Category: Investing

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Banking Bitcoin Cryptocurrency Tax Investing

El Salvador to Exempt Foreign Investors from Tax on Bitcoin Profits

The government of El Salvador announced on September 13 that the country will exempt foreign investors from taxes on their bitcoin (BTC) profits to stimulate and hopefully increase foreign investment.

According to Javier Argueta, legal adviser to President Nayib Bukele, “there will be no taxes to pay on either the capital increase or the income” of bitcoin. After El Salvador became the world’s first country to make Bitcoin (BTC) legal tender earlier this month, policymakers made their move. For the bitcoin enthusiast, however, not paying taxes on capital gains might sound too good to be true.

In cooperation with global companies such as Bitso crypto exchange and Silvergate Bank, El Salvador has launched the official BTC wallet known as Chivo, which allows users to convert bitcoin transactions into USD or withdraw without incurring transaction fees by using a specific ATM. The wallet also aims to facilitate remittances for Salvadoreans working overseas.

Using Bitcoin Safely

Experts and regulators have highlighted concerns about the cryptocurrency’s volatility and its potential to impact inflation in a country with already high poverty and unemployment. That transactions are not reversible and lack protection for users is a potential weak point.

However, according to Argueta, transactions would be halted temporarily if bitcoin’s value were to collapse, in order to minimise the impact of extreme currency fluctuations. And even as the BTC price saw heavy fluctuation last week, El Salvador bought the dip.

The government says its experiment will give many Salvadoreans access to bank services for the first time, and hopes it will shave millions of dollars off commissions on remittances sent home from abroad, mainly from the US.

Remittances account for more than a fifth of the country’s GDP.  The introduction of bitcoin as legal tender will cut the fees of those remittances significantly and remove commissions entirely. The technology used for bitcoin is another step toward banking El Salvador’s unbanked.

What About Fraud and Money Laundering?

There are concerns about the anonymous nature of bitcoin and its role in money laundering and other financial crimes. But since Salvadoreans use a specific app, and not unregistered exchanges and the like, some of those problems are eliminated.

Argueta said that the Chivo wallet has traceability measures to alleviate popular misunderstandings and outright false narratives that bitcoin is used primarily for money laundering or anonymous criminal activity.

“We are implementing a series of recommendations from international institutions against money laundering,” Argueta specified.

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Bitcoin Crypto News Investing Regulation

Ukraine Has Officially Legalised Bitcoin

The Ukrainian Parliament has passed draft legislation to legalise and regulate bitcoin in Europe’s second-largest country after Russia, providing official clarity on the asset.

The bill, first drafted in 2020, passed on September 8 with 276 lawmakers in support and only six against. Its main purpose is to protect those who own and trade in bitcoin. Though never officially illegal, until now Ukrainian law enforcement agencies have treated bitcoin and other virtual currencies as “a scam”. Ukrainians could buy and exchange virtual currencies but local courts had no power to provide protection if something went wrong.

Interestingly, back in April official data showed that 652 officials in the Ukrainian government owned 46,351 bitcoin – among other cryptocurrencies such as XLM, ETH, Monero and ADA – the total value of which was around US$2.7 billion.

Bill Provides Tax Clarity But Signals More Regulation

Ukrainian courts can now properly protect individuals and businesses, since the bill provides tax clarity and officially allows bitcoin businesses to operate in the former Soviet country. It also sets guidelines for how Ukraine may try to regulate bitcoin in the future.

Although virtual assets are now legitimate in Ukraine, citizens cannot use them as a means of payment or exchange for goods or services – only the official national currency, the hryvnia, has this power. The new bill allows citizens to own and trade bitcoin and other cryptocurrencies on exchanges and also provides clarity on wallets and private keys.

Ukraine Hopes To ‘Open the Market’ by the End of the Year

The Ukrainian Parliament is expected to pass and amend its tax and civil codes before the end of the year to officially “open the market” for businesses and investors, according to Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation.

Ukraine President Volodymyr Zelensky. Source: bbc.com

If signed by President Volodymyr Zelensky, the draft law will protect the owners of virtual assets and exchange platforms from fraud. Even so, experts worry that excessive regulation could stifle innovation and place undue pressure on businesses. Some crypto investors could leave the country because they do not trust state initiatives.

Those who opt to stay hope the new legislation will reduce the number of unjustified raids on crypto businesses initiated by Ukraine’s Security Services.

It’s important to note that even though bitcoin is now legal in Ukraine, it does not mean BTC is legal tender, as it officially is now in El Salvador. Another bill entirely will need to be passed for that to happen.

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Australia Bitcoin Crypto News Cryptocurrencies Investing Real Estate

31% of Gen Z Australians Own Crypto According to Latest Report

The days of traditional finance are numbered, with cryptocurrencies expected to overtake fiat in Australia by 2029. A new report also reveals Australians have amassed over A$7 billion in crypto with 31 percent of the Gen Z population leading the investment charge, a figure that has doubled since January.

Overall, 17 per cent of Australians own cryptocurrency, according to the report from comparison site Finder, while a further 13 per cent said they intended to buy digital assets within the next year.

Bitcoin Is Still the Boss

The average Australian investor owns A$2,078 in crypto assets, with Bitcoin (held by 9 percent of Aussies) still the most popular currency ahead of Ethereum (8 percent), Dogecoin (5 percent) and Bitcoin Cash (4 percent).

Finder’s cryptocurrency expert James Edwards says Gen Z’s investment profile signals that traditional finance is being phased out. He makes a bold prediction for the future of crypto in Australia:

Many Aussies are now much more clear on the benefits cryptocurrencies offer, such as bitcoin being a hedge against fiat currency and inflation, plus the ability to earn interest on assets through things like stablecoins and decentralised finance on Ethereum. We should expect to see [crypto] as a dominant financial industry by the end of the decade, especially among younger generations who have never had meaningful access to traditional finance.

James Edwards, cryptocurrency expert, Finder

Crypto Investment Overtakes Real Estate Among Younger Demographics

The Finder report notes that the proportion of Australians (17 percent) who own crypto is now identical to the cohort who own two investment properties. Talking about house and property prices has long been a national pastime but it seems that investing in bitcoin and other cryptocurrencies is what Australians are really up to.

In June, Crypto News Australia reported how 40 percent of Australian millennials prefer to invest in digital assets over real estate. A survey of more than 1000 investors conducted in the same month by fund manager Vanguard Australia showed that millennials are the biggest cohort that own crypto assets.

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Australia Crypto News Investing Trading

ASIC Issues Further Warnings to Aussie Investors Using Unlicensed Crypto Companies

The Australian Securities and Investments Commission (ASIC) has again cautioned Aussie citizens to be wary when investing in unlicensed cryptocurrency companies. The warning comes after investors across the country reported significant losses after trading crypto-related products such as options, futures or leveraged assets on unregistered crypto exchanges.

In a statement released this week, ASIC warned citizens to only make crypto investments if the company offering them has an Australian financial services (AFS) licence or an Australian market licence (AML).

Concern Over “Excessive Leverage, Platform Outages or Unfair Liquidations”

The statement highlighted specific risks of investing in unregistered crypto exchanges, including platform outages, unfair liquidations and, especially, excessive leverage, which can magnify the trader’s profit as well as loss. 

ASIC noted that unlicensed crypto companies overseas have taken measures to prevent Australians from accessing these crypto financial products, including geo-blocking (imposing geographically based IP restrictions), removing references and links, and placing warnings and disclosures on their respective websites and apps.

The commission recommends that unlicensed crypto businesses can register with an external dispute resolution scheme such as the Australian Financial Complaints Authority.

Boosting Consumer Protection in Crypto Trading

Crypto trading (and the overall crypto space in Australia) is not regulated by Australian financial authorities, yet ASIC has made efforts to boost consumer protection around crypto-related products such as CFD (Contracts for Difference). On July 2, the commission published a consultation paper seeking market participants’ feedback to adjust rules for local operators, protect consumers and promote market integrity.

ASIC recently highlighted how young investors are especially vulnerable to “Finfluencers“, a new trend circulating on social media channels such as YouTube or Instagram where financial influencers claim they can make newcomers millionaires or become financially independent, while not dispensing any actual financial advice.

[New market entrants] have been engaged in short-term speculation rather than long-term wealth creation.

ASX
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Australia Investing Markets Regulation

What is Delaying the Aussie Crypto ETF?

One of the final pieces of the cryptocurrency ETF puzzle is deciding how the arrangements with custodians will work. To that end, the Australian Securities and Investments Commission (ASIC) is in the final stages of consultation to decide if a crypto ETF will be traded locally.

This year, ASIC is expected to finalise its market consultation on the potential for digital currency ETFs for the Australian market. While it is still in discussion with relevant stakeholders, a few more creases need to be ironed out.

However, earlier in the year, it was reported that the Aussie crypto ETF could launch on the ASX in 2021.

Australian Securities and Investments Commission (ASIC).

Issues Still to be Finalised

Custodianship is an issue. According to Caroline Bowler, CEO of digital currency exchange BTC Markets, “The trend is for ETFs to physically hold the underlying digital currencies they reference. This raises the question of how custody of these assets would be managed.”

As it stands, there isn’t a suitable onshore custodial solution. So that’s something that needs to be worked out with custodial providers.

Caroline Bowler, BTC Markets

The current lack of relevant regulation and standards for custodians and exchanges is casting a shadow of uncertainty. Standards still need to be set and a regulatory body chosen to ensure the protection of investors.

The composition of crypto ETFs and their benchmark reference are also issues to be considered before local crypto ETFs can be traded.

But as ASIC recently noted as part of its consultation on crypto-asset-based ETPs and other investment products, there is real risk of harm to consumers if these products are not developed and operated properly, given the unique features and risks associated with them.

Alex Vynokur, CEO, BetaShares

It remains to be decided which method of ETF will work the best for the market, considering the needs of investors and their security and safety. With many Australian millennials planning on retiring at 50 with the help of crypto and ETFs, it’s obvious that there is a demand.

Different Kinds of ETFs

Depending on which products investors prefer, both active and passively managed ETFs could be traded.

A passive ETF is an investment that replicates the performance of the asset it references, and the portfolio is updated regularly (generally quarterly) to reflect changes in the reference index – for instance, the S&P/ASX 200.

On the other hand, actively managed ETFs invest in assets that are bought and sold by a portfolio manager on a more dynamic basis, depending on the manager’s view of the market and investment thesis.

Another model might be for an ETF to hold not just digital currencies but also companies whose products are built on distributed ledger technology, digital currency exchanges, and other listed and unlisted firms that are exposed to blockchain through their operations. This could be similar to a basket investment like ‘FAANG’, where investors can invest in a basket of industry leaders.

To successfully launch a crypto ETF in Australia, an issuer will need to show evidence that the underlying crypto asset has robust liquidity, transparency and price discovery, which we believe will only apply to a small subset of crypto assets.

Alex Vynokur, BetaShares

ETFs Provide Safety for Investors

Some of the risks associated with investing in the digital asset class may be mitigated by accessing digital currencies through an ETF, traded through a highly regulated environment such as a national stock market.

Fund managers who seek to offer such investment products should be required to demonstrate a track record of risk management and organisational competency in managing retail investment products.

Alex Vynokur, BetaShares
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Bitcoin Crypto News Institutions Investing

$7 Billion Fund Manager Bets on Bitcoin to Protect Against Rising Inflation

Horizon Kinetics, one of the best-performing fund managers in the US this year, chooses Bitcoin (BTC) as one medium to protect its investors against currency debasement. 

In an interview with the Financial Times, Peter Doyle, one of the co-founders of the US$7 billion investment company, expressed concern over rapidly growing debt fuelled by government response to the Covid-19 pandemic. Doyle fears this will eventually result in global inflation, which is why investors need to protect their portfolios.

There is no turning back after the pandemic and globally there is a debt problem, and it means either default or currency debasement.

Peter Doyle, Horizon Kinetics

Horizon Bets on Bitcoin and Property

Horizon Kinetics is betting on property and Bitcoin to protect its investors, according to the Financial Times article. Bitcoin has a limited supply of 21 million, and therefore it is bound to be scarce. 

People should have exposure to the asset class.

Peter Doyle

Having reportedly invested one percent of its Paradigm fund to Grayscale Bitcoin Trust in 2016, today Horizon’s Bitcoin investment represents a tenth of the fund. The company offers investors exposure to Bitcoin via the fund, which as of July 26 had gained 47.76 percent despite the recent market crash.

Bitcoin has garnered lots of attention, especially from institutional investors, for the sole purpose of hedging against inflation. This is the same reason that drew MicroStrategy to Bitcoin, and it is currently the largest corporate BTC investor. US Senator Cynthia Lummis also believes in Bitcoin as a safe haven and hopes to bring BTC to the “national conversation”. 

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Bitcoin Crypto News Investing Markets

Survey says 60% of Goldman Sachs Uber-Rich Clients Could Buy Crypto Soon

American banking giant Goldman Sachs has reported that 60 percent of family offices are interested in purchasing cryptocurrency and other digital assets. Fears about high inflation and currency devaluation seem to be encouraging this interest.

This revelation comes soon after the multinational investment bank alleged that cryptocurrency is “not a viable investment“.

The survey was conducted among 150 family offices of which 15 percent reported that they already owned digital assets, while a further 45 percent indicated they were interested in buying crypto in the future. Family offices refer to private wealth firms that manage the money of the world’s wealthiest individuals.

Fear of Monetary Debasement the Driving Force Behind Buying Crypto

Many firms are looking to crypto as an investment solution, citing it as a hedge against inflation, prolonged low interest rates and concerns about monetary debasement following a year of global fiscal stimulus.

While some are interested in acquiring crypto, 39 percent of global family offices have raised concerns regarding the long-term staying power of digital assets. Additionally, market volatility and issues with infrastructure surrounding crypto are also holding many back from entering the cryptosphere.

Goldman Sachs has found that interest in bitcoin and other cryptocurrencies varies geographically. The survey results concluded that 24 percent of family offices in the Americas have already invested money in digital assets, while only eight percent in both Asia and Europe, the Middle East and Africa (EMEA) have.

Goldman Sachs Operating in the Cryptosphere

Goldman Sachs (GS) acknowledges that many investors continue to invest in real estate and equities, but a great deal also invest in special purpose acquisition companies (SPACs). GS does, however, state that family offices have been interested in cryptocurrencies since the 2017 bull run.

The company has itself started to move into the world of crypto. Earlier this year, GS filed a BTC ETF application with the US Securities and Exchange Commission, joining the likes of Morgan Stanley. Along with the all-important ETF filing, GS has begun facilitating BTC derivatives trading for clients, bridging the gap between BTC and Wall Street.

Meena Flynn, a Goldman Sachs private wealth management executive, has highlighted the significance of blockchain technology:

This technology is going to be as impactful as the internet has been from an efficiency and productivity perspective.

Meena Flynn, GS

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Crypto News Cryptocurrencies Institutions Investing

Survey Shows 70% of Institutional Investors Plan to Buy Crypto in Near Term

A recent survey by Fidelity Digital Assets, a multinational financial services corporation, has revealed that 70 percent of institutional investors are interested in buying cryptocurrencies.

Vast Majority Will Own Crypto by 2026

According to the survey, seven out of 10 respondents plan to buy digital assets in the near future and 96 percent of them aim to do so by 2026.

The survey ranged across investment banks, hedge funds, endowments, family offices, and financial advisers. It’s worth noting that Fidelity is one of the first traditional financial services that embraced cryptocurrencies. 

The message is clear – institutional adoption is growing, at least according to Fidelity’s last year survey. In 2020, the company found that only 36 percent of institutional investors would dare to invest in digital assets, and only 27 percent of US-based institutions had invested in Bitcoin and Ethereum.

Covid-19 Outbreak Was the “Catalyst for Investors”

Tom Jessop, president of Fidelity, said the pandemic was the catalyst for many institutional investors to look out for alternative assets while the traditional market was collapsing. 

The pandemic – and fiscal and monetary measures in response to it – has been a catalyst for many institutional investors to define their investment thesis and operationalise it.

Tom Jessop, president, Fidelity Digital Assets

A total of 1,100 institutional investors from across Asia, Europe and the US were surveyed. Interestingly, it appears that Asian investors had more exposure to the crypto market compared to North American and European institutions.

Yet some institutions remained sceptical, expressing fear of market manipulation and high volatility.

Corporate Crypto Conversion

As more institutions explore crypto and blockchain technology, it seems natural that clients would want insightful knowledge about the crypto market. According to a recent report, 26 percent of financial advisers would recommend cryptocurrencies to their clients in the next year.

Australians are leading the way when it comes to adoption. Earlier this year, Crypto News Australia reported that more than 5 million Aussies will own crypto by the end of 2021.

Additionally, 40 percent of millennials and 31 percent of Gen Zs favour digital assets over real estate, and the average Aussie crypto investor has 12.5 percent of total assets in crypto.

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Australia Crypto News Investing Markets

Australian Broker SelfWealth to Offer Crypto Trading to its 85,000 Users

Melbourne-based SelfWealth, a non-bank low-cost online share trading platform listed on the Australian Securities Exchange (ASX), has announced plans to open crypto trading for its customers.

SelfWealth Responds to Customer Demands

The company has enjoyed strong growth over the past 12 months on the back of its compelling value proposition – namely low-cost, simplified trading of both Australian and international stocks on one platform.

The ability to trade US stocks, which was only launched in December last year, has proven to be particularly popular. Currently, the value of total securities held on the platform is around A$5.9 billion.

Earlier this year, SelfWealth conducted a survey of its customers and established that more than half were already crypto investors. Furthermore, two-thirds of respondents expressed an interest in the sector.

Australians have decided that cryptocurrency is here to stay and are looking for trusted platforms to facilitate their investment decisions … we want to make investing for our customers as seamless as possible.

SelfWealth chief executive Cath Whitaker

Whitaker touted the new functionality, offering customers a single platform to invest in both local and US shares as well as crypto assets, an “Australian first”.

Basic Details of the Move

The company plans to add up to 10 cryptos by the end of the year, which will include both Bitcoin and Ethereum. Details of which other cryptos will be included are not clear.

Much like conventional share trading, SelfWealth will look to charge a flat percentage fee for all crypto trades and the current plan appears to be that the crypto will be held in an integrated third-party wallet.

SelfWealth has not yet elaborated on specific details relating to which exchange it would be working with and whether users would be given the choice of custodying their own crypto assets. However, the company had this to say in its official press release:

We will be partnering with an established and secure cryptocurrency exchange to provide access to cryptocurrencies … we will factor in popularity, liquidity and security.

Jarrod Purchase, marketing manager, SelfWealth

It’s clear that crypto is slowly gaining mainstream approval as traditional financial institutions increasingly look to offer their clients crypto exposure. Unlike most financial products, it appears that customers are the driving force behind the change, not the institutions themselves.

The highly anticipated Aussie crypto ETF is undoubtedly going to accelerate the process of greater crypto adoption, although the timing of an ASX approval remains unclear at this juncture.

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Australia Investing Scams

ASIC Cautions Investors Against “Finfluencers”

The Australian Securities and Investments Commission (ASIC) has cautioned new and young investors about the risks of taking advice from social media and finfluencers.

So-called “finfluencers” have been circulating on YouTube and social media platforms Instagram and TikTok claiming they can “help you on your journey to financial freedom” while technically “not giving financial advice”.

While social media can be okay as a means of getting background information … relying on it comes with a degree of risk […] Advice may not be licensed and you may get information on something that is inaccurate.

Somer Taylor, senior manager of retail complex products and investor protection, ASIC

Last month, ASIC chairman Joe Longo told a parliamentary committee hearing that social media influencers giving financial advice was an “area of big concern” for the agency.

Young People and Newcomers Are Most Vulnerable

A large number of millennials and generation Zs have turned to investing in cryptocurrencies and equities to generate wealth. And since investing in crypto has so few barriers, people can easily buy in. For first-time investors with some computer savvy and extra cash, it might seem like quite the opportunity.

[New market entrants] have been engaged in short-term speculation rather than long-term wealth creation.

ASX 

In 2020, more than 435,000 investors placed their first trade on the ASX, with almost half of these investors aged between 25 and 39, and 18 percent under 25. These under-40s are recognised as a tech-savvy age group. However, in this age of information overload, it can be difficult to know who and what to trust.

There have been instances of Instagram influencers orchestrating their own scams, stealing from the followers they were supposedly helping. An influencer might be paid to promote a certain product or idea, manipulating assets or even markets, pumping and dumping assets for individual gain. There have been many examples of investors getting scammed, even by semi-reputable e-sports influencers.

Australians lost millions to bitcoin scams in 2020, and following a recent report from the Australian Competition and Consumer Commission (ACCC), the amount of money lost to scams involving bitcoin since the start of this year already equals the entire losses of 2020.  

Most people don’t understand cryptocurrency; they just hear the buzz around it … and they need to do their research.

Delia Rickard, deputy chair, ACCC

Pump and dump activity has long been a problem in the local share market as well as the crypto market. Somer Taylor, ASIC’s senior manager of retail complex products and investor protection, says she has witnessed a sharp increase during the pandemic with a wave of new participants entering the market.

International Finfluencers Not Subject to Australian Laws

In Australia, anyone giving financial advice must have an Australian Financial Services Licence (AFSL). However, the finfluencers with the biggest social media followings are from overseas and not subject to Australian laws. The ASX has warned investors to vet their sources of information before acting on it.

With TikTok’s #moneytok getting more than 7.6 billion page views and #stocktok 1.3 billion, there is an overabundance of finance-related information being shared. Many companies even collaborate with influencers on marketing campaigns.

It’s unfortunate that many companies are being led to believe that building ‘advocacy’ with these types of finfluencers is the right way to engage with investors.

Sarah Lenard, managing partner, strategic consultancy Advisir

Some think they can give financial advice as long as they add the disclaimer “this isn’t financial advice”. But the penalty for giving unlicensed advice in Australia is up to five years’ imprisonment and/or a fine of up to $133,200 for an individual and 10 times that for businesses.