Monthly Report: Key US Senators submit new crypto guidelines in a bid to fund infrastructure deal

From crowdfunding to cryptocurrency regulations, here is a recap of the top stories from the last week of July

Tether under investigation for possible fraud

Bloomberg reported on Monday that Tether was under investigation by the Department of Justice (DOJ) over its actions during the company’s early days in crypto. Citing three persons in the know but who preferred to remain anonymous, the media outlet explained that it was thought Tether executives might have misled banks by intentionally failing to disclose that the transacted funds were associated with crypto.

However, Tether has denied any truth to the news, explaining that it remained committed to open dialogue with the relevant authorities. Questions around Tether previously came to light when customers and experts in the crypto space determined that the firm reserved most of its backing under commercial paper, causing uncertainty about whether Tether had enough dollars backing it, as it claimed.

Controversy was rife back in February when New York Attorney General Letitia James disclosed that Tether had lied about having its entire crypto portfolio backed by fiat. Tether was at the time being investigated due to suspicions that it had moved money to cover up millions of dollars in losses. Following the investigation, an $18.5 million settlement agreement against Tether was reached. Tether plays a unique role in the digital assets ecosystem and thus any action by the DOJ would affect the market considering that it is currently the third-largest crypto token by market cap.

Binance to halt margin trading against the euro, pound and Australian dollar

In a cautionary move on Monday, Binance announced it would be halting margin trading for crypto pairs with the Australian dollar, the pound sterling and the euro from 10 August. It will automatically close any open positions, cancel the remaining orders and then delist all the affected pairs two days later.

Earlier in the week, Binance CEO Changpeng Zhao had revealed that since 19 July, the firm had started executing new regulations that reduced margin trading limits from an initial 100x down to 20x. The rules were initially implemented for new users, but Zhao said that the plan was to continually roll them out to include existing users.

Binance is making changes as it attempts to steer away from all the regulatory attention it has been receiving from various countries worldwide. Earlier this month, the firm said that it was ending support for its stock tokens, which had also been brought into question by regulators who felt that the tokens had been offered unlawfully.

Senate bipartisan infrastructure deal seeks to establish crypto tax

A United States Senate bipartisan infrastructure deal plans to net cash from taxing crypto transactions, and as such, would see more demanding regulations placed on digital asset investments. The deal would require a $550 billion package to facilitate development in areas such as the transport industry — and crypto is being mooted as a potential source of the necessary funds.

CoinDesk reported on Wednesday that it had determined from a fact sheet that the new bill proposed increasing the reporting requirements around crypto to help net the $28 billion. However, the report failed to specify the period across which the entire sum would be spread. The fact sheet suggested that the proposed bill would require all businesses to report transactions over $10,000 to the Internal Revenue Service.

It has been known for a while now that creating regulations for the crypto industry is a priority for the Biden administration. President Biden’s 2022 budget proposal, released in May, suggested scaling up crypto reporting requirements and the inclusion of crypto in the planned increase of the top tax rate for long-term capital gains from 23.8% to 43.4%.

Crypto exchange FTX makes progress towards carbon neutrality

Sam Bankman-Fried, the CEO of FTX asserted on Tuesday that the firm was making steps towards its carbon neutrality goal. This happened as a result of a commitment the company made back in May to offset its carbon footprint. Since then, FTX has channelled $1 million into purchasing carbon offsets to neutralise the carbon output stemming from the company’s activities and another $1 million towards permanent carbon capture.

Further, Bankman-Fried said that FTX had also provided funding to research efforts for fighting climate change. The FTX Foundation Group also launched its proprietary climate programme, dubbed FTX Climate, on the same day. The programme will help fund policies and initiatives that would address the climate change problem, and support the establishment of carbon removal solutions.

Speaking during a CNBC Squawk Box interview, Bankman-Fried acknowledged that Bitcoin and Ethereum were the biggest users of energy in crypto. He added that the usage was set to reduce as the major crypto assets were shifting towards less energy-intensive chains.

Crypto could bank the unbanked, according to Senator Warren

Senator Elizabeth Warren has been a crypto critic for a while now, but on Wednesday, she made comments suggesting that she had softened her stance towards digital assets. During a CNBC Squawk Box interview, the Massachusetts lawmaker noted that the current banking system had alienated a section of the population.

She lamented that low-income citizens had been hugely inconvenienced by the system. Warren proposed that digital currencies and a CBDC could well offer a solution to this problem citing their low transaction costs, which would, as a result, integrate more people into the financial system.

She still maintained that adoption of crypto had to take into account the risks that come with such a move and, in particular, the effect that it could have on the financial system. She also argued that establishing crypto regulation was necessary if the exploitative nature of the ‘big guys’ in crypto was to be tamed, adding that crypto, like any other form of wealth, needed to be taxed.

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