23 September 2022 |

Colorado Now Takes Crypto Tax Payments—The SEC’s Take on Ethereum


The SEC’s take on Ethereum

  • The SEC filed a civil lawsuit against crypto influencer Ian Balina, for failing to register crypto tokens as securities prior to an ICO launched in 2018. This is not a surprise, the SEC has pursued this type of legal action before. However, the news came from a statement buried within the suit: the SEC believes all transactions within the Ethereum network fall under its jurisdiction. 
  • The SEC presented an argument about their ability to sue Ian Balina that stated the transactions were verified by the Ethereum blockchain, which has most of its validator nodes clustered in the US, therefore, the transactions took place in the US.
  • Even though this statement in itself does not hold any real legal significance, since it is not the main object of study in the suit, nor a formal regulatory position, it might signal a big change in how the SEC views the Ethereum network. Arguing that the geographical location of the majority of a blockchain’s nodes is a valid criterion to consider a transaction being made within a jurisdiction, in this case the US, could allow the SEC to largely expand its regulatory scope.
  • This news, added to the SEC’s chairman’s reported comments on proof-of-stake cryptocurrencies qualifying as securities under the Howey test last week, could very well signal a change in the agency’s future plans to regulate Ethereum. 

Colorado now accepts crypto for tax payments

  • In the midst of ETHDenver, Colorado Governor Jared Polis announced that it will become the first US State to accept cryptocurrency for tax payments purposes. 
  • Taxpayers in the State will be able to use crypto to pay for individual income tax, business income tax, sales and use tax, withholding tax, severance tax, and excise fuel tax.
  • The news also comes with the announcement of an alliance with Paypal and its cryptocurrency arm. The Governor said individuals will be able to utilize their PayPal accounts to use this new alternative, and explained that the government will be receiving payments in dollars, not holding the cryptocurrencies itself. 

FTX looking to raise $1B

  • According to CNBC, crypto firm FTX is in talks to raise additional funds up to $1B at a ~32B valuation from existing investors that include Tiger Global, Softbank’s Vision Fund 2, and Temasek. 
  • As we were able to see after the leak of FTX’s financial statements last month, the firm had an enormous growth during 2021 and the first quarter of 2022, amounting to more than $1B in revenue last year, on top of the $400M round raised in January. However, crypto markets have crashed since then due to macroeconomic conditions, and it is impossible to know the effect this has had on the firm’s financial performance. 
  • Since we hit the crypto winter, Sam Bank-Friedman’s strategy has been to use all that capital to expand FTX around the globe through acquisitions such as BlockFi, Bithumb, a bid on Voyager Digital, and even rumors of negotiations to buy Robinhood. If true, this new funding raise could signal more M&A activity as markets continue to suffer in the midst of a recession and hiking interest rates. Will this benefit the industry as a whole, or just increase FTX’s concentration in the crypto markets?