Noting serious privacy, money laundering, consumer protection and financial stability concerns, U.S. Federal Reserve Chairman Jerome Powell announced plans for a working group that will track the forthcoming cryptocurrency Libra. Despite uncertainty regarding the Fed's authority over the project, Powell's comments that the project "cannot go forward" until such concerns are addressed were followed by a decrease in the price of bitcoin (2.4% lower) and a slight hit to the share price of the social networking company spearheading Libra's development (although the price recovered shortly thereafter).
A recently disclosed IRS presentation detailed new tactics, including potential Grand Jury subpoenas of leading software providers, that the agency may employ to obtain user records to aid the agency's efforts to identify criminal tax activity involving cryptocurrency. The disclosure comes amid calls for greater transparency regarding the IRS's treatment of cryptocurrency, as Congressman Tom Emmer reintroduced legislation to prohibit penalties on owners of "forked" digital assets until the IRS issues guidance on reporting requirements for those assets. A "fork" event is when one blockchain is split into two, resulting in two separate digital assets (such as bitcoin and bitcoin cash).
Internationally, Canada published updates to its anti-money laundering rules this week that will require Canadian and foreign cryptocurrency platforms to register as money services businesses with the Financial Transactions and Report Analysis Centre of Canada and implement full anti-money laundering and countering terrorist financing compliance programs. Canada's action is part of what Ciphertrace is predicting to be a significant wave of international cryptocurrency regulation aimed at combating a range of cryptocurrency-related crimes and threats, including exchange thefts, fraud and exit scams, which totaled more than $1.2 billion in 2019 Q1 alone. A recent analysis by Chainalysis determined that bitcoin's use in illegal online marketplaces is set for a record year of more than $1 billion; however, the proportion of bitcoin transactions for illicit purchases, such as drugs or child pornography, appears to be declining.
For more information, please refer to the following links:
- Fed chief calls for Facebook to halt Libra project until concerns addressed
- Congressman Emmer Reintroduces Legislation to Provide Clarity for Taxpayers with Digital Assets Following IRS Inaction
- IRS Allegedly Hopes to Make Tech Giants Release User Crypto Activity
- Canada's Crypto Exchanges Must Now Register as MSBs, Report Transactions Over $10K
- Bitcoin Criminals Set to Spend $1 Billion on Dark Web This Year
- Cyphertrace: Cryptocurrency Anti-Money Laundering Report, 2019 Q1
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