away — in fact, it seems to be encouraging her and ARK (her investment management firm) to buy more and more crypto-related stock. COIN’s price dropped by about 8% yesterday, and in response, ARK purchased 301,437 shares of the stock, amounting to roughly $17.5M. This is only the most recent instance in a long series of COIN purchases by ARK, who seems to be building a large position in the company with serious conviction on how it will perform in the future.
The crypto tax software CoinTracker is partnering with H&R Block to make tax filing far, far simpler for crypto investors and traders. The collaboration will enable users to fill out Form 8949 automatically. This form is for reporting capital gains and losses from investments for tax filings — and it can involve thousands of individual transactions for some investors, which can be a real pain to file manually. This automation will be a massive quality of life improvement for many users.
❓ Trivia Answer
The IRS announced in 2014 that cryptocurrency would now be considered property for income tax purposes, and it estimated that it was missing as much as $50B per year from taxes that “should have been paid” on crypto.
Web3 Resource of the Day
Cathie Wood on Bitcoin, Tech, Venture Capital, and Innovation | Podcast from Anthony Pompliano
We’ve got a great podcast episode to share with you today — in the wake of Cathie Wood and ARKs’ recent purchase of $17.5M in Coinbase stock, we only thought it would be appropriate to send you this episode of the Pompliano podcast. They cover a massive amount of topics, including “investing in innovative companies & technologies, volatility in the market, dealing with critics, investment horizon in oil & energy, bitcoin & the crypto market,” and more.
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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice to buy or sell any assets or to make any financial decisions. Do your own research.