News updates February 4, 2022

1. Hawaii Introduces Crypto-Friendly Bills

Hawaii’s state Legislature has introduced several bills that aim to make its financial markets some of the most crypto-friendly in the US. According to the Hawaii Tribune-Herald, seven crypto-friendly bills have been introduced in the state’s legislature.

These new bills could help to make the state friendlier to the crypto sector. In short, the bills seek to create a regulatory task force for the crypto sector. Additionally, they would allow state agencies to accept crypto as payment for services. Lawmakers backing the bills are quite optimistic about their success. If passed, they could transform Hawaii into the leading state in terms of crypto transactions.

The two main bills in this push to make Hawaii crypto-friendly are Bill 2697 and Bill 2287. These two bills would exempt crypto transactions from the state’s Money Transmitters Act. In its current form, the act has imposed strict requirements on crypto transactions operating in the island state. Consequently, most mainstream exchanges have opted to remain out of the state.

2. Petition to reduce 30% crypto tax in India garners over 15,000 signatures in hours

On February 2, India revealed its plans to launch a ‘digital rupee’ before 2023, as well as a 30% tax on trading cryptocurrencies and non-fungible tokens (NFTs) as the nation edges closer to recognizing crypto as legal tender.

Since then, there has been a pushback against the planned crypto tax in the nation, prompting the creation of a petition on Change.org titled “Government of India: Introduce Reasonable Crypto Tax Policies.“

Approximately 15-20 million crypto investors are registered in India, with thousands of young Indians with an average age of 17-27 years actively involved in developing and implementing different services in the cryptocurrency industry.

Indian officials stated on Tuesday that they want to levy taxes on cryptocurrency revenue, making India the latest large nation to move quickly toward legalizing and regulating crypto. 

The government also wants to introduce its own blockchain-based currency, the digital rupee, which would be managed by the Indian central bank, by April 2023, according to Finance Minister Nirmala Sitharaman. Income derived from the transfer of any digital assets, would be subject to a 30% tax rate.

3. Russia's Minister of Finance Suggests Letting Banks Sell Crypto: Report

Cryptocurrencies should be treated like investments in gold and other assets, the minister wrote in a letter to the prime minister.

Russian Minister of Finance Anton Siluanov reiterated the ministry's stance on regulating rather than banning crypto, and suggested legalizing cryptocurrency trading through banks, Russian newspaper Kommersant said, citing a letter Siluanov sent to Prime Minister Mikhail Mishustin on Wednesday.

In contrast to the Bank of Russia, which advocates a ban on crypto, Siluanov suggests banks can be authorized to provide cryptocurrency exchange services and licensing rules will be introduced for other types of businesses as well. For companies that aren't licensed, providing crypto services would be treated as a criminal offense. Both the Ministry of Finance and the Bank of Russia agree that cryptocurrencies cannot be legal tender in Russia.

4. Indian Parliament Unlikely to Discuss Crypto Bill During Budget Session - Finance Minister

The government will also track the money trail in crypto deals and every transaction will have 1% TDS imposed, taxing every transaction in the crypto world,“ she said.

Other digital currencies and cryptos “will never become legal tender. Bitcoin, ethereum, or any picture of [an] actor [turned into an] NFT will never become a legal tender,” he said.

5. What the IRS Court Case Over Crypto Staking Taxes Really Means

The IRS doesn't offer much guidance for paying taxes on crypto staking rewards. A lawsuit may nudge it toward changing the rules.

A couple sued the IRS after they were denied a refund request for taxes paid on Tezos staking rewards.
After the lawsuit started, the IRS offered a refund.
But the plaintiffs now want a more definitive ruling about crypto taxation.

Should a person be taxed when they receive a staking reward in the form of cryptocurrency—or when they sell it?

That's the question at the heart of a lawsuit being decided in a U.S. federal court, after a Tezos user was denied a refund request from the Internal Revenue Service on taxes owed for earning staking rewards.

Current U.S. tax policy is a tad unclear on whether these rewards are taxable. In fact, it doesn't mention staking at all. But it does say that mining rewards—using one's computing power and electricity to validate blockchain transactions in exchange for Bitcoin or another cryptocurrency—is taxable as income for its "fair market value" (i.e., the going exchange rate) on the day it is earned.

6. Major Crypto Exchanges Ready to Work in Russia Under Proposed Rules, Report. 

Cryptocurrency Exchanges to Set Up Shop in Russian Federation
Some of the world’s largest digital assets exchanges, interviewed by Kommersant, are not objecting to a potential requirement to establish permanent presence in Russia in order to continue to offer services to its citizens. The idea to oblige foreign-based platforms to do so is part of the government’s roadmap to regulate the country’s crypto space.

The document, reportedly signed by Deputy Prime Minister Dmitry Chernyshenko, has been prepared as an alternative approach to Bank of Russia’s call for a ban on trading, among other crypto operations. With its hardline stance, the central bank has found itself in isolation as most other government institutions, including the Finance Ministry, favor regulation over prohibition. 

Binance, the largest crypto exchange by volume, told the business daily it’s ready to open a branch or even register a legal entity in Russia, “if this contributes to the convenience of users and the security of operations.” Olga Goncharova, head of government relations for Russia and the CIS countries, said that Binance supports the regulatory roadmap as a step that “will make operations more understandable, transparent, and user-friendly” while also noting the proposals need further “calibration.”

Another major crypto trading platform, Huobi, stated that it hopes for an “open dialogue with Russian regulators.” Its team believes that a constructive cryptocurrency law would help increase confidence in digital assets and exchanges in both individual and institutional investors.

Crypto exchange AAX revealed it has no immediate plans to establish an office in the Russian Federation but it also said it may start working in this direction in case the regulations are approved. AAX is ready to comply with what it described as “legitimate” regulatory requirements. The exchange, which serves around half a million Russian residents, remarked that it keeps information about its clients, their balances, transactions, and trading activities.