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IRS secures court approval to probe records of M.Y. Safra Bank, SFOX users over failure to report taxes

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IRS secures court approval to probe records of M.Y. Safra Bank, SFOX users over failure to report taxes

IRS secures court approval to probe records of M.Y. Safra Bank, SFOX users over failure to report taxes Monika Ghosh · 3 hours ago · 2 min read

The IRS has found that tax reporting and compliance is significantly low when it comes to digital asset transactions.

2 min read

Updated: September 23, 2022 at 12:59 pm

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Cover art/illustration via CryptoSlate

On Sept. 22, a U.S. judge granted the Internal Revenue Service’s (IRS) petition that requires M.Y. Safra Bank to submit records of taxpayers who may not have reported or paid taxes on crypto transactions.

Specifically, the IRS is interested in the records of cryptocurrency prime broker SFOX’s users, according to a press release. New York-based M.Y. Safra bank offered banking services to SFOX customers for crypto transactions, the U.S. Attorney’s office said in the press release.

Taxpayers must report any profits or losses associated with cryptocurrencies on their tax returns. However, the Attorney’s office said the IRS had found a significant gap in tax compliance regarding digital assets.

IRS Commissioner Charles P. Rettig said:

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“The government’s ability to obtain third-party information on those failing to report their gains from digital assets remains a critical tool in catching tax cheats… Taxpayers earning income from digital asset transactions need to come into compliance with their filing and reporting responsibilities.”

According to the press release, the IRS has found “significant underreporting” of crypto transactions through summons issued to other cryptocurrency dealers. Additionally, the IRS has identified at least ten taxpayers who used SFOX for crypto trades but did not report them as required by law.

As a crypto prime dealer and trading platform, SFOX connects crypto exchanges, over-the-counter digital asset brokers, and liquidity providers. According to the press release, it serves over 175,000 registered users who have collectively conducted transactions worth more than $12 billion since 2015.

SFOX partnered with M.Y. Safra bank to enable its users to access cash-deposit accounts. Users could use their cash to trade cryptocurrencies through those accounts.

According to the press release, the IRS expects that M.Y. Safra will be able to offer information regarding the identities and crypto transactions of SFOX users that used the bank’s services. The IRS will use the information from M.Y. Safra bank and other sources to evaluate any gaps in tax compliance.

The U.S. Attorney’s office of the Southern District of New York said that the summons to be issued does not equate to any allegations of wrongdoing. Instead, the summons is a means of uncovering information about unknown taxpayers that may have failed to comply with the internal revenue laws.

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The IRS also received a green light to serve summons demanding customer transaction records from SFOX itself on Aug. 15.

Banking

Global banks’ exposure to crypto is around 0.01%

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Global banks’ exposure to crypto is around 0.01%

Global banks’ exposure to crypto is around 0.01% Zeynep Geylan · 2 hours ago · 3 min read

Basel Committee report reveals 19 biggest financial institutions worldwide hold €9.4 billion worth of crypto.

3 min read

Updated: October 3, 2022 at 8:56 am

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Cover art/illustration via CryptoSlate

Global banking regulation standard Basel Committee’s latest report estimates the global bank exposure to crypto to be at 0.01%, as the 19 largest financial institutions hold €9.4 billion worth of crypto, which equates to 0.14% exposure.

The report took the crypto asset data from 16 Group 1 banks and three Group 2 banks. Ten of these banks were from the Americas, seven were from Europe, and the remaining two were from the rest of the world.

Number of Banks and Exposure Proportion

Considering these financial institutions’ size and expansion level, the report estimates that the global crypto exposure would turn out to be around 0.01% after the Group 3 banks are included.

With that being said, the report also acknowledges crypto’s exponential growth rate and reminds us that it is difficult to estimate the real exposure rate. It states:

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“As the cryptoasset market is fast evolving, it is difficult to ascertain whether some banks have under- or over-reported their exposures to cryptoassets, and the extent to which they have consistently applied the same approach to classifying any exposures.”

Exposure distributions

Cryptoassets belonging to the ten Americas banks comprise around one-third of the total €9.4 billion. The distribution amongst these banks is not even either.

Distribution of total crypto exposures

Two institutions make up more than half of total crypto exposure, while four make up around 40%. The remaining 10% is shared amongst 13 banks.

Token distribution

According to the data, Bitcoin (BTC) and Ethereum (ETH) are the most held assets. Amongst all 19 institutions, Bitcoin exposure is at 31%, while Ethereum’s is at 22%. Tokens that have Bitcoin or Ethereum as underlying assets follow as the third and fourth most held assets. Bitcoin-based tokens make up 25%, while Ethereum-based ones make up 10%.

When the amount of Bitcoin and Bitcoin-based tokens are calculated together, exposure to Bitcoin stood at 56.1%, while Ethereum’s was 32.8%.

Top 10 reported cryptoassets

The remaining 10% is shared amongst other coins. Ripple (XRP) follows as the third most exposed coin with 2%, while Cardano (ADA) and Solana (SOL) come as fourth and fifth with 1% each. Litecoin (LTC) and Stellar (XLM) rank sixth and seventh with 0.4% each.

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Banks have also reported that they held USD Coin (USDC) in smaller amounts, which are not included in the above charts.

Activity Distribution

Regarding the crypto-related functions participating banks offer, holdings and lending, market-making, and custody/wallet/insurance services came as the top three functions.

Crypto exposures by main activity

Amongst the three, Custody/wallet/insurance and similar services turned out to be most dominant with 50.2%. This category includes all custody, wallet, and insurance services for cryptoassets and facilitating client activity such as self-directed or manager-directed trading.

Clearing, client, and market-making services came second in line with 45.7%. All trading activities on client accounts, clearing crypto derivatives and futures, ICOs, and issuing securities with underlying crypto assets fall under this category.

Finally, holding and investing in cryptoassets, lending to entities, and issuing cryptoassets backed by assets on the bank’s balance sheet are collected under the crypto holdings and lending category, which came out as the least preferred activity with 4.2%.

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AIFC

Bank Buys Bitcoin In Kazakhstan, Country To Develop Crypto Exchange

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Bank Buys Bitcoin In Kazakhstan, Country To Develop Crypto Exchange

A financial institution and a coin trading platform in Kazakhstan have teamed up to carry out what they say is the country’s first such joint transaction for the acquisition of cryptocurrency. Meanwhile, Kazakhstan’s leadership has declared readiness to further develop crypto exchange in the nation’s financial hub.

First Banking Operation With Crypto Assets Opens Door for Legal Coin Purchases in Kazakhstan

Almaty-headquartered Eurasian Bank and the Kazakhstan-based crypto exchange Intebix have reported conducting what they presented as the first crypto-related transaction in the country involving a digital asset trading platform, a banking institution, and a customer. The deal, in which cryptocurrency was acquired with local fiat, was announced at the Digital Bridge 2022 forum.

“This precedent makes it possible for Kazakhstanis to legally purchase cryptocurrencies for tenge, while Eurasian Bank’s proprietary solution made it possible to set one of the lowest fees in the world for such a transaction,” the bank said in a press release. Intebix Exchange Director Talgat Dosanov went even further, claiming:

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This is the first cryptocurrency exchange-bank-client transaction in the entire Eurasian continent.

In May of this year, regulators approved pilot regulations permitting crypto transactions in Kazakhstan, under certain conditions. In order to participate in the project, crypto exchanges are required to obtain a license while banks need to adhere to the adopted rules. The government maintains that the framework meets international standards in terms of transaction oversight and security.

The process of buying crypto with Kazakhstani tenge was demonstrated to the country’s head of state. President Kassym-Jomart Tokayev expressed his administration’s readiness to support the further development of the project to facilitate crypto asset exchange in the Astana International Financial Center (AIFC), the Central Asian nation’s financial hub, if the trial is successful.

Kazakhstan intends to become a leading player in the field of new digital technologies, the cryptocurrency ecosystem and regulated digital mining, Tokayev emphasized. “If this financial instrument shows further demand and security, then it will certainly receive full legal recognition,” he was quoted as saying.

The pilot project at the AIFC was launched this past summer when registered crypto exchanges were allowed to open accounts with domestic banks. Two trading platforms, Intebix (operating under the Biteeu brand in the EU and Australia) and Ataix Eurasia, as well as Halyk Bank, Altyn Bank, and Eurasian Bank are participating in the tests. The pilot will run until the end of 2022.

Eurasian Bank also announced a plan to issue a crypto card this year. It will be linked to an Intebix wallet and holders will be able to pay in tenge while spending their digital coins. The banking institution is currently working out the details with the National Bank of Kazakhstan. Eurasian Bank ranks seven among Kazakhstan’s banks in terms of assets and is a leader in the retail banking market.

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Tags in this story

AIFC, Bank, Banking, banks, Bitcoin, Crypto, crypto exchange, Cryptocurrencies, Cryptocurrency, Eurasian Bank, Exchange, Exchanges, financial hub, framework, Intebix, Kazakhstan, Kazakhstani, mining, pilot project, purchase, Regulations, rules, Transaction

Do you expect a rapid increase of crypto-fiat banking operations in Kazakhstan? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Banking

Reuters reports major US banks pausing crypto lending plans amid challenging SEC guidelines

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Reuters reports major US banks pausing crypto lending plans amid challenging SEC guidelines

Reuters reports major US banks pausing crypto lending plans amid challenging SEC guidelines Oluwapelumi Adejumo · 8 hours ago · 2 min read

The SEC did not consult banking regulators before issuing guidance on crypto banking services, according to Reuters.

2 min read

Updated: September 16, 2022 at 4:55 pm

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Cover art/illustration via CryptoSlate

The US Securities and Exchange Commission (SEC) guidance on crypto custody might impede banks from the industry because of the cost of implementation, Reuters reported on Sept. 16.

According to the report, the SEC accounting guidelines stated that public companies holding crypto assets on behalf of their clients must account for such assets as liabilities because of the high level of risks associated with the industry.

That guidance, however, poses a major problem for banks looking to offer crypto custody services.

Banking regulations include strict capital rules, which require banks to hold cash against all liabilities on their balance sheets.

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Banks trying to offer crypto custodial services for their clients would need more cash at hand as the crypto assets will be reported as liabilities. That might prove too costly for many of these banks, forcing them to suspend their plan of crypto product offerings.

So far, banks like Bancorp and State Street are reconsidering their digital assets offering due to the costs.

Head of State Street Digital, Nadine Chakar, said:

“We do have an issue with the premise of doing that because these are not our assets. This should not be on our balance sheet.”

A Bancorp spokesperson revealed that the bank has stopped accepting new customers for its crypto custodial services due to regulatory requirements.

Reuters, citing anonymous sources, said the SEC did not consult banking regulators before issuing the guidance with one source stating,

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“Lenders building out crypto offerings have had “to cease moving forward with those plans pending any kind of further action from the SEC and the banking regulatory agencies.”

While the SEC has tried to justify its guidance several times, stakeholders like US Representative Trey Hollingsworth, American Bankers Association, the Bank Policy Institute, and the Securities Industry and Financial Markets Association have questioned it.

According to the lenders, the SEC is using its guideline to prevent banks from getting involved in crypto custodial services.

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