Currency

XRP Still Third Largest Crypto by Market Cap After Founder Dumps 1 Billion Coins

10/02/2020 by Idelto Editor

Crypto traders and speculators have been discussing the digital currency XRP (ripple) lately because the price has been stagnant compared to other digital assets. Some venture capitalists and analysts plan to short XRP, while other speculators believe the crypto is poised for a price jump in the future. Additionally, crypto enthusiasts have been discussing Ripple cofounder Jed McCaleb selling 1 billion XRP.

Also read: Bitcoin, Tesla Stock, Tron: How Warren Buffett Got His First Bitcoin

A Closer Look at XRP

The digital currency XRP and the Ripple project have always been a controversial topic among cryptocurrency supporters. Lots of people love and advocate for XRP, while others believe the network is pure garbage. According to the project’s creators, the Ripple network is a real-time gross settlement system that has a native token called XRP. The project was launched in 2012 and XRP is one of the oldest digital currencies in comparison to networks like BTC.

Our newsdesk decided to look at data points to see how the digital asset weighs up against BTC’s market and network performance. News.Bitcoin.com analyzed data from onchain, the economics, development and the XRP project’s prominence on social media. Further, we took a look at today’s opinions from crypto influencers and analysts speculating on XRP digital currency markets and the network’s performance. Long ago, XRP was called “ripple” but most people refer to the cryptocurrency these days as simply XRP. When the digital currency was launched, developers created 100 billion units but at press time there’s less than half that number in circulation (43.6 billion).

XRP is trading for $0.27 per coin today and there’s 43,698,224,662 XRP in circulation. Tallying up each coin’s worth plus the number of XRP in circulation makes XRP the third largest blockchain by market capitalization. According to Messari.io, XRP’s trade volume this week was between $325-660 million per day, but the data site claims “real volume” during the last 24 hours is around $121 million. XRP is down 92% from its $3.84 per unit all-time high (ATH). During the last year against USD, the currency is down 11% and against BTC, XRP is down 66% over the same timeframe. As far as volume by currency is concerned, Cryptocompare indicates that tether (USDT) is the top coin swapped with XRP, capturing 46% of all trades. This is followed by BTC (17.68%), USD (8.77%), KRW (6.96%), ETH (3.60%), JPY (3.08%), and EUR (1.80%).

Crypto Analysts and Traders Wonder if XRP Prices Will Spike or Remain Stagnant

Some traders believe XRP is poised for a spike in value, while other analysts think people should avoid XRP like the plague. For instance, a recent article from Forbes discussing the cofounders of Multicoin Capital is titled: “Avoid XRP Says Multicoin; Bitcoin’s Big Rally.” Within the editorial, it notes that Multicoin Capital’s Kyle Samani and Tushar Jain have been shorting XRP. Venture capitalist and Galaxy Digital CEO Mike Novogratz discussed XRP “underperforming” in a series of tweets on February 6.

“XRP and many other cryptos, like ETH are still in the ‘proving’ phase. They aren’t going to succeed as solely a store of value as BTC has taken that lane,” Novogratz tweeted last Tuesday.

$XRP – Once in a while you gotta stop and look around…. you could miss it

Spring it! pic.twitter.com/45VcIwt7xZ

— TraderXO (@TraderX0X0) February 1, 2020

Meanwhile, a recently published report by Steve Muchoki tells a different story and says that the “XRP price can reach $0.60 in the near future as XRP’s popularity is growing.” “Ripple’s XRP price is showing all the signs of reaching $0.60 in the near future, as it is supported by different technical and fundamental aspects,” Muchoki wrote on Monday. The article mentioned a recent Twitter poll about which altcoins will last the test of time and XRP came out winning. The writer also detailed that Ripple might go public in 2020 with an initial public offering and highlighted that “the total supply is double the circulating supply.” Despite Muchoki’s opinion, many crypto market observers have noticed Ripple cofounder Jed McCaleb has allegedly sold a good portion of his XRP holdings.

McCaleb Sells a Billion XRP

A report written by blockchain analytics provider Whale Alert estimates that McCaleb has sold a lot of XRP since 2014. Whale Alert notes that McCaleb acquired roughly 9 billion XRP since Ripple’s founding days and in September 2019 Whale Alert reported on the transfer of 100 million XRP from Ripple to McCaleb’s wallet. The blockchain analytics researchers managed to find around 8 billion of McCaleb’s alleged stash of XRP.

“In total, we managed to track the sales of 1.05 billion XRP (almost exclusively through Bitstamp) between 2014 and 2019,” Whale Alert’s report highlights. “At an average sale price of 0.129 cents per XRP, the total sale amount was $135 million USD.”

As far as transactions per day are concerned, XRP has been outpacing BTC in that department. Coin Metrics shows that BTC averages around 300,000 transactions (txns) every 24 hours, but XRP is pushing 800,000 to 900,000 txns a day and has recently seen upwards of 2 million per day.

XRP has around 209,000 Reddit subscribers and 945,000 Twitter followers, giving the coin a 21% social benchmark according to Coindesk crypto data. As far as development, XRP has 482 Github watchers and 81 Github contributors which is significantly smaller than other coin contributor counts. The XRP codebase has been forked over 1,000 times but the most prominent fork is the Stellar (XLM) network. As far as merged pull requests on Github are concerned, XRP has seen over 2,400 while BTC merged pull requests stand at 12,200.

XRP Still Faces a Number of Unknowns

XRP believers think Ripple’s partnerships with financial incumbents will help XRP succeed. And XRP proponents also wholeheartedly believe XRP will dominate other cryptos like BTC in the future and help decentralize fiat settlement and remittances worldwide. At the same time, a number of crypto enthusiasts think XRP is very centralized and the number of coins held by early investors and founders is scary. Others believe XRP is also an unregistered security and the crypto could have more issues with government regulators about this concern.

Crypto advocates have been concerned because regulators like the U.S. Securities and Exchange Commission (SEC) could retroactively penalize the project’s creators. Despite these fears, most XRP supporters still think that XRP will continue to remain one of the top digital assets as far as valuation and performance are concerned. So far XRP has remained a silent behemoth, consistently occupying a top three spot by market cap, despite concerted attempts to dislodge it.

What do you think about XRP? What do you think about the consolidation and stagnant price action in regard to XRP markets? Do you think XRP is poised for a breakout? Let us know what you think about this subject in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Price articles and market updates are intended for informational purposes only and should not be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.” Cryptocurrency prices referenced in this article were recorded at 2:30 p.m. on February 10, 2020.

Image credits: Shutterstock, Coin Metrics, Markets.Bitcoin.com, Coinlib.io, Coindesk, Fair Use, and Pixabay.

Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

The post XRP Still Third Largest Crypto by Market Cap After Founder Dumps 1 Billion Coins appeared first on Bitcoin News.

Lawsuit Against Ripple May Decide the Fate of XRP but Regulators Have the Final Say

20/01/2020 by Idelto Editor

A prolonged legal battle, which may hold the key to XRP’s future, has been extended again. The class action lawsuit alleges that Ripple issued and sold the coin, one of the largest by market cap, as an unregistered security. The decision on the defendant’s motion to dismiss the lawsuit has been postponed. But even a victory for Ripple in the case might not bring an end to its troubles with XRP.

Also read: New Guidelines Subject Canadian Crypto Exchanges to Securities Laws

Judge Takes Under Submission Ripple’s Motion to Dismiss the Case

A ruling was expected from the U.S. District Court for the Northern District of California at a hearing on Wednesday, Jan. 15. However, Judge Phyllis J. Hamilton took the motion under submission and there’s no fixed date for her announcement. Ripple’s legal representatives asked the district judge to dismiss the case on Dec. 4, 2019.

The first lawsuits against Ripple Labs Inc., developer of the Ripple payment protocol, were filed by investors about two years ago. The current class-action suit accuses the blockchain company of misleading investors and selling them XRP in violation of U.S. federal law. The plaintiffs claim they lost money and insist they should be compensated by Ripple, its subsidiary XRPII LLC, and Ripple CEO Brad Garlinghouse.

Ripple has maintained XRP is not a security but its latest arguments relate only indirectly to the substance of the case. The company’s defense now insists that even if the coin were a security, the plaintiffs did not file the case on time – within three years of its first offering – as Ripple sold the coin to the public between 2013 and 2015. In the filing, Ripple’s lawyers claim that the case is not relevant as the statute of repose had expired and state:

Plaintiff’s Complaint is self-defeating: his own allegations as to when XRP was first offered for sale and how he purchased XRP require dismissal of his claims.

Referring to the lead plaintiff, Bradley Sostack, the company notes that he “purchased XRP on an exchange in January 2018 from an unknown third party, at a time when Defendant Ripple’s sales accounted for less than one-tenth of one percent of all exchange-based XRP sales,” and also that the “Plaintiff filed the instant Complaint in 2019.” The case was taken to court in 2018 and the consolidated complaint was filed on Aug. 5, 2019. Sostack and his legal team maintain, however, that Ripple is nevertheless liable due to ongoing sales of the XRP coins.

Regulators to Determine If XRP Is a Security or Commodity

The outcome of the lawsuit is likely to determine the fate of the cryptocurrency to a great but not full extent. If Ripple’s motion to dismiss is eventually accepted by the court in California, the company shouldn’t have issues with other private plaintiffs in the future. And if it’s rejected, Ripple can either try to reach a settlement with the plaintiffs or continue the legal battle to prove XRP is not a security. However, the U.S. Securities and Exchange Commission can always argue its own case. The SEC can still file a lawsuit with the District Court for the Southern District of New York, like it did in the case with Telegram’s sale of the Gram tokens.

And that’s not the end of it as cryptocurrencies in the U.S. can also fall under the purview of the Commodity Futures Trading Commission (CFTC). In a recent interview with Cheddar, CFTC Chairman Heath Tarbert emphasized that his organization is creating a market for the digital assets within its jurisdiction such as BTC and ETH. But when asked if more cryptocurrencies like XRP will fall under the commission’s purview this year, Tarbert replied “It’s unclear, stay tuned.” Part of the issue, he elaborated, is that “our jurisdiction we share with the SEC. If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.”

If the district court in California rejects the motion to dismiss the lawsuit and eventually decides that Ripple has been breaking the law by selling an unregistered security, the price of the third-largest cryptocurrency will be at risk. Allowing Sostack to challenge the classification of XRP, “would not only threaten to eliminate XRP’s utility as a currency, but it would upend and threaten to destroy the established XRP market more broadly — a market involving over $500 billion in trading over the last two years,” the company’s legal team warned in the motion. However, even if Judge Hamilton dismisses the lawsuit, XRP’s fate will still ultimately depend on the decisions taken by U.S. regulators SEC and CFTC.

What do you think will be the future for Ripple and XRP? Share your thoughts and expectations in the comments section below.

Images courtesy of Shutterstock.

Do you want to keep an eye on moving cryptocurrency prices? Visit our Bitcoin Markets tool to get real-time price updates, and head over to our Blockchain Explorer tool to view all previous BCH and BTC transactions.

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Crypto vs RBI: 3 Days of Intense Supreme Court Hearings

18/01/2020 by Idelto Editor

India’s supreme court heard the crypto case in detail over three consecutive days this week. In addition to intense arguments against the central bank having the power to ban crypto, the judges learned how other countries regulate this new sector, the amended EU directive, the FATF guidance, and less invasive crypto measures.

Also read: Regulatory Roundup: EU-Wide Crypto Regulations, New Rules in Europe, US, Asia

3 Days of Crypto Case at Supreme Court This Week

The Supreme Court of India began hearing the crypto case for the year on Tuesday as scheduled. The counsel for the Internet and Mobile Association of India (IAMAI), Ashim Sood, took the center stage, recapping the case for the judges. He then spent all day Wednesday presenting extensive arguments against the banking restriction imposed by the central bank, the Reserve Bank of India (RBI), as News.Bitcoin.com has reported.

Thursday was another full day at the supreme court for the crypto case, local news platform Crypto Kanoon reported. Sood started by arguing that the RBI does not have the power to “absolutely prohibit” crypto activities in India, emphasizing that taking away bank accounts constitutes absolute prohibition for crypto exchanges.

The court asked why the exchanges cannot use foreign banks operating in India, such as Citibank. Sood explained that even foreign banks are under the purview of the central bank. Only one bank, the State Bank of Sikkim, is not regulated by the RBI but crypto exchanges do not have access to this bank. The court also asked the IAMAI counsel to explain how peer-to-peer and crypto-to-crypto trading models work.

How Other Countries Treat Crypto Assets

During Thursday’s hearing, the IAMAI counsel presented to the court an in-depth rundown of how other countries worldwide treat crypto assets. He noted that no country has concluded that it is impossible to regulate the crypto sector — only the RBI claims that it cannot be regulated and proceeded to ban it, Crypto Kanoon described.

Among the foreign jurisdictions mentioned before the court were Australia, Germany, Indonesia, Italy, Malta, Japan, Nepal, Pakistan, South Africa, South Korea, the U.K., the European Union, and the U.S., particularly the state of New York. In Japan, the regulator has chosen to regulate the crypto sector even after the fall of Mt. Gox, Sood told the court.

The nature of cryptocurrency was also called into question. Besides being a commodity, the court told the IAMAI counsel that it has features of a medium of exchange, which would place it under the purview of the RBI. The court added that it has no utility as a commodity.

Sood promptly responded that no one is required to use cryptocurrency as a means of payment, asserting that it is not a currency. He explained to the judges that some people find value in digital assets and would exchange them, comparing it to casino chips which are also valuable to people inside the casino. He further told the court that the U.S. Security and Exchange Commission (SEC) is attempting to regulate cryptocurrencies as securities.

IAMAI Counsel Says Crypto Must Be Regulated

The counsel for the Internet and Mobile Association of India spent a substantial amount of time Thursday convincing the court that crypto must be regulated. He read out the EU Anti-Money Laundering Directive and a judgment by a European court that exempts cryptocurrency from VAT.

After asking questions about the Silk Road, the dark web, and TOR, the court said that cryptocurrency, like other technology, is not bad but can be used for bad purposes. Sood quickly responded that crypto must be regulated like other technologies with potential risks.

Several global reports were referenced during Thursday’s hearing. A World Bank report which analyzes electricity consumption of crypto mining was discussed, along with reports by the Financial Action Task Force (FATF), an intergovernmental body responsible for setting policies to combat money laundering and terrorism financing. The IAMAI counsel read out the advantages of cryptocurrency outlined in the reports, such as the potential to serve the unbanked.

The hearing continued with a discussion of India’s Prevention of Money Laundering Rules, 2005. Crypto Kanoon detailed that all documents referred to before the court show that there are risks but all references indicate that the first step must be the least invasive measure.

RBI’s Reply to IAMAI Representation

Much of the subsequent arguments concern the RBI’s reply to the IAMAI representation dated September 2019. The central bank claims that there were some new facts to warrant its action in the interest of the public, the news platform conveyed. Sood immediately countered, affirming that there was no new fact.

In its reply, the RBI also said that its banking restriction was due to cryptocurrency’s anonymity and its uses in nefarious activities. The central bank additionally claims that people who bought cryptocurrencies want to mask their identity. Sood swiftly contradicted, clarifying that the RBI was incorrect as people invest in cryptocurrencies as an alternative investment option, reiterating that the central bank cannot justify the ban.

Sood suggested that a less invasive measure by the RBI could have been to ask banks to deny loans while taking cryptocurrencies as collateral or to not take deposits in cryptocurrencies. “But you can’t deny to give me bank accounts. You have a choice to not involve in my business activity by taking less invasive measure,” Crypto Kanoon quoted him as saying.

Further, the RBI said it is concerned about cross border transactions. Sood submitted that the government can put a restriction on them and impose a penalty as a consequence in that situation. He stressed that not only does a ban not defer such transactions but such restrictions will only make the regulators lose sight of violations.

In the RBI’s counter affidavit, which was read out in detail on Thursday, the central bank stated that virtual currencies are not under its regulatory purview, admitting that it is not privy with different kinds of virtual currencies. Nonetheless, a banking ban was placed on the sector, Sood pointed out to the judges. The RBI also mentioned a Binance hack to justify measures it took to prevent cybersecurity threats. Crypto Kanoon conveyed that Sood mentioned that the power to stop crypto is not found in any statutes, elaborating:

[The] power to regulate monetary policy does not empower RBI to stop or exclude crypto.

The IAMAI counsel concluded that the RBI has adopted a kitchen sink approach, attempting to stop crypto activities indirectly since it has no direct control over the sector. The court is expected to resume hearing the case on Tuesday.

What do you think of the crypto vs. RBI supreme court hearing this week? Do you think the court will lift the RBI ban next week when the hearing resumes? Let us know in the comments section below.

Images courtesy of Shutterstock and the FATF.

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Central Banks Worldwide Testing Their Own Digital Currencies

16/08/2019 by Idelto Editor

Central banks worldwide are examining the possibility of issuing a central bank digital currency (CBDC), with some already testing theirs for different uses. Countries that have advanced their digital currency projects include China, Singapore, Canada, the Bahamas, Thailand, Uruguay, and Sweden. India has also included the digital rupee in the country’s draft cryptocurrency bill.

Also read: Crypto Regulations Are Changing Worldwide to Comply With FATF Standards

China’s CBDC Is ‘Almost Ready’

The most recent country to claim that its CBDC is near completion is China. According to media reports, The People’s Bank of China (PBOC) is “almost ready” to issue the country’s own sovereign digital currency. This was revealed at a forum held in the northern Chinese province of Heilongjiang on Aug. 10 by Mu Changchun, deputy director of the PBOC’s payments department.

He explained that the CBDC will use a two-tier system where both the central bank and financial institutions will be legitimate issuers, Reuters conveyed, noting that “the digital currency would not solely rely on blockchain technology as current blockchain technology would not be able to handle transaction volumes in China.” The publication added that the PBOC started researching the possibility of launching its own CBDC in 2014 with the aim “to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply.”

Trial Between Singapore and Canada

The Monetary Authority of Singapore (MAS) and the Bank of Canada have jointly conducted an experiment on cross-border and cross-currency payments using CBDCs. The two central banks linked up their respective experimental domestic payment networks — Project Jasper and Project Ubin — built on two different distributed ledger technology (DLT) platforms, the MAS described in May. The trial was carried out in partnership with Accenture and J.P. Morgan. The former supported the development of the Canadian network on Corda, while the latter supported the Singapore network on Quorum.

“Cross-border payments today are often slow and costly,” the MAS remarked, emphasizing that they rely on a correspondent banking network “subject to counterparty risk, inefficient liquidity management, and cumbersome reconciliation.” The two central banks, therefore, collaborated to use CBDCs “to make the cross-border payment process cheaper, faster, and safer.” The MAS elaborated:

This is the first such trial between two central banks, and has great potential to increase efficiencies and reduce risks for cross-border payments.

Bahamas Testing CBDC for Payments

Another country that is testing a CBDC is the Bahamas. The International Monetary Fund (IMF) released details of its discussion with the Bahamas’ central bank in July, including work done on the country’s CBDC. “By enabling peer-to-peer transactions, for example through e-wallets, a CBDC can increase access to digital payments systems,” the IMF explained:

The CBOB [the Central Bank of the Bahamas] is planning to pilot a digital version of the Bahamas dollar as a means of payment to boost financial inclusion, especially in smaller islands of the archipelago.

Noting that “the issuance of e-currency can also pose risks to financial stability, cybersecurity, and in the AML/CFT sphere,” the IMF staff “recommended investment in human capital and technological capabilities to ensure that the pilot — and the full-scale adoption of a general-purpose CBDC — is compatible with, and complementary to, the existing financial infrastructure.”

Thailand’s Multi-Phase CBDC Testing

The Bank of Thailand (BOT) has completed the second testing phase of its CBDC called Project Inthanon. Started in August last year, the first phase focused on developing a proof-of-concept decentralized Real-Time Gross Settlement system (RTGS) that uses a CBDC on a distributed ledger. The second phase, now complete, started in February to further explore how DLT can be used in two specific areas.

The first area was “the tokenization of BOT-issued debt instruments on a distributed ledger to achieve their life-cycle activities and delivery-versus-payment settlement.” The second was “the incorporation of regulatory compliance and data reconciliation functionalities into the payment process on a distributed ledger, so as to improve process efficiency and mitigate operational and compliance risks.” The results of the second testing phase were released in July.

The bank will soon proceed with the third phase, which aims to trial a “DLT-based RTGS prototype” that “will be expanded to connect with the other systems to support cross-border funds transfer transactions,” the BOT revealed. “The scope will also cover the regulatory and compliance issues from both THB and foreign currencies.”

Uruguay, Sweden and ECCU

In Uruguay, the central bank completed a pilot program on a retail CBDC in April last year as part of a wider governmental financial inclusion program. The pilot began in November 2017 to issue, circulate and test an e-peso, the Bank for International Settlements (BIS) described. “Transfers took place instantly and peer-to-peer, via mobile phones using either text messages or the e-peso app.” However, no blockchain was used. Twenty million e-pesos were issued, all of which were canceled when the pilot ended. The program is now in an evaluation phase before a decision on further trials and potential issuance can be made.

In Sweden, the Riksbank started working on an e-krona project in the spring of 2017 in response to many years of declining cash use. “An e-krona would give the general public access to a digital complement to cash, where the state would guarantee the value of the money,” the central bank’s website describes. While “There is no decision on whether or not to issue an e-krona,” the Riksbank confirmed that it “is continuing to investigate the possibilities for issuing an e-krona to increase competence and in this way be better prepared to meet a new digital payment market.”

The Eastern Caribbean Central Bank (ECCB) has signed a contract with Barbados-based fintech company Bitt Inc. to conduct a blockchain-issued CBDC pilot within the Eastern Caribbean Currency Union (ECCU). This pilot will involve a securely minted and issued digital version of the EC dollar (DXCD), which will be distributed and used by licensed financial institutions and non-bank financial institutions in the ECCU. The DXCD will be used for financial transactions using smart devices between consumers and merchants. “For example, an individual in St Kitts and Nevis will be able to send DXCD securely from his/her smartphone to a friend in Grenada in seconds — and at no cost to either party,” the ECCB explained.

India Open to a Digital Rupee

The Indian government is currently deliberating on a draft cryptocurrency bill entitled Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019. The bill proposes allowing the government to create a digital rupee as legal tender and currency, and defines digital rupee as “a form of currency issued digitally by the Reserve Bank and approved by the central government to be legal tender.”

The bill states that “The central government, in consultation with the Central Board of the Reserve Bank, may approve digital rupee to be legal tender with effect from such date and to such extent as may be specified.”

Why Central Banks Are Exploring CBDCs

The IMF explained in a June report that a number of central banks are examining issuing a CBDC, noting that those in advanced economies with falling use of cash are exploring the option as an alternative payment method. “The main reasons to consider CBDC are lowering costs, increasing efficiency of monetary policy implementation, countering competition from cryptocurrencies, ensuring contestability of the payment market, and offering a risk-free payment instrument to the public,” the report details:

Most central banks are considering non-anonymous CBDC. Almost all seem to be favoring a hybrid approach that allows the relevant authorities to trace transactions. Several are focusing research on a two-pronged approach with anonymous tokens for small holdings/transactions, and traceable currency for large ones.

Meanwhile, countries with underdeveloped financial systems and many unbanked citizens see CBDCs “as means to improve financial inclusion and support digitalization,” the IMF noted, adding that “several policy and technical hurdles need to be addressed, and a clear case for issuing CBDC has not yet emerged.”

BIS General Manager Agustín Carstens said at the end of June that “Global central banks may have to issue their own digital currencies sooner than expected,” The Financial Times reported. With Facebook’s Libra announcement, a number of central banks have reportedly ramped up efforts on their CBDCs. Concurring with the IMF, Carstens emphasized that “There needs to be evidence for demand for central bank digital currencies and it is not clear that the demand is there yet.” He was quoted as saying:

Many central banks are working on it; we are working on it, supporting them … And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.

What do you think of central banks issuing their own digital currencies? Which country do you think will launch one first? Let us know in the comments section below.

Images courtesy of Shutterstock.

Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The Local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

The post Central Banks Worldwide Testing Their Own Digital Currencies appeared first on Bitcoin News.

Georgia Exempts Bitcoin From VAT to Become the Next Country to Affirm Its Currency Status

13/07/2019 by Idelto Editor

Georgia Exempts Bitcoin From VAT to Become the Next Country Affirming Its Currency Status

Cryptocurrency taxation is a subject that concerns a growing number of users, traders and investors. An area that creates a lot of confusion among taxpayers is the application of VAT, or the value-added tax most countries levy on the sales of goods and services. Georgia has become the latest nation to free crypto-fiat transactions from VAT, a decision that affirms Bitcoin’s status as a currency. The same has already happened in many other jurisdictions, despite the absence of comprehensive regulations.

Also read: Money Laundering Scandals Bring Court Charges and Record Job Cuts to Euro Banks

VAT-Free Crypto Exchange, No Income Tax for Traders

Traders of digital coins, both companies and individuals, will not owe VAT to the government in Tbilisi. That’s according to a newly adopted bill aimed at regulating the taxation of entities that trade or mine cryptocurrencies. The law was recently signed by Georgia’s finance minister Nodar Khaduri and entered into force at the end of June. The document provides a legal definition for decentralized digital money:

Cryptocurrencies are digital assets that are exchanged electronically and based on a decentralized network. Their exchange does not require a reliable intermediary and they are managed using distributed ledger technology.

From now on, residents of the South Caucasian republic exchanging coins to local or foreign fiat currency will not be obliged to pay the value-added tax. Furthermore, private citizens who conduct such transactions will also be spared from income tax. Khaduri stressed that the national currency, the Georgian lari, will remain the only legal tender in the country and using cryptocurrencies for payments will not be allowed. But that’s valid for any foreign currency as well.

Mining companies will have to pay VAT unless they are registered abroad. Georgia, which offers abundant and cheap electrical energy generated by its many hydropower plants, has become a regional mining hotspot over the past few years. Now many companies from the industry are likely to relocate their official headquarters to offshore zones while maintaining their operations in the Caucasus.

Europe Considers Bitcoin a Currency for VAT Purposes

So far, European countries have been trying to regulate cryptocurrencies almost in a decentralized manner. Bitcoin is often treated differently by tax authorities in various EU member states and elsewhere on the continent. Germany, for example, considers the purchase of digital assets an investment but capital gains tax is due only if the coins are held for less than a year.

For many practical purposes, the United Kingdom treats cryptos like foreign currencies. Residents of Bitcoin-friendly Switzerland are expected to pay income and profit tax on their digital cash holdings. Estonia applies capital gains tax on the profit from crypto investments while Slovenia does not tax the gains of individual cryptocurrency traders.

Generally, purchases and sales of cryptocurrency are not subject to VAT taxation in Europe, which is the birth place of the value-added tax. Financial regulators and revenue services in most countries often refer to a decision by the Court of Justice of the European Union (ECJ) which ruled in 2015 that services for the exchange of bitcoin with any traditional fiat currency are exempt from VAT.

Despite the absence of a common European approach towards cryptocurrencies in terms of VAT taxation, the topic has been discussed by the VAT Committee of the European Commission on several occasions. Different proposals on the treatment of digital assets for VAT purposes have been reviewed by the advisory body which provides clarifications on EU’s VAT Directive. These proposals include the classification of Bitcoin as currency, electronic money, negotiable instrument, security, or digital product.

Since the ECJ ruling, the case for accepting bitcoin as a currency has been gaining ground in the light of applicable VAT regulations. In essence, the court decided that the exchange between virtual and traditional currency constitutes the supply of services which are exempt from VAT under Article 135(1)(e) of the VAT Directive.

VAT Is the Cash Cow of Many Governments

Value-added tax (VAT) is a widely implemented indirect tax based on the increase in value of a product or service until it reaches the market. It is collected by retailers from end users and, in most cases, in the jurisdiction where these products and services are consumed. It’s usually a flat rate charged on the final value of the sold goods or provided services.

VAT is an important income source for many governments around the world. Well over 160 nations employ the tax and in certain countries like France it accounts for around half of the state budget receipts. It is generally considered fairer than the sales tax used in the U.S., for example, which can potentially be charged on itself as it is applied at each stage of production and distribution.

Wrapping one’s head around extensive VAT regulations can be a difficult task for many businesses and those in the crypto industry are no exception. But companies need to do so, as when they are registered under VAT laws they are entitled to apply for tax credit for the VAT amounts paid on the value of the materials and services used during production. The mechanism presents an opportunity to get some money back from the government.

Crypto-Related Services Pose a Challenge to VAT Rules

The ECJ ruling led to the issuance of additional interpretations by the VAT Committee that have no legal effect but can nevertheless be used as a reference by national authorities dealing with matters related to the VAT treatment of cryptocurrencies. One of them suggests that no VAT should be charged on the value of the digital coins themselves when they are used as a means of payment.

VAT is due, however, on the value of goods and services purchased with cryptocurrency. Their supply should be treated in the same way as taxable supplies of goods and services paid with fiat currencies. The taxable amount in such transactions should be the one received by the supplier. And if it is denominated in cryptocurrency, the tax should be paid on the equivalent expressed in the national currency of the respective EU member state at the time of the transaction.

Although these suggestions, detailed in a recently published article by PWC Cyprus, provide many answers pertaining to the VAT treatment of crypto transactions, important questions remain unanswered. And these are actually very hard to answer. For example, how do you define the appropriate exchange rate when reporting the value of a crypto transaction in fiat money?

According to the VAT Directive, if bitcoin is viewed as a foreign currency that could be either the latest rate recorded on “the most representative exchange market” of the member state or the latest official exchange rate published by the European Central Bank (ECB). The VAT Committee provides a third option as well: “the open market value of the virtual currency, determined under the responsibility of the taxpayer.”

Neither of these alternatives, however, are directly applicable to cryptocurrencies without more questions. First of all, there’s no central bank publishing a daily spot price for bitcoin. Second, cryptos are often exchanged on a global platform that may not necessarily be the most representative for a particular country. And third, how do you determine the abstract “open market value” of a volatile digital asset without selling it?

Other aspects of VAT taxation in the case of cryptocurrency transactions that the VAT Committee has attempted to clarify include the provision of wallet and exchange services as well as the verification of crypto transactions through mining. For instance, free wallet services are exempt from taxation but the advisory body believes that when providers charge fees, they should fall within the scope of VAT, just like Swift services offered by traditional banks. As for exchange services, they are exempt from VAT when the supplier buys and sells the coins as a principle owner. But where a platform acts as an intermediary between buyers and sellers and charges a fee for their access to its virtual marketplace, these services are subject to VAT.

Things are much more complicated with crypto mining. On the one hand, until miners are rewarded with newly minted coins, transaction fees are in principle paid voluntarily. That means they are still outside the scope of VAT. On the other hand, fees are paid in most cases anyway, as wallets usually have them as a default option and users are not willing to wait too long for their transaction to be processed. Currently, the European Commission’s VAT Committee supports the view that mining is an “essential activity for the actual transfer of funds,” which is closely related to the supply of digital coins and is not a support service. Hence, crypto transaction fees should not be subject to VAT.

What’s your opinion about the applicability of the VAT regime in regards to crypto-related transactions? Share your thoughts on the subject in the comments section below.

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