Bitcoin mining difficulty decreases; Crypto Addressed By CFTC Chairman; Congress addresses crypto tax, accounting; Crypto Enforcement and Crime Continue – JD Supra | Omd Cialis

Bitcoin network mining difficulty continues downtrend amid heatwave

Through Jordan R. Silversmith

A recent analysis of bitcoin mining activity showed that the mining difficulty of the bitcoin network recently dropped 5 percent, continuing a three-month downtrend since hitting its all-time high in May 2022. This is the third consecutive downward adjustment in mining difficulty and the first since last July when China banned bitcoin mining. The drop in difficulties this time around is reportedly due to US miners shutting down their machines over the past two weeks due to rising electricity prices as record-breaking heatwaves continue. The rising cost of mining has reportedly had a significant impact on miners in Texas, where temperatures are hotter than usual, causing some miners to shut down operations to handle the state’s power grid load. Although exceptional electricity costs have prompted some industrial miners in Texas and beyond to scale back their mining operations, some miners could benefit. Analysts believe that the lower difficulty is good news for small bitcoin miners, as the lower difficulty allows miners to confirm transactions with fewer resources, allowing small miners to compete with larger miners for mining rewards.

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CFTC Chairman Talks Crypto; Proposed bill would simplify crypto tax rules

Through Keith R Murphy

The US Commodity Futures Trading Commission (CFTC) recently released a keynote address by Chairman Rostin Behnam discussing the future of cryptocurrency regulation. Among other things, Chairman Behnam noted that despite information suggesting that one in five American adults has invested or otherwise used cryptocurrency, the market has evolved without clearly defined regulatory boundaries, adding that the recent “crypto winter” revived the demand for a cryptocurrency regulatory approach. Explaining that the US digital asset industry does not fall under a single comprehensive regulatory regime, Behnam later suggested that “like any commercial market, the digital asset market would benefit from a consistent imposition of requirements relating to assurance.” certain core principles, including market integrity, customer protection, and market stability.” Among other statistics, he shared that since 2014, the CFTC has prosecuted more than 50 enforcement actions, including for digital asset-related misconduct, digital asset retail fraud, the illegal offering over-the-counter trading of digital assets and untruthfulness or misleading statements and omissions. According to Federal Trade Commission information shared by Behnam, more than 46,000 people have reportedly lost more than $1 billion in cryptocurrency to fraud since 2021, and the top cryptocurrencies used to pay scammers are bitcoin, tether, and ether . Behnam vowed that the CFTC will continue to use its enforcement powers to protect consumers from fraud and tampering in the digital asset space.

In another recent development, two senators this week proposed a bipartisan bill that would simplify the application of tax rules to digital currency transactions. According to a press release, under the proposed Virtual Currency Tax Fairness Act, small personal cryptocurrency transactions under $50 would be exempt from capital gains tax. Under current law, a taxable event occurs with every use of a digital asset. The bill, which has been well received by the cryptocurrency industry, reportedly includes an aggregation rule that identifies related sales and exchanges as a single transaction to prevent potential tax evasion.

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Congress Members Criticize SEC Bulletin Dealing With Crypto Accounting

Through Christina O Gotsis

In late July, four members of Congress sent a letter to the Securities and Exchange Commission, urging it to withdraw a bulletin advising on accounting for crypto assets. The SEC bulletin notes that publicly traded companies, as well as private companies that combine with special purpose entities, report crypto assets as liabilities and provide additional disclosures about the value of those assets. This represents a departure from the practice of holding custodial assets in segregated accounts off the balance sheet. Congressmen warned that the change would make banks’ custody of such assets “commercially unfeasible,” and claimed that the SEC failed to follow “reasonable procedures,” such as providing a deadline for public comment.

While SEC Commissioner Hester Peirce called the bulletin a “shot and inefficient” attempt to regulate crypto, SEC Chairman Gary Gensler argued that the measure will help protect investors amid a downturn in digital asset markets. Gensler defended the bulletin, SEC Staff Accounting Bulletin #121, noting that the bulletin follows the same process as the 120 bulletins before it in its mission to protect investors. Gensler reportedly referred to the bulletin as “advice” for companies seeking accounting guidance for crypto assets. The bulletin itself also notes that it is “interpretative guidance for companies” and does not carry the agency’s “official approval”. Gensler reportedly found that a bank’s insolvency puts customers’ digital assets at risk, and that those assets are “underdeveloped enough” and “sufficiently different” from traditional assets like stocks or bonds.

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DOJ, SEC, and OFAC continue cryptocurrency enforcement efforts

Through Robert A. Musiala Jr.

This week, the US Department of Justice (DOJ) issued a press release announcing that Michael Stollery “[t]he CEO of Titanium Blockchain Infrastructure Services Inc. (TBIS)[,] pleaded guilty … to his role in a cryptocurrency fraud scheme involving TBIS’ initial coin offering (ICO), which raised approximately $21 million from investors in the United States and overseas.” According to the press release, Stollery admitted admits that he made a number of false and misleading statements to the buyers of tokens in the TBIS ICO and that he mixed the funds of the ICO investors with his personal funds, using part of the proceeds for personal expenses. Stollery pleaded guilty to one count of securities fraud and faces up to 20 years in prison.

According to reports this week, two major US cryptocurrency exchanges could be under investigation by government agencies. A report noted that sources say a major U.S. exchange is under investigation by the U.S. Securities and Exchange Commission (SEC) in relation to certain exchange-listed cryptocurrency tokens. Another report details a reported investigation by the US Treasury Department’s Office of Foreign Assets Control (OFAC) into another major US cryptocurrency exchange. The OFAC investigation reportedly relates to alleged sanctions violations involving exchange clients in Iran, Syria and Cuba.

In a recent development, blockchain analytics firm has released Chainalysis The Chainalysis 2022 State of Cryptocurrency Investigations Survey. The survey polled a population of public sector workers on topics related to cryptocurrency successes and challenges. Opinions expressed by survey participants included the following: (1) cryptocurrency will positively advance the financial system; (2) cryptocurrency is prevalent in a variety of types of crime, including drugs, fraud, theft, and cybercrime; (3) accurate data, transaction visualization, and training are critical to using blockchain analytics tools effectively; and (4) 74 percent said their government agency is not currently well equipped to investigate cryptocurrency-related crimes.

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Reports show hackers are turning to cryptojacking and DeFi to siphon off crypto

Through Lauren Bass

Global cryptojacking incidents hit record highs earlier this year, according to a recent report released by cybersecurity firm SonicWall. Cryptojacking refers to a cyber attack in which hackers inject malware into a computer system and then secretly command that system to mine cryptocurrency for the hackers’ benefit. Overall, incidents rose 30 percent, with retail posting a 63 percent increase and the financial sector posting a 269 percent year-to-date increase. The report suggests that (1) the decline in ransomware attacks, (2) the system vulnerabilities introduced by Log4j, and (3) the ability of cryptojackers to operate under the radar have all contributed to the cybercrime’s rising popularity.

In related news, risk management firm Crystal Blockchain recently released a report detailing the top cryptocurrency security breaches and fraudulent activities over the past decade. According to the report, Decentralized Finance (DeFi) exchanges have become an increasingly popular target for malicious actors, with over $2.5 billion lost to DeFi-related breaches, scams, and hacks in 2022 alone.

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