Day: May 1, 2024

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Two bipartisan lawmakers, Reps. Wiley Nickel, D-N.C., and Drew Ferguson, R-Ga., have introduced the Providing Tax Clarity for Digital Assets Act. The bill aims to clarify that staking rewards should only be taxed at the time of their sale to prevent double taxation.

Rep. Ferguson emphasized the need for clarity in the treatment of digital asset rewards, citing confusion among investors and businesses, as well as the risk of American businesses relocating overseas due to tax complexities. He highlighted that the bill would provide much-needed clarity, establish US leadership in digital asset tax treatment, and foster innovation and business within the country.

The bill comes in response to a ruling by the Internal Revenue Service last year, which stated that crypto investors earning rewards from staking services must include the value of those rewards in their gross income.

According to Coin Center, the bill proposes that taxes on block rewards from proof-of-work or proof-of-stake networks should only be applied when they are spent or sold, rather than when they are acquired. This approach aims to resolve major issues with current cryptocurrency taxation and ensure fair treatment of the technology.

The Proof of Stake Alliance echoed similar sentiments, describing the bill as a “common-sense clarification of existing law” that promotes tax fairness and compliance. The alliance emphasized that the bill would prevent double taxation by taxing block rewards only at the time of their sale or exchange.

Rep. Nickel, a supporter of crypto, has previously advocated for digital asset legislation and pushed for the advancement of the Financial Innovation and Technology Act. Both Rep. Nickel and Rep. Ferguson have announced their retirement and will not seek reelection.

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Securitize, a leading player in RWA tokenization, has closed a significant $47 million funding round, with BlackRock spearheading the investment. This collaboration underscores the growing momentum and promise within the RWA tokenization landscape.

The investment round, announced on May 1, saw participation from key financial institutions including Hamilton Lane, ParaFi Capital, and Tradeweb Markets. The infusion of capital will enable Securitize to further its mission of harnessing blockchain technology to digitize capital markets, thereby simplifying processes and expanding accessibility.

Carlos Domingo, Co-Founder and CEO of Securitize, expressed gratitude for the support from esteemed investors, emphasizing the transformative potential of blockchain in reshaping finance and tokenization specifically.

BlackRock’s involvement marks a strategic move, particularly following their collaboration with Securitize on the BlackRock USD Institutional Digital Liquidity Fund. This partnership underscores BlackRock’s commitment to RWA tokenization, a process involving the digitization of real-world assets like equities and bonds for trading on a blockchain.

Joseph Chalom, BlackRock’s Global Head of Strategic Ecosystem Partnerships, has been appointed to Securitize’s Board of Directors, signaling deeper collaboration and strategic alignment.

According to Chalom, BlackRock sees tokenization as a catalyst for significant transformation in capital markets infrastructure. The investment in Securitize reflects BlackRock’s commitment to driving innovation to meet the evolving needs of its clients.

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Spot-Bitcoin exchange-traded funds (ETFs) are exhibiting signs of stress as the cryptocurrency market endures a downturn, with prices of major ETFs tracking Bitcoin witnessing significant discounts to their underlying asset values.

Following a roughly 5% decline in Bitcoin’s price, several leading ETFs recorded their largest discounts on the value of underlying assets in their short trading history on Tuesday. The trend persisted on Wednesday as Bitcoin continued to drop, experiencing a decline of up to 5.6%.

The $16 billion iShares Bitcoin Trust (IBIT) closed approximately 1.7% below its net asset value on Tuesday, marking the largest dislocation since its inception in January. Similarly, the $9 billion Fidelity Wise Origin Bitcoin Fund (FBTC) and the $2.5 billion ARK 21Shares Bitcoin ETF (ARKB) both saw discounts exceeding 1.4%, the highest on record for each ETF. The $2 billion Bitwise Bitcoin ETF (BITB) also closed with a notable discount.

James Seyffart, an ETF analyst at Bloomberg Intelligence, noted that while the discounts are significant, they are not unprecedented in the context of ETF trading dynamics. However, the deviations underscore the challenges of integrating the traditional market with Bitcoin, where shares in ETFs can only be created and redeemed for cash rather than Bitcoin itself.

Although price discrepancies in ETFs tend to be temporary due to the creation-redemption mechanism, Bitcoin’s volatility presents greater risks for ETF investors compared to traditional financial assets. Despite this, specialized trading firms, known as authorized participants, capitalize on such volatility to profitably maintain ETF prices in line with their net asset values.

Virtu Financial Inc. CEO Douglas A. Cifu expressed confidence in sustained opportunities in crypto ETFs, citing the inherent volatility of the asset class. However, the uncertain macroeconomic environment, potentially influenced by Federal Reserve policy decisions, poses challenges for speculative assets like digital tokens.

While hopes persist for increased institutional adoption of spot-bitcoin ETFs, the performance of Bitcoin remains intertwined with broader economic factors. As the Federal Reserve concludes its policy meeting, the outlook for rate cuts may further impact Bitcoin’s price trajectory and ETF discounts.

Mohit Bajaj, director of ETFs at WallachBeth Capital, acknowledged the possibility of ETF discounts persisting if Bitcoin’s downward trend continues, highlighting the uncertainty surrounding the cryptocurrency market.

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