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5 nations challenge crypto experts and investigators to target tax crimes

The J5 generates significant leads through events, which, in the past, has helped uncover multimillion-dollar crypto Ponzi schemes, such as the BitClub Network.

The Joint Chiefs of Global Tax Enforcement (J5), a global anti-tax fraud group, hosted investigators, cryptocurrency experts and data scientists in “The Cyber Challenge” event to track down individuals and organizations committing tax fraud.

The J5 members comprise the criminal intelligence communities from Australia, Canada, the Netherlands, the United Kingdom and the United States, which collaborate in the fight against international and transnational tax crime and money laundering.

The group includes the Australian Taxation Office, the Canada Revenue Agency, the Dutch Fiscal Information and Investigation Service, His Majesty’s Revenue and Customs from the U.K. and IRS-CI from the United States. Participants included experts from J5 countries, which were tasked with optimizing the usage of data acquired from a variety of open and investigative sources available to each country.

J5 members include criminal intelligence communities from Australia, Canada, the Netherlands, the United Kingdom and the United States. Source: irs.gov

Since its inception in 2018, the J5 has hosted five such events. In 2022, the fourth event focused on nonfungible tokens (NFTs) and decentralized exchanges (DEX). Sharing details about the latest 2023 event, the U.S. Internal Revenue Service report stated:

“This is the first Challenge where Financial Intelligence Units (FIUs) from each J5 country participated. Private sector was represented by blockchain analysis companies Chainalysis, BlockTrace, and AnChain making this the most collaborative Challenge to date.”

In the process, the J5 generated significant leads for further investigation, which, in the past, helped uncover multimillion-dollar crypto Ponzi schemes, such as the BitClub Network. John Ford, deputy commissioner of the Australian Taxation Office, stated:

“This collaboration between public and private specialists not only generates operational outcomes, but shares expert training, techniques and procedures, which is integral for the participants to remain proactive and effective in a rapidly evolving operating environment.”

Ryan Ryder from Chainalysis pointed out that crypto’s inherent transparency, coupled with international public and private sector experts, “can collaborate to identify and shut down illicit activity,” a task that remains impossible in traditional finance.

Related: G7 countries to launch AI code of conduct: Report

The Cointelegraph Innovation Circle recently featured seven crypto experts in an article to help Web3 companies prep for tax season. First and foremost, Web3 companies must constantly monitor the tax implications of their activities and diligently work to ensure they’re meeting their obligations.

In addition, the members of the Cointelegraph Innovation Circle recommended seven best practices to ensure adherence to tax formalities. Choosing a tax-friendly country while ensuring on-time payment is a top priority, in addition to avoiding shortcuts and finding an experienced crypto tax accountant.

Other key factors include accurate documentation of all activities, seeking expert legal counsel, automating transaction tracking and using specialized software.

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G7 countries to launch AI code of conduct: Report

The Group of Seven (G7) countries will agree on a voluntary AI code of conduct for companies developing AI to reference for mitigating risks and benefits of the technology.

The Group of Seven (G7) industrial countries are scheduled to agree upon an artificial intelligence (AI) code of conduct for developers on Oct. 30, according to a report by Reuters. 

According to the report, the code has 11 points that aim to promote “safe, secure, and trustworthy AI worldwide” and help “seize” the benefits of AI while still addressing and troubleshooting the risks it poses.

The plan was drafted by G7 leaders in September. It says it offers voluntary guidance of actions for “organizations developing the most advanced AI systems, including the most advanced foundation models and generative AI systems.”

Additionally, it suggests that companies should publicize reports on the capabilities, limitations, use and misuse of the systems being built. Robust security controls for said systems are also recommended.

Countries involved in the G7 include Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union.

Cointelegraph has reached out to the G7 for confirmation of the development and additional information.

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This year’s G7 took place in Hiroshima, Japan, with a meeting held between all participating Digital and Tech Ministers on April 29 and 30.

Topics covered in the meeting included emerging technologies, digital infrastructure and AI, with an agenda item specifically dedicated to responsible AI and global AI governance.

The G7’s AI code of conduct comes as governments worldwide are trying to navigate the emergence of AI with its useful capabilities and concerns. The EU was among the first to establish guidelines with its landmark EU AI Act, which had its first draft passed in June.

On Oct. 26, the United Nations established a 39-member advisory committee to tackle issues related to the global regulation of AI.

The Chinese government also launched its own AI regulation, which began to take effect back in August.

From within the industry, the developer of the popular AI chatbot ChatGPT, OpenAI, announced that it plans to create a “preparedness” team that will assess a range of AI-related risks.

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Canada central bank assesses innovations and challenges of DeFi

The staff note suggested that although the DeFi ecosystem brings a ton of innovations in the financial sector the regulatory challenges and vulnerability limit its potential use in traditional finance.

The Central Bank of Canada published a staff note on Decentralized Finance on Oct. 17, assessing the innovations that made it popular and the challenges and risks associated with its use.

The staff note described DeFi as a multi-layered structure with the Ethereum blockchain serving as the bottom layer (or settlement layer). Developers construct a variety of tools and services on top of the main blockchain including tokenization, lending and borrowing services, and much more.

DeFi Architecture. Source: Bank of Canada

The staff note shed light on the rise in popularity of the DeFi ecosystem starting in 2020 and how it became an integral part of the crypto economy with billions in volume over the next few years. The popularity of the ecosystem took a dip starting in 2022 with the collapse of multiple key crypto platforms with significant DeFi exposure including Terra-Luna.

Talking about the key features of the decentralized ecosystem, the staff note lauded DeFi’s “composability,” which allows the apps and services in the ecosystem to interconnect. The Bank of Canada note highlighted three of the key areas where DeFi can transform the financial system

  • Frictionless financial service offering: A decentralized ledger-based system reduces frictions experienced in the legacy system and expands the scope of financial services currently being offered.
  • Open competition: The DeFi ecosystem is open to everyone to build and access given the open-source nature thus it makes way for increased competition offering better options for the end user.
  • Transparency: The use of programable smart contracts eliminates intermediaries and increases transparency in the system as everything is accessible to people analysing.

Apart from the key DeFi innovations that can transform the traditional financial system, the staff note also talked about the challenges and risks associated with the DeFi ecosystem claiming that “despite its innovations and possibilities, the overall economic benefits of DeFi remain limited.”

Related: Bank of Canada emphasizes need for stablecoin regulation as legislation is tabled

The note lists three key challenges that the DeFi system faces today: The lack of real-world tokenization, the higher concentration of interconnection within and its dependence on the unregulated centralized finance ecosystem.

The note also highlighted the regulatory challenges posed by the DeFi ecosystem and the rise in vulnerabilities in the ecosystem leading to several hacks and exploits. The note claimed that “the anonymous and borderless nature of public blockchains complicates regulatory oversight.”

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Bitstamp’s departure from Canada is ‘timing issue,’ says CEO

Bitstamp’s decision to discontinue operations in Canada is “primarily a timing issue” related to the firm’s expansion priorities, Bitstamp USA CEO said.

Cryptocurrency exchange Bitstamp hopes to return to Canada after halting operations early next year, according to Bitstamp USA CEO and global chief commercial officer Bobby Zagotta.

Bitstamp will officially discontinue its services to customers in Canada starting from Jan. 8, 2024, the exchange confirmed in a statement to Cointelegraph.

As a result of the service termination, all Canada accounts on Bitstamp will be closed, and customers will no longer have access to their accounts. Bitstamp has strongly recommended its Canadian customers withdraw their funds by January 2024, also urging the clients to deactivate their Bitstamp accounts.

“We want to emphasize that your crypto assets always remain yours, and we are committed to reaching out to any customers who were unable to close their accounts themselves to ensure the return of their funds,” Bitstamp noted.

Bitstamp’s decision to discontinue operations in Canada is “primarily a timing issue” related to the company’s current expansion priorities, Zagotta told Cointelegraph. The exchange is exiting the Canadian market to refocus on regions where Bitstamp can align “more effectively” with local regulations, he said, adding:

“We hope to serve this market in the future; however, at this time, we are unable to prioritize the work and allocate the necessary resources to meet new regulations.”

Zagotta emphasized that Bitstamp remains committed to serving its global user base, and any decisions regarding its presence in specific countries would likely depend on evolving regulatory environments and market conditions.

Bitstamp’s exit from Canada comes amid the exchange reportedly raising funds to scale its global operations. The platform has reportedly been working to secure new capital since May 2023 to launch derivatives trading in Europe in 2024 and expand its services in the United Kingdom.

Related: Canadian regulatory body clarifies stablecoin rules for exchanges and issuers

Founded in 2011, Bitstamp is one of the world’s longest-running cryptocurrency exchanges. According to the Bitstamp website, the platform serves a large number of countries at the time of writing, including the United States, Singapore, South Korea, Japan and others.

According to data from CoinGecko, Bistamp’s daily trading volumes amount to roughly $114 million at publishing time. The volumes are significantly lower than volumes reported by major competitors like Binance, which trades nearly $4 billion per day, according to CoinGecko.

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Canadian regulatory body clarifies stablecoin rules for exchanges and issuers

The umbrella organization for Canada's securities regulators has set out conditions for the trading and issuance of stablecoins.

The Canadian Securities Administrators (CSA) has provided guidance to exchanges and cryptocurrency issuers on its interim approach to what it calls value-referenced crypto assets, with a particular focus on stablecoins.

On Oct. 5, the umbrella organization of Canada’s provincial and territorial securities regulators published a clarification saying it may allow trading of certain cryptocurrencies that reference the value of a single fiat currency, subject to terms and conditions.

In February, the CSA reaffirmed its view that stablecoins “may constitute securities and/or derivatives” which Canadian crypto exchanges are prohibited from trading.

However, if issuers maintain an appropriate reserve of assets with a qualified custodian and crypto exchanges offering stablecoins make “certain information related to governance, operations, and reserve of assets publicly available,” then the CSA could allow for those assets to be traded.

CSA Chair and Chair and CEO of the Alberta Securities Commission, Stan Magidson, said in a statement:

“This interim framework, which we will build upon in the future, sets certain standards to help ensure that investors receive the information they need about the assets they are purchasing, including the risks associated with them.”

The CSA cautioned that fiat-backed crypto assets satisfying the terms are still risky and should not be viewed as endorsed or risk-free.

Related: Canadian crypto ownership declines amid tight regulations, falling prices

In August, Cointelegraph reported that regulatory clarity in Canada has generated greater interest in crypto from institutions.

In July, the CSA issued guidance on staking stating that it was allowed but lending opportunities are limited and the proportion of “illiquid” assets is restricted.

Stablecoin market capitalization has been in decline over the past 18 months or so and is currently at $123 billion representing around 11% of the total crypto market cap.

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Bitcoin drives digital asset inflows for the first time in 6 weeks: Report

But Solana was the only other major asset to show inflows for the week.

Cryptocurrency assets experienced inflows for the first time in six weeks during the week of Sep. 22-28, according to the latest Digital Asset Fund Flows Weekly Report from European digital assets management firm CoinShares.

Bitcoin was the biggest gainer with inflows in the amount of $20.4 million for the week.

Solana took second with $5 million as the only other asset to show inflows. Per CoinShares, this is its 27th week of inflows with only four weeks of outflows for 2023, making it “the most loved altcoin this year.”

On the flip side, Ethereum experiences outflows in the amount of $1.5 million. This marks its seventh consecutive week of outflows and, according to CoinShares, solidifies its status as “the least loved altcoin.”

Related: CoinShares says US not lagging in crypto adoption and regulation

Flows for other altcoins, including XRP after it saw more inflows than Solana in the previous week, were negative and minimal.

CoinShares analysts attributed the the lack of altcoin movement alongside Bitcoin’s trend-breaking momentum to a combination of factors:

“We believe the inflows are a reaction to a combination of positive price momentum, fears over US government debt prices and the recent quagmire over government funding.”

The quagmire referenced by CoinShares involves the ongoing negotiations over U.S. government funding. Earlier in the previous week’s cycle, fears over a republican-wrought stalemate led to predictions that the U.S. government would shut down on Oct. 2. However, a last-minute effort by senate leaders allowed for the passage of a stopgap that ensures funding through November 17. Whether congress and the president can come to terms to fund the government beyond the current measure’s expiration remains to be seen.

Geographically, Germany, Canada, and Switzerland lead the charge for the week with inflows amounting to $17.7 million, $17.2 million, and $7.4 million respectively. Australia and France held the line, metaphorically speaking, with $0.1 million for the former and a nil push for the latter.

The United States played foil to Europe and Canada’s inflows, registering $18.5 million in outflows with Sweden and Brazil following suit at $1.8 and $0.9 outgoing respectively.

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Crypto Biz: Bidding war for SVB Capital, new crypto funds and Citi’s private blockchain

This week’s Crypto Biz explores SVB Capital bids, new funds from Blockchain Capital, the Hut 8-US Bitcoin merger and Citigroup’s private blockchain.

The venture capital industry appears to be gearing up for portfolio rebalancing in 2024, with investors positioning themselves to increase exposure to digital assets in the next bull market. Blockchain Capital, for instance, closed two new funds this week, with $580 million in capital to be deployed in crypto gaming and decentralized finance projects. 

Likewise, SkyBridge Capital, Atlas Merchant Capital and Vector Capital are among the final bidders to acquire SVB Capital, the venture arm of the collapsed Silicon Valley Bank. SVB Capital is reportedly a backer of other major venture capital firms in the crypto space, including Sequoia and Andreessen Horowitz.

Meanwhile, Bitcoin-based investment products from mainstream financial giants are becoming more popular. Japan’s largest investment bank, Nomura, launched through its subsidiary, Laser Digital, a new Bitcoin (BTC) fund for institutional investors looking to cater to the demand for Bitcoin exposure.

A growing number of newcomers are also attracting funds. Web3 startup Bastion disclosed $25 million in a seed round to bridge Web3 infrastructure into enterprise technology. The round was led by Andreessen Horowitz, Laser Digital Ventures (Nomura’s crypto venture arm), Robot Ventures, Aptos Ventures and Alchemy Ventures.

This week’s Crypto Biz explores SVB Capital bids, new funds from Blockchain Capital, the Hut 8-US Bitcoin merger and Citigroup’s private blockchain.

Scaramucci leads bidding for Silicon Valley Bank VC arm: Report

SVB Financial Group, the former parent company of Silicon Valley Bank, is getting closer to a deal that will see the institution sell its venture capital arm, SVB Capital. According to a report from The Wall Street Journal, Anthony Scaramucci’s SkyBridge Capital and Atlas Merchant Capital are jostling with the San Francisco firm Vector Capital in the final stages of the bidding process. Sources claimed that SVB’s venture capital arm could be sold off for between $250 million and $500 million but warned that a final sale is not guaranteed and would still require the review of the creditor’s committee. SVB Capital conducts a wide range of investments, including backing other major venture capital firms, such as Sequoia and Andreessen Horowitz. The company is not part of SVB’s Chapter 11 bankruptcy proceedings, and a decision on the sale is expected in the coming weeks.

SVB Capital holdings overview as of December 2022. Source: SVB Capital

Hut 8 receives green light from Canadian Supreme Court for US Bitcoin merger

Canadian Bitcoin mining firm Hut 8 is set to wrap up its planned merger with US Bitcoin following final approval from the Supreme Court of British Columbia. Hut 8 and US Bitcoin announced the move in February 2023, subject to shareholder and regulatory approval. The merger will see the two companies form Hut 8 Corporation, or “New Hut,” which will become a publicly traded United States-based business. An initial announcement from Hut 8 highlighted that the merger would open up 825 megawatts of capacity across six different Bitcoin mining and data center facilities. New Hut also plans to list its shares on the Nasdaq and Toronto stock exchanges, trading under the ticker HUT.

Blockchain Capital closes funds totaling $580 million for investments in crypto gaming, DeFi

Venture capital group Blockchain Capital announced the closing of two new funds, totaling $580 million, for investment in infrastructure, gaming, decentralized finance (DeFi), and consumer and social technologies. The funds will operate as Blockchain Capital’s sixth early-stage fund and its first “opportunity fund,” which will serve as an entry point for companies that have already attracted funding. The funds will be split, with $380 million reportedly going to the early-stage fund and $200 million earmarked for the opportunity fund. The company did not specify which projects will be prioritized by the investment fund; however, a spokesperson noted that it has no plans to invest in artificial intelligence-related projects or act as a hedge fund. 

Citi Token Services will provide payments, liquidity to institutional customers

Institutional clients can now access cross-border payments, liquidity and automated trade finance solutions through Citi Token Services, a private blockchain by Citigroup. According to the financial giant, its Citi Treasury and Trade Solutions is licensed in over 90 countries and has completed two pilot programs. It worked with Danish shipping company Maersk and an unnamed canal authority on a program that made instant payments to service providers via smart contracts, reducing transaction processing times from days to minutes. The service replaces bank guarantees and letters of credit, the statement said. A second pilot enabled clients to transfer liquidity between Citi branches, allegedly reducing “frictions related to cut off times and gaps in the service window.” Citi was among the large financial institutions that participated in a proof-of-concept headed by the Federal Reserve Bank of New York that concluded in July.

Crypto Biz is your weekly pulse on the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

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Bitbuy enters strategic partnership with Canadian crypto ATM firm Localcoin

Localcoin ATM will also be expanding its range of cryptocurrency offerings and launching a wallet app.

Canadian fintech corporation WonderFi, a firm backed by billionaire Kevin O’Leary, recently announced a strategic partnership between Bitbuy and cryptocurrency ATM provider Localcoin ATM.

The partnership, announced on Sept. 18, will shore up Localcoin’s crypto ATM offerings throughout Canada with Bitbuy’s exchange platform and the “deep liquidity” that comes with it, according to a press release from WonderFi.

Bitbuy was the first cryptocurrency exchange to receive full regulatory approval in Canada. It was acquired by WonderFi in the January 2023 purchase of its parent company, First Ledger Corp., for close to $162 million (206 million Canadian dollars).

Localcoin purportedly operates the largest cryptocurrency ATM network in Canada. According to the press release, its 900 machines make up some 33% of the national total — which stands at approximately 2,700, making Canada second only to the United States in total adoption.

According to the press release, with this partnership, “Bitbuy’s digital asset services will cover nearly 50% of Canada’s Bitcoin ATMs.”

Last year, Ontario Securities Commission CEO Grant Vingoe said the regulator believed “more than 30 per cent of Canadians plan to buy crypto assets” in 2023, despite the recent exodus of numerous crypto companies from the market.

As Cointelegraph previously reported, while ByBit and Binance both made their exits from the Canadian cryptocurrency scene, citing regulatory changes, WonderFi CEO Dean Skurka told Cointelegraph last month that the increased regulatory clarity was bringing institutional investors to cryptocurrency and digital assets to Canada.

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In a statement given to Cointelegraph, Localcoin ATM CEO Tristan Fong also announced the impending launch of a Localcoin Wallet app and an undisclosed “extended range” of cryptocurrencies available at Localcoin ATMs:

“We’re always evaluating opportunities to grow and enhance our offerings. As part of our aggressive Canadian & International network expansion, we’re also excited to announce upcoming features: an extended range of cryptocurrencies available at our ATMs, our Localcoin Wallet app, and the ability to sell bitcoins online for e-transfer or cash pick up at our locations. While full details are on the horizon, we’re committed to bringing crypto to the masses."

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Canadian BTC exchange partners with Costa Rica’s largest fiat payment system

Bull Bitcoin forms a partnership with SINPE Movil, Costa Rica’s principal fiat payments system, and Bitcoin Jungle, a local crypto wallet solution.

A non-custodial Bitcoin-only exchange with a head office in Canada, Bull Bitcoin, has formed a partnership with SINPE Movil, Costa Rica’s principal fiat payments system, and Bitcoin Jungle, a local crypto wallet solution.

According to Bull Bitcoin’s press release from Sept 14, both the citizens of Costa Rica and “foreigners” will be able to convert the local currency, Colones, to Bitcoin, and vice versa. Bull Bitcoin will also allow conversion to and from bank accounts (IBAN) both in Colones and USD via regular bank transfers.

The exchange will operate through the Bitcoin Jungle wallet with users purchasing Bitcoin by sending their fiat money to Bull Bitcoin via SINPE Movil and getting BTC on their Bitcoin Jungle accounts. As Bull Bitcoin emphasizes, this will make it “possible for merchants to quickly and effectively "cash out" their Bitcoin for fiat currency and increases their confidence in accepting Bitcoin payments.”

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In the company’s terms, an entry into the Costa Rican market “officially kicks off” its international expansion. Over the next 12 months, Bull Bitcoin plans to become available to “over a billion people worldwide” after “almost 10 years of being available only in Canada and serving a market of 35 million individuals.”

Costa Rica is among the list of Latin America’s countries covered by recently launched Binance’s “Send Cash” product. In August, the largest crypto exchange in the world reported the launch of a new crypto-to-bank account payment solution for the region. Users from Honduras, Guatemala, Costa Rica, Paraguay, the Dominican Republic, Panama and Mexico will be able to send money via Binance Pay to recipients with bank accounts in Colombia and Argentina.

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Strict Canadian crypto exchange rules allowed Kraken clarity to invest there, exec says

Kraken’s Canada managing director told Cointelegraph in an interview that attaining restricted dealer status provided a clear regulatory pathway.

Size and energy allowed Kraken to stay in Canada after the imposition of new registration requirements for crypto exchanges in February. But in spite of the demanding process, the regulatory clarity has benefited the company, Kraken managing director for Canada Mark Greenberg said.

Speaking to Cointelegraph’s Sam Bourgi at the Blockchain Futurist Conference in Toronto, Greenberg had positive things to say about the Canadian regulatory environment:

“The Canadian regulators have been collaborative, helpful. […] There’s a clear regulatory pathway. It’s allowed us to invest in the country.”

Kraken has a staff of over 250 in Canada, Greenberg said. That strong base has been key to the company’s success in the country. After registration rules for crypto exchanges were tightened in Canada in February by the Canadian Securities Administrators, requiring them to register as restricted dealers, some exchanges, such as OKX, left the country.

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“It’s not the easiest thing to meet those requirements,” Greenberg said, “especially for smaller platforms […] that just weren’t able to put that kind of energy against it.”

Kraken, however, reiterated its commitment to Canada, where it has been operating with money service business registration since 2011. “It took a lot of work for us,” Greenberg continued. “We’re lucky in that we have a great user base here in Canada, and we were able to make those costs work.”

On-ramps and off-ramps remain challenging. The five major banks in Canada “have typically been relatively hostile to crypto,” according to Greenberg. It is possible to make fiat payments to crypto exchanges or receive fiat from them in person at Canada Post. In addition, Kraken has partnered with the Canadian payment service Payper to provide instant e-money transfers of up to 3,000 Canadian dollars.

“We have many rails we hope to build over the coming months and years,” Greenberg said.

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