Fintech Daily Digest

European Libra users will have to treat their Libra holdings as an asset for capital gains tax purposes - and for the UK, HMRC confirms that, as a basket of currencies, Libra doesn't qualify as a currency itself. "The problem would potentially be even more serious with no annual capital gains exemption in France, Italy or Spain and a much smaller €600 limit in Germany."

Even relatively simple fiat-backed stablecoins could be characterized as swaps or demand notes, both of which would be treated as securities. And the SEC's head of digital assets, Valerie Szczepanik, confirmed at a hearing last week that it does not matter that the stablecoin 'does not have an expectation of profits' (with the usual caveat of "facts and circumstances").

The Token Taxonomy Act of 2019 would require amending US federal securities legislation to exclude crypto assets from the definition of a security, and to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currencies.

A review of their technical documentation describing the Libra protocol and the associated ecosystem, reveals that they left out the foundational components of user security: Protection of the private key, proof of user consent, decentralized compliance and global privacy.

The U.S. Securities and Exchange Commission (SEC) is getting ever more serious about blockchain data, as it seeks more data on public blockchains.

In North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, the U.S. Supreme Court unanimously said that a state could not tax out-of-state residents on trust income without minimum contacts.

CME Group is set to make changes to its reference rate and index tied to ether. Sources say it could mean a future tied to the crypto is coming to its marketplace.

This article seems to sppeculate that the Libra Association will effectively run open market FX operations to maintain the stability of the Libra against the currency basket. Although the article doesn't mention it, I guess it's implicit that the huge cash balances of Facebook ($50B+) and other Association members are in effect FX reserves for these purposes.

The developers at ZenGo, an Israeli startup that recently released a keyless, non-custodial retail wallet, just published open source code for Libra's first non-custodial wallet, just two weeks after Facebook's announcement.

"There is no longer any doubt that high-altitude balloons can be used to provide cellular service to remote locations or places reeling from natural disaster. The question for Loon - an Internet-providing balloon service owned by Alphabet, Google's parent company - is whether that technology is commercially viable."

Our previous post in November last year provided compelling empirical evidence that USDT printing was used by Bitfinex to manipulate the BTC/USD price upwards during the fourth quarter of 2017. And until the current allegations are proved one can only conjecture, but we conclude that the crypto market is now entering its second tether bubble.

"SIX MONTHS OF 2019 are on the books already, and certainly there have been six months' worth of data breaches, supply chain manipulations, state-backed hacking campaigns, and harbingers of cyberwar to show for it. But the hallmark of 2019, perhaps, is feeling like the worst is yet to come. Ransomware is an ever-growing threat, corporate and US government security is still a mess, and geopolitical tensions are rising worldwide."

The US$1 trillion that traditional retail and commercial banks have invested globally over the past three years to transform their IT operations has not yet delivered the anticipated revenue growth, according to a new report from Accenture.

Banco BTG Pactual will with Dubai's Dalma Capital to host a deal pipeline of $1bn for existing and future prospective security token offerings. They plan to utilize the Tezos blockchain, which will include a range of tokenized traditional and alternative investments.

Deputy Governor Amamiya said the BOJ has no plans to issue digital currencies for now, partly due to uncertainties over how it affects conventional commercial banking. He also brushed aside the idea that central banks can boost the effectiveness of negative interest rate policies by issuing digital currencies, as it would require the elimination of cash.

JPM Coin (JP Morgan), USC (UBS and twelve others), J Coin (Mizuho and a consortium of Japanese banks), MUFG Coin (Bank of Tokyo-Mitsubishi UFG), and Signet (NY-based Signature Bank).

Fujitsu is developing a digital identity exchange technology that uses blockchain to prove reputation and improve trust in validating a user. It makes it possible for individual users and service businesses involved in online transactions to confirm the identity of the other parties.

"What the Libra discussion totally misses is how consumers are going to get value into the Libra system in the first place.  If I have cash, how do I put funds on Libra?  I'm going to need to go through a bank or other financial institution, and it's not going to be free.  Same if I want to take money out of Libra."

My best guess is that Libra is meant to be like a mutual funds share, redeemable (by authorized resellers, not by the public directly) at the net asset value of a low-risk mutual fund diversified across several fiat currencies. The public can buy and sell Libra "coins" in exchange for existing fiat money. Also, unlike an ordinary mutual fund, which allows members of the public to buy shares directly and sell them directly back to the fund at their current net asset value, Libra only allows Resellers to interact directly with the Libra Reserve.

Digital ID holds the promise of enabling economic value creation for each of these three groups by fostering increased inclusion, which provides greater access to goods and services; by increasing formalization, which helps reduce fraud, protects rights, and increases transparency; and by promoting digitization, which drives efficiencies and ease of use.