joe biden

US Fed faces internal probe over Silicon Valley Bank failure

Federal Reserve chair Jerome Powell said a “careful and thoughtful” review is needed to understand how the bank collapsed under its watch.

The Federal Reserve is investigating the factors that led to the failure of Silicon Valley Bank — including how it supervised and regulated the now-collapsed financial institution.

The Federal Reserve announced on March 13 that Vice Chair for Supervision Michael Barr is “leading a review of the supervision and regulation of Silicon Valley Bank, in light of its failure,” with a review set for public release by May 1.

“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” Chair Jerome Powell stated in the announcement.

“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” Vice Chair Barr added.

SVB was shut down by the California Department of Financial Protection and Innovation on March 10, with no specific reason offered behind the bank’s forced closure.

However, prior to shutting down, SVB was reportedly on the edge of collapse due to severe liquidity troubles relating to major losses on government bond investments and withdrawals by spooked depositors.

It was the second major U.S. bank to crumble last week, following the bankruptcy of crypto-friendly Silvergate, with its parent company Silvergate Capital Corporation announcing a voluntary liquidation on March 8.

Adding to the chaos, another crypto-friendly U.S. bank went bust on March 12 when the New York Department of Financial Services took control of Signature Bank.

Related: Fed starts ‘stealth QE’ — 5 things to know in Bitcoin this week

The latest announcement from the Federal Reserve comes just a day after it rolled out the $25 billion Bank Term Funding Program to backstop liquidity troubled banks, curb further collapses and protect depositors.

The Biden administration has taken swift action in that regard, with the president announcing on March 13 that:

“America can have confidence that the banking system is safe. Your deposits will be there when you need them. […] No losses will be borne by the taxpayers.”

Biden added that the management behind the collapsed banks will be held accountable for their failures, and suggested that those responsible could be prosecuted. He also called for stronger banking oversight and outlined that thorough investigations will take place.

“We must get the full accounting of what happened,” he said.


Biden vows to hold accountable those responsible for SVB, Signature collapse

United States President Joe Biden said on Twitter that he is “firmly committed” to holding those responsible for the Silicon Valley Bank and Signature Bank collapse “fully accountable.”

The president of the United States, Joe Biden, has vowed to hold those responsible for the failure of Silicon Valley Bank and Signature Bank while assuring Americans that their deposits are safe. 

On March 12, the New York District of Financial Services took possession of Signature Bank. The Federal Reserve said that the crypto-friendly bank was closed to protect the U.S. economy and strengthen public confidence in the banking system. 

The Fed also announced a $25 million fund aimed at backstopping certain banks that could face liquidity issues in the future. 

Biden tweeted to his 29.9 million followers on March 13 that he’s pleased that the agencies have “reached a solution that protects workers, small businesses, taxpayers and our financial system.”

The president added he was also “firmly committed” to holding those responsible for the mess “fully accountable.” He added that he would “have more to say” in an address on Monday, March 13. 

Meanwhile, a host of other United States politicians have also shared praise over the recent federal regulator actions aimed at stemming contagion from the recent banking collapses. 

U.S. Senator Sherrod Brown and Representative Maxine Waters said they were also pleased to see that both insured and uninsured SVB depositors would be covered, according to March 12 statement by the U.S. Senate Banking and Housing Committee:

“Today’s actions will enable workers to receive their paychecks and for small businesses to survive, while providing depository institutions with more liquidity options to weather the storm.”

“As we work to better understand all of the factors that contributed to the events of the last several days and how to strengthen guardrails for the largest banks, we urge financial regulators to ensure the banking system remains stable, strong, and resilient, and depositors’ money is safe,” the statement added.

Meanwhile, U.S. Securities Exchange Commission Chairman Gary Gensler has used the moment to double down on his agency’s pursuit of wrongdoers, without naming any industries in particular.

The chairman reinforced that the SEC would be on the lookout for violators of U.S. securities laws in a March 12 statement:

“In times of increased volatility and uncertainty, we at the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly.”

“Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws,” the SEC chairman added.

The shuttering of SVB temporarily triggered the depegging of Circle’s USD Coin (USDC) to as low as $0.88 on March 11, as $3.3 billion of Circle’s $40 billion USDC reserves are held by SVB.

However, USDC is nearly back at $1 after the Federal Reserve confirmed that all customer deposits at Signature Bank and SVB would be made in “whole.”

Related: US Fed announces $25B in funding to backstop banks

Another prominent crypto-bank, Silvergate Bank, announced last week that it would shut down and voluntarily liquidate “in light of recent industry and regulatory developments.”

Shortly after, Gensler wrote a March 9 opinion piece for The Hill that threatened U.S. crypto companies to “do their work within the bounds of the law” or be met with enforcement action.

US senators commit to advancing crypto bill despite FTX collapse

The two U.S. Senators said the downfall of FTX clearly exemplified “the need for greater federal oversight of the digital asset industry.”

United States senators Debbie Stabenow and John Boozman have doubled down on their commitment to publishing a final version of the Digital Commodities Consumer Protection Act 2022 (DCCPA) in the wake of FTX’s shocking collapse.

For a short time, the cryptocurrency community wasn’t sure how the senators would respond to the FTX crisis — as the DCCPA bill is understood to have been strongly supported by FTX CEO Sam Bankman-Fried.

But the members of the U.S. Senate Committee on Agriculture, Nutrition and Forestry confirmed their intentions in a Nov. 10 statement — stating “the events that have transpired this week reinforce the clear need for greater federal oversight of the digital asset industry.”

“Chairwoman Stabenow and I remain committed to advancing a final version of the DCCPA that creates a regulatory framework that allows for international cooperation and gives consumers greater confidence that their investments are safe,” wrote Senator Boozman.

Bankman-Fried is understood to be a strong supporter of the crypto bill. He has attended several Senate Hearings and published a recent post titled “Possible Digital Asset Industry Standards” on Oct. 19.

The senators did not disclose additional details as to what stage the DCCPA is at and when the bill will be published for the Senate to review.

Related: Industry reps suggest improvements to Stabenow–Boozman crypto regulation bill

The DCCPA bill was officially introduced into the U.S. Congress on Aug. 3. 2022.

If the DCCPA passes into law, it would grant the Commodity Futures Trading Commission (CFTC) — one of the two U.S. market regulators — an extension of regulatory powers over the sector. 

The bill will still need to be passed by both the U.S. Senate and House of Representatives and be signed by President Joe Biden in order to become law.

Biden’s cryptocurrency framework is a step in the right direction

Cryptocurrency guidelines released by the Biden administration this month show that officials are considering the benefits of crypto. That’s a step in the right direction.

The White House released its first comprehensive framework this month for the Responsible Development of Digital Assets following President Joe Biden’s March 9 executive order. The order called for regulators to assess the industry and develop recommendations to safeguard investors while simultaneously promoting innovation. While more work is needed, the framework is a step in the right direction as it shows the willingness of regulators to provide the industry with the much-needed regulatory clarity it seeks. 

The framework’s recommendations addressed six key areas to protect market participants, offer access to financial services, and promote innovation. While Biden’s administration has focused more on just the protection of consumers in the industry in the past, it is encouraging to see the framework focus on all three groups in the industry: consumers, investors and businesses. The framework cited a 2018 Wall Street Journal study that showed nearly a quarter of coin offerings had red flags such as plagiarized documents and promises for return on investment. To encourage protection, the framework encouraged regulators to “aggressively pursue” unlawful practices in the industry, redouble enforcement efforts and increase public-awareness efforts to promote education in this area.

Related: Biden’s anemic crypto framework offered nothing new

Additionally, the framework provided steps for both the Biden administration and Congress to fight against illicit finance, such as amending the Bank Secrecy Act, monitoring transactions and exposing and disrupting illicit actors.

The framework also discussed promoting access to safe and affordable financial services. This is one of the key positives for the cryptocurrency industry, as it has provided access to financial services to millions around the world. It mentioned the fact that nearly 7 million Americans have no bank account, and another 24 million rely on nonbanking services, which can be costly. By encouraging payment providers to have increased instant access to payment systems, prioritizing the efficiency of cross-border payments, and supporting research in technological and socio-technological disciplines, the framework can help provide much-needed financial services to those in need.

Cryptocurrencies, USA, United States, Law, Bitcoin Regulation, White House, Government, US Government

Biden will also consider creating a federal framework to regulate nonbank payment providers, some of which now offer cryptocurrency services. The framework will also provide financial stability by having the Treasury bolster financial institutions’ capacity to identify, track and analyze emerging strategic risks and mitigate cyber vulnerabilities.

The recommendations promote the advancement of responsible innovation in digital assets. Biden does this by having the Office of Science and Technology Policy and the National Science Foundation (NSF) develop a Digital Assets Research and Development Agenda, as well as providing regulatory guidance and technical assistance to innovative American firms in the industry. The NSF will also back social sciences and education to promote safe and responsible digital asset use.

This is a step in the right direction for regulators as it allows them to first understand both the technological benefits of this technology while also tracking the environmental impacts in order to provide a clear strategy for the industry to move forward. This will allow the United States to reinforce its global financial leadership and competitiveness by helping innovative technology and digital asset firms to become stronger in international markets as well as assist foreign and developing countries in building out their digital asset infrastructure with United States values intact.

The area where the framework has received the most resistance is related to exploring a U.S. central bank digital currency (CBDC). While at face value, CBDCs seem to be the best of both fiat and cryptocurrencies, the implications can have widespread negative effects. The recommendations note potential benefits of a U.S. CBDC, such as a more efficient payment system, faster cross-border transactions and environmental sustainability.

Related: Iota co-founder: Lummis–Gillibrand is a blessing for the crypto industry

While these certainly are positives, a CBDC’s main flaw stems from centralization. Having a centralized system governing CBDCs means they are much more easily tracked, have more vulnerable systems when compared to that of Bitcoin, and can lead to a potential increase in data breaches.

With that said, Biden’s officials are simply exploring the use case for CBDCs, meaning that he and his regulators are gathering feedback to determine the best course of action.

Cryptocurrencies have existed for over a decade. Yet, despite the industry looking to the government to provide the regulatory clarity needed to remove much of the uncertainty and doubt, it has not been until this year that the industry finally received an indication of what that clarity may look like.

Biden and the regulatory agencies that submitted nine reports to him have created the first-ever comprehensive regulatory framework for cryptocurrencies. It does a commendable job targeting the areas that are most in need of regulation and by increasing research in this area along with listening to market experts, what is a great first step can become exactly what the industry needs to continue to grow and innovate without a looming threat over its shoulder.

Mitesh Shah is the founder and CEO of Omnia Markets, an artificial intelligence firm providing expertise on financial analytics, trends and insights in the cryptocurrency industry. He specializes in finance and technology and holds an MBA in finance from St. John’s University-Tobin College of Business, as well as a certificate in machine learning from Stanford University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Biden’s anemic crypto framework offered us nothing new

The cryptocurrency industry needs substantive proposals that aim to do more than simply mitigate potential damage. The Biden administration’s framework failed to acknowledge crypto’s advantages.

The long-awaited cryptocurrency regulation framework released by President Joe Biden’s Treasury Department this month attempted to outline a plan for managing the burgeoning crypto industry. Unfortunately, the department’s assessment failed to embody more substance than a mere mission statement.

While Biden’s administration appears to be taking a “whole-of-government approach” toward overseeing the decentralized finance (DeFi) sector and its ripple effects on the traditional economy, they are focused predominantly on defending against negative events — such as financial crime — and failing to facilitate positive events, such as the wealth-building opportunities that crypto offers to Americans excluded from the traditional big-banking system.

The new framework was a follow-up to Biden’s executive order in March, titled, “Ensuring Responsible Development of Digital Asset.” Officials focused predominantly on prosecuting money launderers and Ponzi schemers across jurisdictions. That may come as no surprise, considering it was developed as crypto dominoes fell over the summer months. Those included the collapse of Terraform Labs, which led to an Interpol arrest warrant for its founder, Do Kwon; the Celsius Network’s bankruptcy; and the collapse of crypto prices.

Nonetheless, these events served the healthy purpose of shaking out bad actors who were in crypto for criminal or self-interested purposes. An effective set of laws related to crypto that prevent illicit activity and promote peer-to-peer financial transactions would work wonders for crypto’s public image. The Biden framework, which is more reactive than proactive, doesn’t achieve that.

Related: Biden is hiring 87,000 new IRS agents — and they’re coming for you

As a nation, we don’t agree on much these days. We mostly want the United States to remain a global economic superpower, but we differ on how to do it. Stablecoins and other cryptocurrencies dismantle the power of federal currencies and allow individuals to accrue wealth independently, which is exactly why the federal government doesn’t like them.

The Biden framework literature suggests digital currency is key to securing America’s future as an economic leader. But if it grants power over crypto to the same authorities who wield power over traditional finance, the status quo isn’t going to change. Instead of establishing the U.S. dollar’s “digital twin,” the government would be better off finding a way to coexist with alternative currencies.

It’s time to move beyond the enforcement of existing regulations and to institute new programs that integrate blockchain technology into areas most in need of disruption, such as healthcare and big business, even if we can’t quite agree on how to address currencies.

For example, keeping medical records on a blockchain — like Estonia’s highly advanced e-health system already does — would streamline and secure each person’s health data from birth through death, with each doctor or pharmacist along the way accessing an accurate history to make the best decision. Collecting anonymized, uncorrupted medical data is going to lead to better research, better treatments and more cost-effective health care.

Related: Cryptocurrency is picking up as an instrument of tyranny

Similarly, putting property and business records on a blockchain would lead to more accountability for big, opaque corporations that make bold claims of charity and sustainability. Such transparency would allow consumers to make more informed decisions about who they buy from — and bank with.

The federal government should also nurture blockchain technology by investing in large-scale blockchain projects and incentivizing companies that use it to better serve the public.

Going forward, let’s hope both federal and state governments will cooperate to write real crypto industry legislation, not just to mitigate its damage, but to foster its potential. Cryptocurrencies and other digital assets have the capacity to bring wealth-building opportunities to huge swaths of unbanked Americans, break up monopolies, and hold wealthy Goliaths accountable for their business dealings to a degree never seen before. The Biden framework is a lukewarm beginning, but we have a long way to go.

Guy Gotslak is the president and founder of the CryptoIRA platform My Digital Money (MDM). He holds a degree in computer science & engineering from UCLA and an MBA from Northwestern University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Biden’s anemic crypto framework offered nothing new

The cryptocurrency industry needs substantive proposals that aim to do more than simply mitigate potential damage. The Biden administration’s framework failed to acknowledge crypto’s advantages.

The long-awaited cryptocurrency regulation framework released by President Joe Biden’s Treasury Department this month attempted to outline a plan for managing the burgeoning crypto industry. Unfortunately, the department’s assessment failed to embody more substance than a mere mission statement.

While Biden’s administration appears to be taking a “whole-of-government approach” toward overseeing the decentralized finance (DeFi) sector and its ripple effects on the traditional economy, they are focused predominantly on defending against negative events — such as financial crime — and failing to facilitate positive events, such as the wealth-building opportunities that crypto offers to Americans excluded from the traditional big-banking system.

The new framework was a follow-up to Biden’s executive order in March, titled, “Ensuring Responsible Development of Digital Asset.” Officials focused predominantly on prosecuting money launderers and Ponzi schemers across jurisdictions. That may come as no surprise, considering it was developed as crypto dominoes fell over the summer months. Those included the collapse of Terraform Labs, which led to an Interpol arrest warrant for its founder, Do Kwon; the Celsius Network’s bankruptcy; and the collapse of crypto prices.

Nonetheless, these events served the healthy purpose of shaking out bad actors who were in crypto for criminal or self-interested purposes. An effective set of laws related to crypto that prevent illicit activity and promote peer-to-peer financial transactions would work wonders for crypto’s public image. The Biden framework, which is more reactive than proactive, doesn’t achieve that.

Related: Biden is hiring 87,000 new IRS agents — and they’re coming for you

As a nation, we don’t agree on much these days. We mostly want the United States to remain a global economic superpower, but we differ on how to do it. Stablecoins and other cryptocurrencies dismantle the power of federal currencies and allow individuals to accrue wealth independently, which is exactly why the federal government doesn’t like them.

The Biden framework literature suggests digital currency is key to securing America’s future as an economic leader. But if it grants power over crypto to the same authorities who wield power over traditional finance, the status quo isn’t going to change. Instead of establishing the U.S. dollar’s “digital twin,” the government would be better off finding a way to coexist with alternative currencies.

It’s time to move beyond the enforcement of existing regulations and to institute new programs that integrate blockchain technology into areas most in need of disruption, such as healthcare and big business, even if we can’t quite agree on how to address currencies.

For example, keeping medical records on a blockchain — like Estonia’s highly advanced e-health system already does — would streamline and secure each person’s health data from birth through death, with each doctor or pharmacist along the way accessing an accurate history to make the best decision. Collecting anonymized, uncorrupted medical data is going to lead to better research, better treatments and more cost-effective health care.

Related: Cryptocurrency is picking up as an instrument of tyranny

Similarly, putting property and business records on a blockchain would lead to more accountability for big, opaque corporations that make bold claims of charity and sustainability. Such transparency would allow consumers to make more informed decisions about who they buy from — and bank with.

The federal government should also nurture blockchain technology by investing in large-scale blockchain projects and incentivizing companies that use it to better serve the public.

Going forward, let’s hope both federal and state governments will cooperate to write real crypto industry legislation, not just to mitigate its damage, but to foster its potential. Cryptocurrencies and other digital assets have the capacity to bring wealth-building opportunities to huge swaths of unbanked Americans, break up monopolies, and hold wealthy Goliaths accountable for their business dealings to a degree never seen before. The Biden framework is a lukewarm beginning, but we have a long way to go.

Guy Gotslak is the president and founder of the CryptoIRA platform My Digital Money (MDM). He holds a degree in computer science & engineering from UCLA and an MBA from Northwestern University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Biden is hiring 87,000 new IRS agents — and they’re coming for you

The Internal Revenue Service is hiring a fleet of new agents. And they’re probably coming for you — regardless of your income level.

The Inflation Reduction Act, signed into law this month by President Joe Biden, empowers the IRS with nearly $80 billion in new funds. The world’s most powerful tax collection agency is using the money to go on a hiring spree to fuel much tougher enforcement efforts.

It is widely assumed that the audits will be brutal and widespread. Taxes start with tax returns, which must be signed under penalties of perjury. The Biden administration has said that the audits on steroids are for fat cats who have escaped having to pay their fair share for too long. The administration has suggested the IRS would perform no new audits on anyone making less than $400,000 annually. Republicans tried to include that in the law, but every Senate Democrat voted against the amendment, as well as IRS audit protection for those earning less than $400,000.

In other words, American taxpayers at every income level are fair game regardless of income. So buckle up, and think about whether your taxes — and records — are vulnerable. How would they look under a microscope? Tax returns must be signed under penalties of perjury. What’s more, if you try to change that language, the IRS says it doesn’t count as a tax return — which means your statute of limitations on an audit never begins. You can be audited forever.

Related: US govt delays enforcement of crypto broker reporting requirements

Speaking of perjury, the IRS asks on every individual tax return, “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

The 2022 version of that question is even more intrusive as we’ll see. The IRS says that all taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just those who engaged in a virtual currency transaction in 2021.

In the tax world, a simple yes or no question can be a surprisingly big deal — if you answer wrong. But can you check “No?” Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year or limited their activities to:

  • Holding virtual currency in their wallet or account;
  • Transferring virtual currency between their wallets or accounts;
  • Purchasing virtual currency using real currency, including purchases using real currency on electronic platforms such as PayPal and Venmo; and
  • Engaging in a combination of holding, transferring or purchasing virtual currency as described above.

But many people must check “Yes.” Just think about these everyday transactions in crypto, all of which would require checking the “Yes” box:

  • The receipt of virtual currency as payment for goods or services provided;
  • The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
  • The receipt of new virtual currency as a result of mining and staking activities;
  • The receipt of virtual currency as a result of a hard fork;
  • An exchange of virtual currency for property, goods or services;
  • An exchange/trade of virtual currency for another virtual currency;
  • A sale of virtual currency; and
  • Any other disposition of a financial interest in virtual currency.

Just answering yes or no isn’t hard, but one thing it’s meant to do is tip you off that you have a taxable event, which usually means paying some tax. So you also have to report the gain or income. As if the crypto community wasn’t nervous enough, get ready for more since the tax stakes are going up again. For 2022 tax returns, the IRS has modified the crypto question asked on IRS Form 1040, the tax form used for individuals. A draft of the 2022 IRS Form 1040 asks:

“At any time during 2022, did you: (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

That casts the net wider than did the prior version. The IRS gift and estate tax people are generally distinct from IRS income tax personnel. But the expansion of the crypto tax question may herald more to come, more crypto audits, more IRS scrutiny on crypto and crypto taxpayers and more money being poured into IRS compliance generally. The so-called Inflation Reduction Act is supposed to fund the hiring of 87,000 new IRS agents and add nearly $79 billion to the IRS, a vast $45 billion of which is being directed solely into IRS “enforcement.”

Related: How to navigate cryptocurrency tax implications amidst the CPA shortage

Crypto is one of the IRS’s big targets. The new law says the IRS will pursue “digital asset monitoring and compliance activities,” apart from general tax enforcement. What can the IRS do with $80 billion of taxpayer money?

The new law says the IRS is supposed to use the money in these ways:

  • Taxpayer services: $3,181,500,000;
  • Enforcement: $45,637,400,000;
  • Operations support: $25,326,400,000;
  • Business systems modernization: $4,750,700,000;
  • Task force to design free, direct e-file system: $15,000,000;
  • Treasury Inspector General for Tax Administration: $403,000,000;
  • Treasury Office of Tax Policy: $104,533,803;
  • Tax Court: $153,000,000; and
  • Treasury Departmental offices for oversight and implementation support to help the IRS implement the IRA: $50,000,000.

Enforcement is the biggest line item, and Congress wants results too. Congress has already projected that adding IRS enforcement dollars is going to pay off. They project the new funding will add a whopping $124 billion more in increased collections over 10 years.

The bill is vague on how the IRS can spend $45 billion on “enforcement,” though ominously, it does mention legal and litigation support, and enforcement of criminal statutes regarding tax law violations. The bill also specifies “digital asset monitoring and compliance activities” and investigative technology for criminal investigations as items on which the IRS should spend the money. Any way you slice it, you can expect more IRS attention on crypto, more scrutiny on tax reporting, and above all, more audits.

Robert W. Wood is a tax attorney representing clients worldwide from his offices at Wood LLP in San Francisco. He handles a broad range of tax planning and tax controversies and has served as an expert witness on cases including tax matters in civil cases, class actions, and disputes over independent contractor or employee classifications. He formerly served as an instructor at the University of California’s Hastings College of the Law.

The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.