Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Stablecoins, Metaverse, NFTs
House Fails to Stop SEC’s Accounting Rule SAB 121
Crypto Regulation | Jul 12, 2024
Image: Freepik/pch.vector
US House Fails to Override Biden's Veto on SEC's Controversial Staff Accounting Bulletin 21 (SAB 21)
Recently, a bill to override President Joe Biden's veto of the controversial SEC Staff Accounting Bulletin No. 121 (SAB 121) was not successfully passed by the U.S. House of Representatives. According to SAB 21, businesses that hold digital assets on behalf of clients are required to list those assets on their balance sheets as liabilities.
See: SEC Intensifies Accounting Audits in 2023
The override attempt failed to garner the two-thirds majority required to overcome the presidential veto, even though it was approved by both the House and the Senate with support from both parties.
Background on SAB 121 and Bill to Overturn It
SAB 121, which the SEC released in March 2022, has caused controversy in the cryptocurrency and banking worlds. Through correct accounting for digital assets, the guideline seeks to protect investors and enhance transparency by possibly reducing the risks associated with their volatility. However, opponents contend that this regulation places excessive constraints on companies and may inhibit innovation in the quickly developing crypto markets.
Representative John James (R-MI) proposed the bill to repeal SAB 121, and it received a lot of support, indicating that lawmakers were generally skeptical of the SEC's strategy. The bill's supporters argued that the SEC's guidelines were unduly burdensome and detrimental to companies, particularly those that dealt with digital assets. There was significant bipartisan opposition to the SEC's mandate, as seen by the House's 228–182 vote and the Senate's 60–38 vote.
Biden's Veto and Its Implications
President Biden vetoed the bill emphasizing how crucial it is to uphold strict regulatory standards in order to safeguard investors and consumers. Biden claimed that repealing SAB 121 would weaken the SEC's power and its capacity to impose important financial reporting standards in his veto statement.
See: Canada to Enforce Cryptoasset Reporting by 2027
The House attempted to override the veto after it was issued, but was unsuccessful with a vote of 214–191, falling short of the necessary two-thirds majority. Due to this result, SAB 121 is still in force and will continue to have an impact on how businesses declare their digital assets.
Outlook
More legislative and regulatory hurdles are expected as the sector develops. It will be up to policymakers to strike a balance between protecting investors and maintaining market stability while promoting innovation.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC Drops BUSD Paxos Trust Investigation, No Enforcement
Enforcement | Jul 12, 2024
SEC Ends Investigation into Paxos Over Binance USD Token with No Enforcement Action Taken
The Securities and Exchange Commission (SEC) of the United States has finished its probe into Paxos Trust Company concerning the stablecoin Binance USD (BUSD) issuance and is not taking any enforcement action over BUSD.
Paxos statement as reported by WSJ:
“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified. We are proud of our relentless advocacy for stable-value digital assets and that the SEC staff determined it will not bring enforcement action against Paxos in connection with BUSD.”
Background
Since 2019, Paxos, a regulated blockchain infrastructure company, collaborated with Binance to issue a BUSD stablecoin which was authorized by the New York Department of Financial Services (NYDFS) and is fixed 1:1 to the US dollar.
The SEC warned Paxos in a Wells Notice at the beginning of 2023 that there may be enforcement action taken in response to BUSD's classification as an unregistered security. The NYDFS was compelled by this notice to direct Paxos to stop issuing new BUSD tokens, while stablecoin redemptions were still permitted.
See: Paxos International Launches Yield-Bearing USDL Stablecoin
In response to these regulatory demands, Paxos severed ties with Binance in respect to the issuance of BUSD. The business vowed to protect investors and guarantee that all BUSD tokens are entirely backed by US dollar reserves kept in FDIC-insured accounts.
Outlook
The NYDFS is still keeping an eye on Paxos's compliance and redemption procedures, but this case highlights how much regulatory attention is being paid to stablecoins and other digital assets. As seen by recent steps taken against Uniswap and Robinhood as well as the continuous investigation of Coinbase's staking services, the regulatory moves against Paxos are a part of a bigger trend. The crypto industry is likely to face ongoing regulatory challenges as authorities seek to establish clearer frameworks for digital assets.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Inside Federal Securities Laws and Crypto’s Tightrope
Regulation | Jul 11, 2024
Image: Gurbir S. Grewal Director Enforcement Division, SEC
Insights from SEC's Director of Enforcement: Federal Securities Laws in the Age of Crypto
in a recent speech titled "What's Past is Prologue: Enforcing the Federal Securities Laws in the Age of Crypto", Gurbir S. Grewal, Director of the SEC's Division of Enforcement, delivered an overview of the present legal environment for crypto assets at the Third Annual Symposium of the William & Mary Business Law Review.
See: Challenges in Global Crypto Regulations – Lessons from Dubai
He highlighted the importance of strong enforcement, the continuous applicability of federal securities laws, and the delicate balancing act between innovation and compliance. Below are select quotes across five themes from the depths of the SEC's securities enforcement division that shine light on the implications for the cryptocurrency industry.
1. Historical Continuity of Securities Regulation
Grewal emphasizes the continued applicability of the basic principles that informed the development of US securities laws.
“The history of our securities laws makes clear that Congress always intended the definition of what is a security to be principles-based and flexible to cover the many kinds of schemes where promoters seek others’ money and promise profits in return. Whether something is a security depends on the substance of the transaction – not its name, not its form, and not its underlying technology.”
He implies that crypto assets have to live by the same regulatory frameworks as conventional securities, even though blockchain technology is unique. This guarantees strong investor safeguards while preserving market integrity in the face of technological improvements.
2. Investor Harm and Market Integrity
Grewal laments the substantial financial impact that the volatility of the cryptocurrency market has caused to regular investors.
“The current turmoil in the crypto markets is taking a real toll on everyday Americans. According to one survey, approximately 16% of U.S. adults have invested, traded, or used crypto, and among that group approximately 46% report their investments have done worse than they expected. In the end, investors, large and small, defrauded, and billions in customer assets misused or stolen.”
To stop further exploitation and rebuild investor confidence, there needs to be more governmental oversight of the cryptocurrency markets due to the massive losses and fraudulent activities that have occurred there. These comments highlight how important it is to follow securities rules strictly in order to protect investors.
3. Compatibility of Innovation and Compliance
A key theme in Grewal’s speech is the compatibility of technological innovation and regulatory compliance.
“Innovation and compliance with the securities laws are not mutually exclusive. The quarrel, therefore, is with noncompliant actors, not the technology or its promises.”
See: SEC Enforcement Director Grewal On Crypto Regulation
Grewal argues for a moderate strategy that promotes innovation while guaranteeing investor protection by differentiating between non-compliant behaviour and the promise of blockchain technology.
4. Public Trust and Regulatory Enforcement
Grewal is talking about the critical role of public trust in financial markets, which is reinforced by strict securities laws.
“Public trust requires robust enforcement of the securities laws. We must act with all the tools at our disposal to protect investors and enhance public trust and confidence in our markets."
This means that for the cryptocurrency industry, following regulatory guidelines is crucial for both legal compliance and preserving investor confidence and market participation. Strong enforcement measures reassure investors about the integrity of the market and function as a deterrent against unwanted behaviour.
5. Socioeconomic and Racial Disparities
Grewal brings attention to the disproportionate impact that crypto market volatility has on minority and marginalized communities.
“Crypto assets are the only major financial products that Black Americans are more likely to own than white Americans. And there is some evidence that Black and brown investors have now been disproportionately harmed during the downturn of crypto markets."
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
He also critiques:
“Predatory inclusion tactics of crypto entities directed at Black, brown, and other marginalized communities.”
Market participants and authorities have moral obligations to make sure that financial progress does not take advantage of vulnerable populations. In order to achieve equitable financial inclusion and protect all investors from predatory activities, gaps must be addressed.
Conclusion
Gurbir S. Grewal presents a case for a strict yet flexible regulatory framework that would safeguard investors while upholding the integrity of the market, and encourage innovation in the crypto sector. Grewal describes a regulatory approach that takes into account the historical background, investor harm, compliance, public trust, and socioeconomic inequality.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Inside OMFIF’s Tokenisation Report: New Rails of Finance
Report | Tokenisation | Jul 4, 2024
Image: OMFIF Tokenisation The New Rails of Finance, Cover
9 Insightful Quotes from the OMFIF Report on the Future of Finance
OMFIF's "Tokenisation, New Rails of Finance" report takes a comprehensive look at how tokenisation and blockchain technology are poised to disrupt the financial industry. Here, we highlight 9 key statements from the report and their significance to provide insight into the future of finance. #blockchain #digitalmoney #stablecoins #smartcontracts
1. Stablecoins as Financial Enablers
"Stablecoins, as blockchain-native representations of government obligations, equip traditional fiat currencies with internet advantages." - Lewis McLellan, Editor of the Digital Monetary Institute at OMFIF.
Importance:
By providing a link between blockchain technology and conventional fiat currencies, stablecoins facilitate easier and more convenient transactions in the digital economy. Stablecoins provide a new means for people to transact on blockchain platforms, and fintechs view them as an alternative to conventional banking products. To remain relevant in the market, financial institutions may need to build their own digital currencies or modify their offerings to compete with stablecoins.
Further Reading: Tokenizing Assets and Unlocking Value on the Blockchain
2. Programmability of Stablecoins
"The programmability of stablecoins could make them a natural fit for creating a new, interoperable technology layer that works in the background." - Paul Green, Chief Technology Officer at IBM.
Importance:
Stablecoins with programmable features can automate complex financial transactions and connections, rendering them an adaptable instrument within the financial infrastructure. Fintech companies can create novel solutions by utilizing smart contracts and programmable stablecoins to automate financial procedures. Programmable stablecoins can be used by financial organizations to improve interoperability and streamline operations with other financial technology.
Further Reading: Swift’s Blockchain Breakthrough Boosts Global Tokenization
3. Economic Activity on Blockchain
"The World Economic Forum, Citigroup and Boston Consulting Group estimate that trillions of dollars’ worth of economic activity will take place on the blockchain in the coming years." - David Anderson, Strategic Positioning and Global Thought Leadership at Circle.
Importance:
The substantial amount of business activity that is anticipated to take place on blockchains highlights how revolutionary this technology can be for a variety of financial transactions. Fintechs can benefit from the increasing uptake of blockchain technology by creating next gen financial services and products that make use of tokenisation. Financial institutions need to invest in technology and expertise to enable the change to blockchain-based economic activity and stay competitive. This is a major transformation that they should be ready for.
Further Reading: Citi Report: Blockchain’s Next Billion Users: Money, Tokens, Games
4. Broader Tokenised Assets
"Beyond tokenised cash, other types of tokenised assets are also poised to scale significantly." - Linda Thompson, Digital Currency Expert at the Federal Reserve.
Importance:
The fact that additional tokenised assets can be scaled suggests that tokenisation's advantages go beyond stablecoins to encompass a range of asset classes. Tokenisation for a range of digital assets opens up new avenues for investment and financial engineering. Financial institutions are building infrastructure in order to facilitate the maintenance and trading of various tokenised assets today.
Further Reading: Real World Implementation of Real Estate Tokenization
5. Driving Financial Inclusion
"The potential for tokenised assets to drive financial inclusion and move global finance forward is significant." - Rachel Lee, Director of Fintech at Deloitte.
Importance:
By democratizing access to financial services, tokenised assets will foster more participation from from underrepresented sectors in the global economy. Tokenisation is a tool that fintechs can use to provide financial services to underprivileged communities, thus encouraging greater financial inclusion.
Further Reading: JPMorgan Announces First Transaction on TCN Network
6. Need for Regulation
"Central banks need to set strict prudential rules around the composition and auditing of the reserves backing stablecoins." - Financial Analyst at Citigroup.
Importance:
Stablecoins must be properly regulated in order to guarantee their dependability and safety as well as to stop their abuse for illegal purposes. Strict regulatory requirements must be followed by fintechs issuing stablecoins in order to reduce risks and guarantee adherence to financial laws. To avoid abuse and guarantee financial stability, financial institutions and authorities must set up thorough systems for tracking and managing stablecoin transactions.
Further Reading: Insights from the Tokenization Report Act of 2024 Hearing
7. Enhancing Transaction Efficiency
"Tokenising commercial bank deposits can enhance the efficiency and security of financial transactions, reducing costs and increasing transparency." - Mark Wilson, Head of Digital Assets at HSBC.
Importance:
Tokenising central bank funds and commercial bank deposits can improve the security and efficiency of financial transactions while lowering costs and boosting transparency. Fintechs can create systems that enable tokenised commercial bank deposits, enabling consumers to transact on the blockchain easier than today. To meet customer demand for blockchain-based transactions and technological improvements, central and commercial banks may need to step up their tokenisation activities and services.
Further Reading: JPMorgan Announces First Transaction on TCN Network
8. Importance of Interoperability
"Interoperability is hard to deliver – but absolutely essential for the future of blockchain technology." - Olivia Brown, Lead Blockchain Engineer at Microsoft.
Importance:
The smooth operation of several blockchain networks, which allows for effective and integrated financial ecosystems, depends on interoperability. Fintechs should concentrate on creating products that make it easier for various blockchain platforms to communicate with one another, for more seamless and effective transactions. Financial institutions can only provide complete and integrated services in a multi-blockchain environment if they invest in relationships and technology that foster interoperability.
Further Reading: MAS Update: Asset Tokenization in Project Guardian
9. Future of Banking Models
"The broader question remains: is the business of banking, complete with lending and fractional reserves, inextricably linked to payments or is there room for alternative models?" - Anna Roberts, Economist at the Bank of England.
Importance:
This statement questions the conventional banking paradigm (i.e., branches, direct consumer interactions, legacy systems etc) and encourages innovators to consider possibilities for fresh, cutting-edge financial services that keep lending and payments distinct. Fintech companies can create substitute financial frameworks that disentangle loans from payments, providing more specialized and effective services. In order for financial institutions to stay competitive in a changing financial landscape, they should reevaluate their business strategies and look into the potential of alternative structures.
Further Reading: BlackRock Launches New Fund on Ethereum, Bullish on Tokenization
Conclusion
OMFIFs latest tokenisation report shines light on the revolutionary possibilities of tokenisation and blockchain technology for the financial industry. Stablecoins and its programmable characteristics are becoming more popular, and blockchains are predicted to see significant economic activity as well. These developments will undoubtedly promote efficiency, transparency, and inclusion in global banking. Both fintechs and traditional financial institutions must innovate and adapt to stay competitive in this rapidly evolving industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Meta’s AI-Powered Metaverse to Kickstart New Era in Gaming?
AI + Metaverse | Jul 3, 2024
Image: Pixabay/xresch
Meta is hiring a Gen AI role for content and metaverse gaming. Another kick at the can?
Meta's most recent job ad provides a glimpse at Mark Zuckerberg's strategic vision for integrating generative AI into the metaverse. This vision seeks to harness AI to create non-deterministic, ever-changing gaming worlds, revolutionizing how players interact with and experience virtual surroundings.
Checkout The Job Posting here
The job description offers a leadership position within Meta's Metaverse Content team, concentrating on:
- Defining and implementing the generative AI strategy for game content creation.
- Managing research and development funds for experimental work streams.
- Collaborating across multiple functions to create a complete AI vision.
See: Metacrime in the Metaverse
The goal is to provide tools that will help developers enhance their workflow efficiency and prototype new user experiences. AI seeks to boost both developer efficiency and user engagement by allowing games to change each and every time you play it. The job is an R&D role for an individual contributor working on theoretical initiatives at this point but looking at the requirements, the role could quickly transform into a growing business unit operating at scale and working across multi-functional teams.
Zuckerberg's Vision for AI and the Metaverse
Mark Zuckerberg envisions AI as a critical component in creating dynamic, immersive, and personalized virtual experiences. Unlike earlier efforts that may have struggled due to technological constraints or user readiness, generative AI aims to provide unique, evolving game worlds that adapt to player interactions in real-time. This vision promises to enhance the engagement and interactivity of virtual environments, potentially overcoming past challenges. As quoted in this Engadget article, Zuckerberg has been pitching an AI-centric metaverse for a while.
"Pretty soon, I think we're going to be at a point where you're going to be there physically with some of your friends, and others will be there digitally as avatars as holograms and they'll feel just as present as everyone else. Or you know, you'll walk into a meeting and you'll sit down at a table and there will be people who are there physically, and people are there digitally as holograms. But also sitting around the table with you. are gonna be a bunch of AIs who are embodied as holograms, who are helping you get different stuff done too. So I mean, this is just a quick glimpse of the future and how these ideas of the physical and digital come together into this idea that we call the metaverse." Mark Zuckerberg
Non-Deterministic Experiences
Although the new hire is to focus primarily on Horizon Worlds, Meta's social VR platform, there are numerous non-deterministic platforms in market today that are very likely integrating AI to create new experiences for the/their metaverse (gaming platforms), such as Roblox, No Man's Sky, Second Life, Decentraland, and Core.
So what exactly does non-deterministic mean?
Non-deterministic game worlds are virtual settings in which the game's state and outcomes are not predetermined or fixed, allowing for a high level of variety and unpredictability each time a player interacts with the game. The storyline, character interactions, and environmental changes can all vary greatly depending on player decisions, AI-driven events, and random variables, resulting in a unique experience every time the game is played.
See: AI and the Metaverse: The Imperative for Rules and Regulations
Imagine a role-playing game where each quest's outcome depends on numerous variables, including player choices, AI decisions, and random events.
- Unpredictable results. Different decisions by players or AI agents can result in a variety of possible results, making the game feel new and unpredictable each time it is played.
- AI will generate dynamic content, including sceneries, missions, and NPC behaviours, in real-time, reacting to player choices and assuring unique gameplay experiences.
- Players drive narratives and have a substantial impact on the storyline and game environment, with their choices leading to an endless variety of outcomes.
- The game world changes over time, affected by both player activities and independent AI processes. This development may include changes to the environment, the emergence of new problems, and adaptive gaming systems.
For example, in one session, a player may discover a thriving community, while in another, it may be under assault or abandoned, all based on a dynamic narrative driven by generative AI. Mind-blowing, right? And just when we're all trying to get some predictability back into our lives again LOL. Welcome to 2024.
Image: Pixabay/Vika Glitter
How Generative AI Promises to Revolutionize Metaverse Gaming
- AI can quickly generate high-quality game objects in real time, allowing for more detailed and immersive landscapes.
- Artificial intelligence can modify game complexity, storyline pathways, and character interactions in real time, making games more responsive and personalized.
See: Economist Impact Report: Unfolding the Metaverse
- AI-driven Non Player Characters (NPCs) can display nuanced behaviours, resulting in a more immersive and realistic story experience.
- AI adapts game surroundings and challenges to individual player choices, resulting in unique playthroughs.
- AI allows for expansive content creativity that would be difficult or impossible to produce manually, encouraging creativity and experimentation.
5 Reasons Why Meta's New Approach to the Metaverse with Generative AI Could Succeed
Meta's first push into the metaverse was hit with considerable hurdles, resulting in large financial losses and a strategy shift. However, numerous aspects may make the current technique, which incorporates generative AI, more successful.
1. Maturing Tech and AI Advancements
The improvements in generative AI during the last few years have been significant. Technologies such as GPT-4o and DALL-E 2 have proved AI's ability to generate high-quality, dynamic material rapidly and efficiently. These techniques may build realistic scenes, people, and interactions that were previously impossible or extremely resource-intensive to produce. Meta's technological maturity allows for the use of AI to construct more engaging virtual environments with less effort.
2. Streamlined Development Processes
AI-driven content creation technologies can significantly cut the time and expense of creating complicated virtual worlds and materials. By automating monotonous operations and allowing developers to focus on creative aspects, Meta can shorten the development cycle and bring new content to market faster. This efficiency can help Meta maintain a competitive edge and enhance the metaverse experience.
3. Cross-Platform Integration
Unlike the earlier metaverse initiative, which was largely focused on VR, the new strategy involves cross-platform integration, including support for mobile and PC systems. This broader strategy broadens the possible user population and assures that more individuals can access and benefit from the metaverse, regardless of the technology they use. Expanding outside VR helps reduce the risks of relying on a single platform.
4. Collaborative Ecosystem
Meta's strategy includes both internal development and partnerships with third-party producers and merchants. This collaborative approach can help to create a more lively and diverse environment, boosting innovation and introducing new ideas and expertise.
See: Epic’s CEO Tim Sweeney Illuminates How the Metaverse Will Actually Function
Collaboration with external partners expands Meta's creative and technological capabilities, improving the quality and diversity of metaverse content.
5. Learning from Past Mistakes
Meta's previous metaverse failures taught Zuckerberg key insights into what works and doesn't when it comes to creating and managing a large-scale virtual world, such as overestimating short term adoption while underestimating the intricacy of user engagement. Meta can improve strategic decision-making and resource management by leveraging past experiences.
Outlook
Meta's renewed focus on the metaverse, aided by generative AI, is ready to overcome the obstacles that caused its prior difficulties. Meta has a stronger chance of realizing its metaverse goal by leveraging sophisticated AI technologies, increasing user involvement, optimizing development processes, integrating across many platforms, cultivating a collaborative ecosystem, and implementing lessons learned from previous experiences.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Balance Invests $10M to Launch Trust Company in Canada
Balance | Release | Jul 3, 2024
Image: Balance
Balance Commits $10 Million to Register Balance Trust Company
Balance, the biggest and oldest custodian of digital assets in Canada, has announced the incorporation of Balance Trust Company as a special purpose trust under the Loan and Trust Corporations Act (Alberta). The company has committed $10 million in regulatory capital into a wholly-owned subsidiary. By offering fiat custody, digital asset custody, collateral management, and escrow services, this new subsidiary hopes to qualify as a custodian in both the US and Canadian markets.
See: Balance Commits to Alberta, Relocates to Calgary
This milestone follows over a year of meticulous preparation, including financial audits, SOC 2 Type 2 certification, and system penetration tests. Balance has also strengthened its insurance programs and added key leadership positions, including a CFO and Chief Compliance and Risk Officer.
Leadership and Governance
The board of directors of Balance Trust Company comprises industry veterans:
- George Bordianu: Co-founder, President, and CEO of Balance.
- Alex McDougall: Co-founder and CIO of Bicameral Ventures, President and CEO of Stablecorp.
- James Slazas: Founding partner and CEO of DARMA Capital.
- Colin Pyle: EVP of Strategy and Corporate Development at RFA Capital Holdings.
- Jean Desgagné: Former President and CEO of the Canadian Depository for Securities (CDS).
Significance of Milestone
Setting up the Balance Trust Company is an important milestone for several reasons:
See: 2023 BIS Survey: CBDC and Crypto Trends Revealed
- Balance is now in a position to provide really localized services in the Canadian market, reducing the dependency on the US for tech and custodians.
- At the moment, Balance uses its digital asset custody solutions to safeguard assets valued at over $2.5 billion. Once the Balance Trust Company is registered, Balance will expand to offer fiat custody, collateral management, and escrow services.
- By becoming a qualified custodian in both the US and Canada, balance will surely expand it's footprint in regulated North American markets.
George Bordianu, co-founder and CEO of Balance:
“Canadian regulated entities are still forced to this day to use US custodians or Canadian custodians leveraging US-based technology. We’re laser-focused on bringing a truly local solution to the ecosystem and are grateful to the team at the ATBF for their help and guidance in achieving this mission and for granting us this letters patent."
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
Conclusion
Balance Trust Company will be able to assist investment broker-dealers, advisers, and issuers of public ETFs and mutual funds after it is registered and qualified as a custodian.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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New US Crypto Tax Reporting Rules Starting 2025
Crypto | Jul 2, 2024
Image: Freepik/rawpixel.com
US Treasury Finalizes New Crypto Tax Reporting Rules for Exchanges and Payment Processors Starting in 2025
The US Treasury Department has finalized a comprehensive set of new cryptocurrency tax reporting guidelines that will take effect in 2025 (2026 tax filing season). These laws, aimed at increasing transparency and compliance, will have a substantial influence on cryptocurrency brokers, exchanges, and investors. They are also estimated to generate $28 billion in tax revenue over a decade.
See: CRA Pursues $54 million in Unpaid Crypto Taxes
Starting in 2025, bitcoin brokers, including exchanges and payment processors, will have to record user transactions to the IRS. A new tax form, Form 1099-DA, will be used to report gross profits, purchase dates, and sales prices. Furthermore, any transactions involving digital assets that exceed $10,000 must be recorded. Regulations for non-custodial brokers and decentralized exchanges have been deferred, with further information due later this year.
Treasury Makes Adjustments Based on Industry Concerns
The crypto industry has expressed concerns about the broad definition of 'brokers' triggering potential privacy issues, as well as the high compliance costs. This included nearly 44,000 comments made to reduce excessive restrictions on the impacted organizations. As a result of this feedback, the Treasury department altered the definition of broker such that "The final regulations require reporting by brokers who take possession of the digital assets being sold by their customers."
Danny Werfel, IRS Commissioner:
“These regulations are an important part of the larger effort on high-income individual tax compliance. We need to make sure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets. Our research and experience demonstrate that third-party reporting improves compliance. In addition, these regulations will provide taxpayers with much needed information, which will reduce burden and simplify the process of reporting their digital asset activity.”
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
Compared to Canada?
In Canada, bitcoin transactions are classified as capital gains or business income, and taxpayers must disclose all crypto transactions on standard tax forms. Unlike the United States, Canada does not require particular tax forms for bitcoin transactions, with a focus on individual taxpayer reporting rather than broker duties. For more information on Canadian regulations, visit the CRA Crypto Guidelines.
Closing
These improvements are intended to streamline the tax reporting process for cryptocurrency users and enable the IRS enforce tax compliance more efficiently. As the industry evolves, expect additional rules to change the landscape of digital asset taxes.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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