News updates June 11, 2022

1. Bitcoin Slides As CPI Report Hints At Soaring Inflation – More Bearish Pressure Ahead?

As traders buckle down for the weekend, Bitcoin prices ushered in Friday’s session rather sluggishly.

During European trading hours, Bitcoin stayed slightly around $30,000, displaying signs of weakening ahead of the U.S. consumer price index (CPI) release.

The price of Bitcoin decreased on Friday after U.S. CPI data revealed that inflation was not abating.

 *Bitcoin Drops 1.6% Minutes After CPI Report*

In contrast to forecasts, the U.S. CPI increased last month, as indicated by the data. BTC fell by 1.6% in the minutes following the release.

BTC prices continue to trade below this week’s resistance level of $30,500 and have inched closer to the $29,500 support level.

BTC traders have experienced a consolidation between $32,000 and $28,650 after the selloff in May pushed the BTC/USDT pair to a low of $26,350. As a result, the BTC price has oscillated within a range for about a month, signaling market participants’ uncertainty.

 *CPI Climbs 8.6% YOY Last Month*

According to the U.S. Department of Labor, the CPI, the most commonly followed measure of inflation, rose 8.6 percent year over year in May, up from 8.3 percent in April. The market anticipated a reading of 8 percent.

U.S. inflationary pressures have driven the Federal Reserve to boost interest rates more rapidly, suggesting additional losses for riskier assets.

In spite of negative macroeconomic market sentiment and systemic threats in the broader cryptocurrency market, Bitcoin has traded inside a narrow band of $28,000 to $31,000 over the previous 30 days.

In addition to rising interest rates, inflation, and the economic uncertainty that has plagued the entire financial system as a result of Russia’s unprovoked invasion of Ukraine, rising interest rates and inflation are also among the primary factors that have contributed to the negative market sentiment.

 *BTC Sheds Nearly 65% From ATH*

The world’s most sought-after crypto is down almost 65 percent from its all-time high, which was reached in the fourth quarter of 2017.

Despite recent losses, Bitcoin values are about 1 percent higher than they were a week ago, when they were trading for less than $29,000.

Meanwhile, Saturday’s Coingecko graphic depicts BTC trading at $29,271.63, down 1.5 percent in the last seven days.

2. Bitcoin's Hashrate Hits an All-Time High Nearing 300 Exahash per Second

While Bitcoin’s mining difficulty was expected to decrease two days ago on June 8, instead the difficulty increased by 1.29% on Wednesday. On the same day, at block height 739,928, Bitcoin’s hashrate tapped an all-time high (ATH) reaching 292.02 exahash per second (EH/s).

 *Bitcoin’s Blockchain Secured by Close to Three Hundred Quintillion Hashes per Second*

This week, the Bitcoin network has never been more powerful as the protocol’s computational processing power reached a lifetime high on Wednesday. In fact, at 292.02 EH/s the network neared the 300 EH/s region for the first time.

The last hashrate ATH took place on May 2, 2022, at Bitcoin block height 734,577, when it reached 275.01 EH/s. The jump to 292.02 EH/s 37 days later, was approximately 6.18% higher than the ATH on May 2. The ATH on Wednesday was only 2.73% away from reaching 300 EH/s or 0.3 zettahash per second (ZH/s) range.

The hashrate has been running so high that the difficulty adjustment algorithm (DAA) that was expected to decrease, increased by 1.29% instead. Three days ago on June 7, the difficulty was expected to see a reduction of 0.51%.

Despite the 1.29% increase, the difficulty is still lower than the ATH of 31.25 trillion recorded on May 10, 2022. The network’s difficulty is currently at 30.28 trillion and it is expected to remain at that metric until the retarget date on June 21. That’s roughly ten days from now or around 1,600 blocks away until the next DAA change.

At 292 exahash per second, two hundred ninety-two quintillion hashes per second (H/s) were dedicated to the Bitcoin blockchain’s security on Wednesday. Three-day statistics show that Foundry USA has been the top mining pool, with fifty-two quintillion four hundred twenty quadrillion H/s or 52.42 EH/s

Foundry has discovered 109 Bitcoin block rewards out of the 475 blocks mined during the last 72 hours. Antpool’s hashrate has hovered around 35.11 EH/s or thirty-five quintillion one hundred ten quadrillion H/s. Antpool found 73 blocks out of the 475 blocks found and F2pool captured 32.EH/s and discovered 67 blocks over the last three days.

Current hashrate speeds and the rate it takes to mine the next 1,600 blocks will determine the next difficulty change. Currently, using today’s metrics, the difficulty is expected to increase by 1.52% from the current position, but that estimate is likely to change.

3. Nigerian Court Sentences Crypto Fraudster to One Year in Jail, Accused Given Option to Pay Fine

A Nigerian court has convicted and sentenced a man to one year in prison who is accused of duping an unsuspecting cryptocurrency investor. On its charge sheet, the prosecution said that the man had contravened Nigeria’s anti-fraud laws and hence should be punished accordingly.

 *Fake Cryptocurrency Investment Scheme*

A court in Nigeria has convicted a man accused of using a bogus cryptocurrency platform to defraud $680 from an unsuspecting investor, a report has said. In its ruling, the Port Harcourt Zonal Command of the Economic and Financial Crimes Commission (EFCC) said the man, Obu Ebibo, whose alias is Kenneth Gibson, must serve one year in jail.

The court however said the accused has an option to pay a fine of $1,180 (N500,000) which he can deposit into the government’s consolidated revenue account. According to a PM News report that details the accused’s alleged crimes, by committing the alleged offenses, Ebibo was in contravention of Nigeria’s anti-fraud laws.

That you Obu Gabriel Ebibo (alias Kenneth Gibson) on or about the 1st November 2021, in Port Harcourt, within the jurisdiction of this Honourable Court with intent to defraud obtained an aggregate sum of Six Hundred and Eighty United States Dollars ($680.00 USD) on the pretence that, the money was meant for cryptocurrency investment, a pretext you knew to be false and thereby committed an offence contrary to Section 1 (2) of the Advance Fee Fraud and Other Fraud-Related Offences Act 2006 and punishable under Section 1 (3) of the same Act,” the accused’s charge sheet states.

Noting that Ebibo had pleaded guilty, the prosecution counsel only identified as F.O. Amama is reported to have requested the court to sentence the accused accordingly. However, Ebibo’s lawyer argued that since his client had accepted charges against him, the court should show mercy to the first-time offender.

In handing down the sentence, the judge reportedly ordered that the mobile device used by the offender be forfeited to the state.

4. Abra Touts First Bitcoin Card on the American Express Network

Abra Touts First Bitcoin Card on the American Express Network
Cardholders will be able to earn Bitcoin and other cryptocurrencies on purchases made via the Amex-powered credit card.

Abra announced today the launch of its crypto credit card, which will use the American Express network and give cardholders the chance to earn Bitcoin as a reward for making purchases.

We've known Abra for a long time—since 2015—and we've been excited about [Abra founder and CEO] Bill [Barhydt]’s vision,” Mohammed Badi, American Express President of Global Network Services, told Decrypt. “And we wanted to play our role in supporting Bill and his vision, and having an Abra card on the American Express network felt like a natural next step.”

Before the announcement at Consensus 2022 in Austin, Barhydt told Decrypt that the Abra Crypto Card is a “traditional credit card" and that cardmembers will receive a statement in U.S. dollars and crypto-based rewards in exchange for those payments.

He added that the crypto reward options will start with Bitcoin and Ethereum, with more perks and rewards coming later. According to Barhydt, the program announced today is scheduled to launch later this year.

5. New Crypto Bill Suggests Some DAOs Be Taxed Like Businesses

The bill specifies that DAOs are by default classified as a business entity, meaning that these community-led groups can expect to pay up on tax day

* Senators Lummis and Gillibrand’s bill attempts to bring DAOs into the tax code, but classification of groups will be complicated.

* State versus federal classifications are also concerning, one industry member said.

The long-awaited bipartisan digital asset bill introduced to Congress Tuesday has many in the industry optimistic about the future of crypto policy, but sections of the legislation, if passed, may significantly change how actors in the space operate. 

Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., co-sponsored the initiative, dubbed the Responsible Financial Innovation Act. While the bill includes some measures mentioned in other proposed legislation, it also tackles new issues for the first time, one of which being DAOs, or decentralized autonomous organizations. 

In the section on DAOs, the bill specifies that the default classification for these community-led entities is as a business entity for tax purposes. It also requires most DAOs to be properly incorporated in accordance with existing laws of an identifiable jurisdiction, such as a limited liability company (LLC) or partnership.

That means that DAOs would be taxed as corporations or as partnerships, despite the differences between DAOs and traditional corporations and partnerships,” said Dario de Martino, a cryptocurrency and blockchain attorney at Allen & Overy. “Under the existing default rules, a DAO would be a partnership if the DAO is domestic or if it is non-US, and at least one of its members does not have limited liability.”

Because DAOs are by definition decentralized and have several members, often with frequent turnover, classification and taxes are going to be complicated, de Martino added.

The bill states that to qualify as a DAO, an organization must be “properly incorporated or organized under the laws of a State or foreign jurisdiction as a decentralized autonomous organization, cooperative, foundation or any similar entity.”

Looking forward, the definition of a DAO will be crucial — is it a corporation or a security?,” Aaron Tilton, CEO of SmartFi and former Utah state legislator, said. “DAOs allow voting rights for governance and some economic distribution rights similar to dividends.”

DAOs may require sub-classification for tax purposes depending on how they operate and how they remunerate their members, Tilton added. 

There will be much for both federal and state legislatures to tackle in the coming months and years on this issue,” he said. 

The bill states that a project can avoid business disclosure requirements if it can prove it is sufficiently “decentralized” to not be considered a business entity. 

“Termination of disclosure requirements is tied to whether a project has substantial evidence that there have been no entrepreneurial or managerial efforts with respect to the underlying assets,” de Martino said. 

The bill states that a project can avoid business disclosure requirements if it can prove it is sufficiently “decentralized” to not be considered a business entity. 

“Termination of disclosure requirements is tied to whether a project has substantial evidence that there have been no entrepreneurial or managerial efforts with respect to the underlying assets,” de Martino said. 

The proposed disclosure regime would remain in place until the issuer can demonstrate that the project is decentralized through an opt-out process, de Martino said. The issuer must submit a certification, which may be denied if the SEC determines by majority vote that the certification is not supported by substantial evidence. 

State versus federal classification is also an issue, Tilton said. LLC and corporation filings are submitted to state entities, further complicating the potential implications of Lummis and Gillibrand’s bill, he said. 

The DAO recognition will really be handled at the state level like any other business entities such as corporations or LLC,” Tilton said. “Without state level recognition of DAOs, those federal tax implications will not be affected.”

Jae Yang, CEO of non-custodial crypto exchange Tacen, agreed, adding that enforcement will need to be further clarified.

“Who’s going to be watching these DAOs very closely remains to be seen,” Yang said. “Much like there are tens of thousands of companies that are out there, but not every single company’s internal activities are going to be reviewed by auditors or regulators from outside.

6. Coin Center Sues US Treaury Over 'Unconstitional' Tax Reporting Rule

The reporting rule was included in a 2021 infrastructure law which also galvanized the industry over a separate broker rule.

AUSTIN, Texas — Crypto think tank Coin Center filed a suit against the U.S. Treasury Department and Internal Revenue Service on Friday, claiming a crypto tax reporting requirement enshrined in a 2021 infrastructure law is "unconstitutional."

The requirement, which will take effect in 2024, requires U.S. taxpayers who receive over $10,000 in cryptocurrency to report the social security numbers and other personal information of the sender. The provision was one of several included in a 2021 infrastructure bill, which also included a controversial crypto tax reporting requirement which applied to brokers. That provision galvanized a massive industry backlash, though it was ultimately unsuccessful.

The reporting mandate would force Americans using cryptocurrency to share intrusive details about themselves, both with each other and with the federal government," the lawsuit said. "Under the terms of the mandate, everyday senders and receivers of cryptocurrency would be forced to reveal their names, Social Security numbers, home addresses another personal identifying information."

According to the suit, Coin Center is concerned that these rules would require Americans to store sender information for up to a year in case any given set of transactions could be deemed "related," if the total ultimately reaches $10,000 or more.
Treasury Secretary Janet Yellen and IRS head Charles Rettig are both named defendants in the suit.

7. South Korea: Man arrested on charges of exploiting data leak to steal digital assets

South Korea continues its clamp down on criminal actors in the digital currency space. Police in South Korea’s capital city of Seoul have reportedly arrested and charged a 30-year-old man in connection with digital assets theft. 

According to a report by Segye Ilbo, a local news outlet, the man, called person A, allegedly stole around KRW820 million (US$660,000) in digital currency from 90 victims between January and May this year. 

The police say there is evidence that the man obtained a large cache of personal data that was leaked on a channel on Naver Band, a popular group chat social media platform in the country. 

The group administrator leaked the information by accident and included details of the group member’s digital currency wallets and exchange login information. One victim reportedly lost over $400,000 million, according to the report. 

The police raided his home to make the arrest last month, acting on a tip-off. The hacker is now being charged for fraudulent use of computers under the act of the Aggravated Punishment of Specific Economic Crimes. Under this act, he may face up to five years imprisonment with labor. 

 *South Korea’s war against digital currency crimes proved successful* 

The hacker’s arrest has not been the only digital currency fraud-related action South Korean police recently took. According to the Korea Herald, four operators of a fake digital currency exchange that stole around $1.3 million were also arrested in May. 

Prosecutors wrapped up South Korea’s biggest digital currency fraud case earlier this year. Four digital currency exchange executives accused of stealing $1.9 billion from investors were each handed stringent sentences. 

The police first started paying particular attention to digital currency phishing activities in 2021. The National Police Academy and the ICT ministry teamed up to crack down on digital currency phishing sites. 

However, recent police data shows that digital assets crimes have risen steadily. Per the police data, the total damage recorded from digital currency crimes grew 14-fold from 2020 to reach KRW213.6 billion. There was also a surge in the number of criminal cases and victims. South Korea is working on sweeping regulations for digital assets, with the government ramping up their efforts in the wake of the Terra ecosystem crash that affected a lot of local investors.

8. Jack Dorsey is building ‘Web5’ powered by Bitcoin

Block subsidiary TBD has announced plans to build a new decentralized web centered around Bitcoin (BTC), underscoring founder Jack Dorsey’s belief that the largest blockchain network will play a major role in the internet’s evolution. 

The new project, called “Web5,” represents the latest Bitcoin-centric endeavor to be pursued by Dorsey since stepping down as CEO of Twitter in November 2021.

Whereas Web3 incorporates blockchain technology and tokenization to decentralize the internet, Web5 is being envisioned as an identity-based system that only utilizes one blockchain: Bitcoin. Twitter user Namcios broke down the concept of Web5 in a series of tweets that described several software components working together to enhance the user's experience and enable decentralized identity management.

9. Crypto Community Reacts To News That Kwon Silently Cashed Out $80 Million Monthly Before Terra Implosion

In a shocking twist, the U.S. Securities and Exchange Commission (SEC) has reportedly uncovered evidence that shows Terraform Labs CEO Do Kwon was withdrawing $80 million worth of LUNA (now called Luna Classic) and TerraUSD every month in the lead-up to the collapse of the Terra ecosystem in May.

Responding to these new developments in the Terra debacle, the crypto community expressed their sentiments.

Dogecoin creator shared a meme on Twitter that reads “pretends to be shocked”, while analyst Crypto Michaël said Kwon deserves to be behind bars for getting away with a massive chunk of money when LUNA/UST investors were nursing devastating losses.

Like other crypto aficionados, Michaël also likened the Terra chief to American financier and Ponzi schemer Bernie Madoff who was imprisoned for masterminding a financial racket that ruined thousands of lives.