UK Tax Authority in Search of Blockchain Analytics Tools

The United Kingdom’s Revenue and Customs (HMRC) – the country’s tax authority – has recently revealed to be investing towards the development and implementation of a new blockchain analytics tool that could help identify crypto cybercriminals.

According to HMRC’s request for proposal document, UK’s tax authority seeks to develop a new tool to catch crypto cybercriminals.

The agency is concerned that, due to the anonymous transactions made possible by blockchain technology, cybercriminals are able to use this anonymity for illicit purposes. As such, the institution intends to analyze cryptocurrency transactions that are being used for criminal activities such as tax evasion and money laundering.

“Many of these crypto-asset transactions are recorded publicly in a ledger known as a blockchain. Whilst the transactions are typically public, the participants undertaking them are not,” stated the tax authority in the report.

Currently, the HMRC is looking for the “provision of a tool that will support intelligence-gathering methods to identify and cluster crypto-asset transactions into linked transactions and identify those linked to crypto-asset service providers”.

According to the HMRC, the new tool will be used to help the tax authority trace several types of cryptocurrency transactions, which are stored anonymously on a blockchain. Ideally, the agency is looking for software that can track privacy-oriented coins such as the Monero, Zcash, and Dash.

However for now, the HMRC will focus on finding a tool that would help monitor transactions on the most popular blockchains, which are Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Tether, Ripple, and Litecoin. They also want to be able to maintain that capability following any future forks that ripple out related to those assets.

The governmental institution is currently accepting proposals from potential tech agencies until the end of January, and looking to start the project on February 17th. In addition to that, the report states that HMRC is ready to invest up to £100,000 ($130,000) toward licensing for the blockchain analytics tool.

Potential suppliers for the new tool include blockchain analytics firms Chainalysis, Elliptic and CipherTrace. These tech firms focus on tracking crypto transactions, for instance, the U.K.-based Elliptic has recently found over $400 million worth of XRP transactions associated with illegal activities such as scams and Ponzi schemes.

In the meantime, the tax authority has been relentlessly working to bring more safety and security to the industry. In August of last year, the agency demanded customer and transaction information from the following crypto exchanges: Coinbase, eToro, and CEX.IO. Accordingly, HMRC had sent out letters to these exchanges requesting customers’ names and transaction histories, stating that “these transactions may result in potential tax charges and HMRC has the power to issue notices requiring exchanges to provide this information.”

Although an increasing number of people are using cryptocurrency and digital assets for legal purposes, earning legitimate payments on their digital assets, there is still a looming concern about those who use cryptocurrencies for criminal activities.

Zipmex Receives Digital Asset Exchange License from Thailand’s Authorities

Asia’s popular cryptocurrency exchange Zipmex, which currently operates in Singapore, Indonesia and Australia, is the first exchange in 2020 to receive a coveted digital assets exchange license from Thailand’s regulatory authority.

According to the official press release on January 20, Zipmex became the first exchange of this year to have been granted a license from the nation’s Ministry of Finance and the Securities and Exchange Commission (SEC).

Following the news, Zipmex told the press that the process of securing the license hadn’t been easy as the firm had to comply with numerous rigorous conditions such as proving they had robust finances, with a shareholder equity worth over 50 million baht ($1.6 million) as well as proving to operate at a high standard in their IT and cybersecurity systems.

In addition to that, licensed digital assets operators that are granted a license are – under the current Thai law – classified as financial institutions and must comply with Anti Money Laundering reporting obligations.

Akalarp Yimwilai, co-founder and CEO of Zipmex, remarked excitedly that it took about twelve months to receive the much-awaited approval from the SEC.

“Being licensed and regulated by the SEC was always our main priority as we believe that being a regulated entity will help provide trust to newcomers looking to enter the digital assets market,” Yimwilai said in a statement.

Zipmex is yet to go live with services in Thailand. Yimwilai stated that the exchange is currently awaiting activation, and will launch the platform within the first quarter of 2020.

In the meantime, so far around twenty crypto firms have applied for approval from the SEC, and only four have been granted the license, including Bitkub Online, Bitcoin Exchange, Coins TH Co., and Satang Corporation. The SEC cited insufficient and inconsistent Know-Your-Customer procedures as the reason for rejecting the other firms.

Thailand’s SEC regulates crypto firms under the “Emergency Decree on Digital Asset Businesses B.E. 2561,” which was issued in 2018. Huobi Thailand also recently obtained a license but is yet to start operations.

The license follows Zipmex’s $3 million pre-Series A funding round last September. The round was led by Infinity Blockchain Holdings. Zipmex has raised a total of $5 million to date, and its current valuation stands at $18 million, according to the exchange.

The Singapore-based exchange is one of the most preferred cryptocurrency exchanges of the Asia Pacific region, as the platform managed to handle trades worth 67 billion Indonesian Rupiah within one month of its launch in Indonesia. Since then, it has witnessed an exponential rise in its trade volumes and charted its expansion plan to the tee. As to what lays ahead, Yimwilai revealed that it has its eye on Vietnam for its next expansion.

Crypto Asset Manager Grayscale Reports Increased Institutional Activity in 2019

Crypto asset management giant Grayscale Investment has reported an impressive 2019, with more than $600 million from investors throughout the year.

According to a 2019 digital asset investment report released by Grayscale, the digital giant has managed to raise over $607.7 million in investments throughout 2019, with most of the record-breaking figures coming from institutional investors. As stated in the report, the 2019 numbers have exceeded cumulative amount from 2013 to 2018, and bringing the total amount to $1.17 billion.

The New York-based digital asset giant specializes in providing their customers with up-to-date market information, investment exposure, and diversification, as well as a range of investment products that meet the needs of today’s ever-expanding class of digital assets.

In a comprehensive document, the company has reported a record breaking amount in Q4 of 2019, raising $225.5 million into its investment products.

The company’s leading investment products – Bitcoin Trust – has managed to garner more than $470 million in 2019, with $193 million of which was accumulated in the Q4 alone – the largest quarterly raise since its establishment. In addition to that, the product earns a weekly investment average of over $9 million.

Moreover, Grayscale’s total weekly investments for Q4 averaged $17.3 million – a stark comparison to the weekly $11.7 million throughout 2019.

In the meantime, Grayscale has managed to expand its investment base by 24% in 2019, which brought in a total of $146.9 million in investment funding. The remaining $460.8 million came from their existing investors, of which 36% have now diversified their holdings across multiple investment product issued by the company.

The report further revealed that a total of 71% of Grayscale’s total investment numbers came from institutional investors, primarily hedge funds, and thus marking a steady increase from 66% in 2018.

Following the news, managing director Michael Sonnenshein has stated:

“We saw record-breaking investment into Grayscale’s family of products, illustrating continued demand from investors for digital currency access products and with a majority of investment coming from institutions, it’s clear that we’re experiencing institutional adoption.” 

On the other hand, communications director Marissa Arnold has pointed out the shift from traditional investors towards the digital industry, stating:

 “As the largest digital currency asset manager, we feel that our numbers are indicative of broader market sentiment and institutional flows into digital currency.” 

In addition to that, she believes that Q4 is proof that showcased what carried on the investor demand.

Whilst 2019 may not have been the best year for digital assets, Grayscale has managed to raise an impressive amount of capital through investment, thus proving that there is a bright future for digital investments.

Although it’s still too early to say how well the company will fare in Q1 of 2020, if the company keeps this pace up, then more significant numbers are expected from Grayscale in the coming months.

Cryptocurrency Exchange Bithumb Files to Have Their Tax Bill Annulled

South Korea’s leading cryptocurrency exchange Bithumb has just filed a complaint against the National Tax Service (NTS) regarding the recent groundless tax fee of around $69 million the agency imposed last November.

According to local news, the exchange has filed a complaint with the Tax Tribunal, claiming the tax fee, imposed in November 2019, to be groundless as digital currencies are not legally recognized as currencies and therefore the agency lacks the authority to impose a tax on any kind on their assets.

The article quoted an anonymous Bithumb official, who commented on the issue:

“We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court.”

Concurrently, the agency stated it had imposed a withholding tax of over $69 million on Bithumb’s foreign customers’ income last November. Mostly applied to employment income, a withholding tax – also known as a retention tax – is an income tax paid to the government by the payer of the income rather than by its recipient.

The agency then claimed that gains withdrawn in Korean won from accounts held by foreigners are taxable income. In other words, the NTS classified the exchange’s cryptocurrency trading of foreigners as miscellaneous income, recognizing capital gains as assets.

Choi Hwoa-in, an adviser to Korea’s financial regulator, the Financial Supervisory Service, refuted this by arguing that cryptocurrencies are not considered an asset under the current law of the country, and therefore, it is not taxable.

“The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless, especially since it is still awaiting the ministry opinion on the same matter it sought again.”

Furthermore, Choi noted that the exchange „filing a suit after paying the full amount in that sense is a calculated move expecting partial to full return of the amount paid.“

The Tax Tribunal will have 90 days to determine whether to grant or dismiss Bithumb’s motion seeking to nullify the 80.3 billion won ($69.1 million) in withholding tax the NTS imposed last November.

An anonymous NTS official told The Korea Times that as the matter is ongoing, they cannot comment.

Meanwhile, the dispute coincides with ongoing efforts to impose tax on the new form of digital currency, which has long been criticized for its use as a means of speculation among seekers of short-term windfall gains. It also follows the growing public protests that demand fair taxation based on the principle that “where there is an income there should be a tax.”

Bitstamp and Silvergate Partner Up to Offer Leveraged Trading Options

California state-chartered Silvergate Bank has announced today the launch of a new product in collaboration with Luxembourg-based crypto exchange Bitstamp.

The new product, called the SEN Leverage, was created by Silvergate in order to provide its customers with the opportunity to obtain U.S. dollar loans collateralized by Bitcoin (BTC) with leverage provided by the Silvergate Exchange Network (SEN) platform.

According to a press release, the product will use the platform to fund loans and process repayments in real-time, with deposits and withdrawal of U.S. dollars available around the clock. Notably, the bank will first roll out a pilot version of the product which will be offered only to some selected institutional clients.

First established in 2017, the Bank’s API-based SEN has seen rapid adoption with over $10 billion in USD transactions taking place during just the third quarter of 2019 alone. In addition to that, the network has also attracted a series of big-name exchanges, including Kraken in November and Gemini in August.

On the other side of this launch partnership is Bitstamp Ltd., a major digital currency exchange founded in 2011.  As stated in the announcement, Bitstamp’s role as Silvergate’s first partner will be to provide custody services and manage the Bitcoins used as collateral. The exchanhe has previously worked with the bank during SEN Leverage’s development phase.

Currently, Bitstamp actively supports five cryptocurrencies for trading (BTC, ETH, LTC, XRP, BCH) and saw an average daily trading volume of around $113 million in 2019.

Upon the announcement, Miha Grcar, Head of Business Development at Bitstamp stated:

 “We see growing demand from our institutional customers to access greater trading capital. […] We already use SEN to enable withdrawals and deposits to Bitstamp accounts within minutes at any time and look forward to offering our clients additional flexibility to manage their bitcoin positions through SEN Leverage.”

On the other hand, Alan Lane, Chief Executive Officer of Silvergate explained in his statement that this new product came to be as their digital currency customers have asked the institution to help them create greater capital efficiency.

He further said that “we are excited to be working closely with Bitstamp to solve this problem for them. The integration and work that our collective teams have put into this over the past six months is a testament to the conviction we have to serve our customers.”

Silvergate’s existing presence in the crypto space is significant, based on the number of industry clients it maintains. Founded in 1988, Silvergate has changed its business models over the years in order to accommodate the ever changing industry.

Most recently, it has switched its focus towards crypto businesses by providing banking services to the crypto firms, and therefore filling the gap between the hostile banking sector and the digital asset industry.

Silvergate revealed that it is providing banking services to 756 crypto clients till last September, according to a filing with the U.S. Securities and Exchange Commission (SEC) last year. Furthermore, it also tapped major clients including Coinbase, Bitstamp, Genesis Trading, Blocktower Capital, Polychain Capital, and Xapo.