The Week: Stablecoin Basis Folds, Revolut Wins Banking License, Swiss Crypto Exchange Launching

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Last week was somewhat of a mixed picture for the crypto industry as the 2018 bear market  claimed some more casualties, but also saw some positive developments for the space.

$133m stablecoin project Basis announced its closure along with a refund to all investors, while mining giant Bitmain said that it is shutting down its Israeli R & D wing. In more positive news, mobile finance app Revolut - which features crypto services - won an EU banking license, while Swiss exchange Stuttgart Börse revealed plans to launch a crypto trading platform.

Digital assets recorded another yearly low when the total crypto market cap fell from $113 billion to a little over $100 billion on Saturday. Overall volume is down by 30%, below the $10 billion mark. Market leader Bitcoin (55% dominance) set a new low for 2018 of $3,150, down by 12.5% from last week’s high of $3,600. Ethereum was down by more than 10% as of last Monday. In a similar fashion, across the general market, Ether has been seen at its lowest levels of 2018, around $83. Ripple, the second largest coin, is holding slightly above its 2018 low from September, and is still down 7% intra-week.

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Regulatory News

CFTC Seeks More Information on Ethereum

The US Commodity and Futures Trading Commission has asked the general public for feedback on different questions on Ethereum in its Request for Input (RFI) published on Friday. “The input from this request will advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets. The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here ether and bitcoin, as well as etherspecific opportunities, challenges, and risks.”

Revolut App Wins EU Banking License

Mobile finance app Revolut, which offers crypto trading services, has been granted a banking license from the European Central Bank. Revolut currently offers trading of 5 cryptocurrencies.

Japanese Lawmaker Proposes Changes to Ease Crypto Taxes

A Japanese lawmaker Takeshi Fujimaki, has proposed 4 changes to the current taxation regime in order to ease the burden for cryptocurrency users and encourage adoption of cryptocurrencies in the country. Fujimaki is proposing to 1) exempt all payments made in crypto from sales-tax, to 2) tax exempt all profits made by trading two digital assets, 3) allow past losses to be deducted from profits in subsequent year, 4) allow a 20% instead of 55% tax rate from crypto gains.

French Government Intends to Spend €500 Million on Blockchain

5 Members of the French Government are pushing for a €500 million injection to develop the country’s blockchain ecosystem over a 3 year period. The investment will come from France’s National Research Agency and French investment bank BPI France

Crypto Market News

Coinbase Adds Cash Withdrawals to PayPal

The largest US-based crypto exchange Coinbase has announced free of charge cash withdrawals to PayPal for Coinbase’s American customers. Other countries will be rolled out over 2019.

Kraken is Gathering Investors for Its Private Offering

American crypto exchange Kraken has spread the word about its upcoming private offering valued at $4 billion. According to the company, “fundraising is not a necessity”, but in the current situation “building a war chest for acquisitions in the bear market presents a win-win opportunity”

Gemini Launches New Mobile App

A big week for US exchanges indeed, as another US-based exchange, Gemini, has launched its crypto app for customers. Founder Tyler Winklevoss writes: “We spent the last three years building the world’s most trusted cryptocurrency platform and today we are excited to extend it into your hands and allow you to engage with cryptocurrency wherever you are and whenever you want,”

Basis Stablecoin Confirms Shutdown $133 million stablecoin startup

Basis is shutting down and will be refunding all of its investors, due to the shaping regulatory landscape in the United States. CEO of Basis, Nader Al-Naji: “As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status for bond and share tokens (though Basis would likely be free of this characterization).” Al-Naji added: “Although this isn’t the outcome any of us wanted, we knew going into this that we were fundamentally making a binary bet on a favorable regulatory landscape”. Basis was backed by Andreessen Horowitz, Google Ventures, Polychain Capital and Metastable Capital.

Gazprom Bank to Launch Crypto Services in 2019 Swiss

Gazprombank ($3.2 billion AUM/owned by Russian Gazprombank) in partnership with fintech company Avaloq and crypto firm Metaco, has announced the launch of an “integrated crypto asset solution” by mid-2019. 6 “The system is meant “for the management of client portfolios across all asset classes, including cryptocurrencies.” Bitmain Closing R&D Department in Israel The largest crypto mining company Bitmain is closing down its Israel-based R&D branch. 23 employees, including the project lead, have been laid off due to general market conditions.

Second Largest Stock Exchange to Launch Crypto Trading Platform

Stuttgart Börse is partnering with German fintech company SolarisBank to create a cryptocurrency trading platform in the first half of 2019. SolarisBank will be responsible for technical infrastructure and will also act as a banking partner for the venture. Last Week in Funding Digital banking platform Good Money raised $30 million in a Series A round led by Galaxy Digital. Crypto loan startup BlockFi has raised $4 million in convertible debt investments, led by Akuna Capital. Orbs raised ~$15 million in crypto, with help from Kakao, and plans to spend the funds on further R&D.

Security Token News

TokenSoft Acquires Stake in Regulated Broker-Dealer

Token launching platform TokenSoft has acquired a 20% stake in registered brokerdealer firm Marpine Securities LLC, as part of a push to offer broader services to its clients.

OpenFinance is Live

OpenFinance has become a fully operational regulated security token trading platform after Thursday’s switch from beta. The OFN platform is available to accredited and nonaccredited investors both in the U.S. and abroad. Its Investor Passport Application serves as a one-time verification process allowing participants to invest, based on their eligibility.

First Security Token Framework in Africa on the Horizon

Bahamian-Kenyan technology startup Raise, has joined forces with Kenyan corporate law firm ALN Kenya-Anjarwalla & Khanna (A&K) to launch Africa’s first security token framework. Tokenizing Debt by Jesus Rodriguez Security token Evangelist Jesus Rodriguez unpacks the benefits of tokenizing debt in his 2-part medium blogs, part 1 / part 2

Israeli Courts: Bitcoin Is a Taxable Financial Asset, Not a Currency

A central district court in Israel has reportedly ruled in favor of the nation’s tax collection department, which has categorized bitcoin (BTC) as a financial asset - but not a medium of exchange (MoE).

According to the court’s ruling, the Israeli tax department may impose and collect taxes on transactions involving bitcoin, the world’s most dominant cryptocurrency. The court’s decision on the matter was announced on Monday (May 20, 2019).

Bitcoin Is a Taxable Financial Asset

As confirmed by Israel’s central district court, bitcoin-related transactions are subject to a capital gains tax as the pseudonymous cryptocurrency is considered a financial asset by the country’s central bank.

Notably, the matter was brought before court Judge Shmuel Bornstein by the founder of a crypto startup that argued bitcoin should be treated as a currency, or medium of exchange. The entrepreneur said that transactions involving the cryptocurrency should not be taxed because it’s a currency, not a financial asset.

Bitcoin's Status Hasn't Yet Been Established

As noted by local news outlet Globes: 

The Central District Court in Lod accepted the tax authority’s interpretation, and held that bitcoin is an asset and not a currency, and that the transaction in question is therefore taxable.

Going on to mention that Israeli financial regulators have not yet established a comprehensive regulatory framework for cryptoassets, Judge Bornstein said that it was “hard to envisage a result whereby Bitcoin would be considered a currency for tax purposes in particular.”

According to Globes, the case involving bitcoin-related transactions could reach Israel’s Supreme Court.

Commenting on the status of Bitcoin, Itay Bracha, Managing Partner at Israel-based law firm Bracha & Co., remarked:

The ruling is a signal to all those who have yet to report cryptocurrency-related [capital gains] or based their actions on differing legal advice.

Building Decentralized Infrastructure for the Transportation Sector

Per the legal specialist, the recent ruling is “unequivocal” and that it is only a “judicial interpretation”, not a “new legalization.” Therefore, the current ruling on the status of bitcoin would only “apply retroactively.”

As noted by local sources, the latest BTC-related case involves Noam Copel, the founder of blockchain startup DAV. As stated on the crypto firm’s official website:

We’re building a decentralized infrastructure to revolutionize the transportation industry on the blockchain.

In 2011, Copel reportedly purchased BTC and sold it in 2013 for a profit of around $2.3 million. Arguing that his profits, or capital gains, were not taxable, the crypto entrepreneur stated (in court):

Bitcoin should be classified as a foreign currency, and that his profits should be seen as exchange rate differences received by an individual not in the course of a business, and therefore should not be taxed.

As explained, the Israeli courts ruled in favor of the nation’s central financial institution by categorizing Bitcoin as a financial asset - which is subject to taxes.