Coinbase Prepares to Fight IRS Summons With New Court Filing

An attempt by the IRS to obtain user records from digital currency exchange Coinbase just got more complicated.

Court documents filed in the District Court for the Northern District of California this week show that lawyers for the California-based startup have filed to officially intervene in the case.

The US Internal Revenue Service (IRS) launched its case in late November, seeking court approval for a subpoena that would allow it to obtain information on US users (and, in its eyes, potential tax cheats) who used the service between 2013 and 2015. A month later, Coinbase customer Jeffrey Berns moved to block the IRS, an effort the tax agency asked the court to invalidate.

Both Coinbase and Berns have said the tax agency is overreaching, though the startup hadn’t officially responded in court until now. When the case first emerged in November, representatives for the firm said they intended to protest the summons in court.

Coinbase lawyers wrote in the documents that, amidst the filings and counter-filings, the startup deserves to be heard in light of "an extraordinarily broad 'John Doe' summons". The startup is seeking both the chance to have say in the effort led by Berns as well as the IRS summons itself.

The company said:

"The motion to intervene is made on the grounds that Coinbase has an interest in the subject matter of this proceeding, and that disposition of the action may, as a practical matter, impair or impede Coinbase’s ability to protect that interest. Coinbase’s interest is not adequately represented by the existing parties."

In addition to seeking official entry into the case, Coinbase asked that a hearing on the motion filed by Berns be delayed until 30th March at the earliest. The reason: according to the startup, the outcome of the case could have ramifications for the company and its customer base, as well as the wider digital currency space.

"Accordingly, Coinbase would like the opportunity to be heard, at an appropriate time, on the substantive issues that Mr. Berns has raised to the IRS summons at issue," the company said.

When reached for comment, a representative for Coinbase told CoinDesk:

"Both the IRS and Mr. Burns have engaged in briefing both the procedural questions of Mr. Bern’s standing to intervene and also the substantive merits of the IRS’s subpoena. To ensure the court does not rule on the substantive merits of the IRS’s subpoena before they have heard from Coinbase and other companies in the industry, we have filed a motion to intervene and have asked the court to delay hearing on the substantive aspects of Mr. Bern’s motions for 75 days."

Monero Gains After Announcement of New Feature Improving Confidential Transactions

There’s been a spike in the price of Monero since it announced its plan to launch a new feature for China. The digital currency that has been touted to be untraceable is getting ready for an influx of transfers in January.

The platform released the news about its ring confidential transactions feature (or RingCT), one which allows users the ability to hide the amount sent in a transaction, on Dec. 27. The price of XMR has since gained almost 60 percent.

Access

However, despite the rise, not many of the top exchanges in China presently trade XMR, raising the question of how the Chinese would access it en masse.

According to CoinMarketCap, 1 XMR is now worth about $16.82 (as at the time of writing) which is a new all-time high record, surpassing the previous price of $13.35 in September. The currency began 2016 at a value of as low as $0.50, reaching over $2 in July and climbing to $13 by September.

It recorded an almost 100 percent increase in price over a six-day period in the last week of August. At the time, the growth was attributed to several factors including the darknet’s integration of the currency for anonymous purchases, mainstream media hype and its legitimate cryptography by its developers.

The media hype, as well as other factors, were later blamed for the price reversal to $6.84 in October and $4.74 by November. Possibly, this is also responsible for the lack of media attention since it started its ascent after Dec. 27.

Hidden transactions

The new feature, which is currently in its testnet phase, is expected to introduce an improved version of ring signatures called “Multi-layered Linkable Spontaneous Anonymous Group signature,” which allows for hidden amounts, origins and destinations of transactions with reasonable efficiency and verifiable, trustless coin generation.  

The developers believe Monero will allow underground banks and investors to feel safer conducting cryptocurrency transactions while they dodge surveillance and monitoring and be invisible on the Blockchain.

Relatedly, Kraken has launched support for trading Monero as one of the leading cryptocurrencies that have seen a huge 40x market cap growth in 2016.

Monero plans a hard fork for block 1220516 to enable RingCT transactions by Jan. 9 or 10.

5 Things Any Cryptocurrency Needs to Achieve Mass Adoption

Bitcoin, the giant in the world of cryptocurrency, continues to defy all expectations of an early demise and rises higher and higher in value and use. Its adoption as everyday money, however, remains negligent among the common people, almost eight years after the digital currency first emerged.

While the title of “ the first cryptocurrency” is no longer up for grabs, the title of “digital cash” still remains unclaimed, ready to be seized by another up-and-coming digital money. In order to become the common medium of exchange for large swaths of the world, a cryptocurrency first needs to fulfill a few crucial requirements.

Easy and inexpensive transactions

Forget about cryptocurrency for a second. Right now, regular people use either cash or card for day-to-day transactions.

Cash has no transaction costs but requires you to be physically present and have adequate change, and card transactions are relatively instant, though final confirmations often happen the next day, although fees are relatively high it is enough to disincentivize very small transactions. Any cryptocurrency wanting to make inroads with the common people has to beat this by having faster and cheaper transactions.

Bitcoin already offers this advantage, though the margin by which it does is growing slimmer by the day, and even now it may not be enough to entice the public to abandon traditional financial means. Any cash or card replacement has to be better by a large enough margin to warrant a change.

The same goes for fees. Cash has no fees. Other money transfer tools, like cards and bank accounts, are able to charge a fee because they are able to function across great distances with greater efficiency. Cryptocurrency has those same advantages over cash, and as such can be expected to have an associated transaction fee. However, that fee must be significantly lower in order to entice your average consumer away from banking systems. Large companies can afford to make major payment changes in order to save a few cents per transaction because of scale, but regular people cannot.

Improvements to Bitcoin’s basic model

Bitcoin retains an enormous lead in adoption ahead of other cryptocurrencies. Compared to traditional financial systems, Bitcoin provides enough benefits and improvements to warrant a switch. If a currency wants to beat Bitcoin as the new money, it has to be objectively better. Faster or more inexpensive transactions, more anonymity, a better governance structure, and other features are needed to set another coin apart to justify its use and adoption. If a cryptocurrency does similar things as Bitcoin in the exact same way, its chances of taking over as the digital money of the future will be extremely slim.

A streamlined Bitcoin substitution mechanism

Right now, Bitcoin maintains a massive lead in adoption over every other cryptocurrency. That lead was earned on the promise and hype, not of Bitcoin alone, but of cryptocurrency and of the Blockchain technology itself.

Attempting to best the great front-runner of digital currency from scratch, and without a truly staggering level of difference between the two, simply won’t happen. The only way to compete with Bitcoin, as previously mentioned, is to provide at least as much utility, and a large chunk of Bitcoin’s utility is its adoption lead. What another cryptocurrency needs, then, is an easy and efficient way to be used in Bitcoin’s place such as an automatic exchange built into the wallet.

An easy fiat currency conversion system

Like it or not, the world still currently runs on government-issued fiat currency. Living entirely off of cryptocurrency, without any method of conversion into fiat, it is extremely difficult at the present time, and not a viable option for most people. The average person will need an easy way to buy and offload a cryptocurrency for it to be a practical option for them. Most cryptocurrencies are only easily accessible through first acquiring Bitcoin. In order to become dominant and widely accessible, that crippling reliance on Bitcoin needs to end.

An aggressive adoption campaign targeted at the common people

Finally, in order to entice the world at large, the digital currency needs to presented in a way that resonates with most people. While some technical users will care about hash rates, cryptographic keys, smart contracts, and ring signatures, the common folk will not. They need to be reached with the language of cheaper fees, faster access to funds, more security, less paperwork, etc. The only way anyone will know why cryptocurrency makes sense for them is for someone to tell them why. In order to achieve that, a successful marketing campaign is needed.

The cryptocurrency world, while new, is wildly diverse. However, in terms of a tool for everyday use in financial transactions, Bitcoin has almost exclusive reign. In order to dethrone the king of digital cash, any competitor has to bring their A-game.

2017 - The Year Bitcoin Finally Breaks Free

Bitcoin is set for a bullish market, Ethereum is here to stay, traditional investment vehicles and cryptocurrencies will marry and Blockchain awareness shall grow globally, according to an expert.

The year 2016 saw an influx of Blockchain startups, with Ethereum showing a lot of promise before the DAO breach. As 2017 begins, Bitcoin has broken the $1000 mark and will achieve a new level of market capitalization.

Jason Cassidy, a Blockchain expert and president at CryptoConsultant.com, tells Cointelegraph his expectations within the crypto environment over the course of the year.

The end of the Bitcoin bear market 

Since the climatic downfall of Mt.Gox back in late 2013, Bitcoin has been in a bear market, says Cassidy.

He explains:

“The bear has been in slumber for some time now and 2017 is the year that Bitcoin finally breaks free and enters into a new bull market. And while I do not anticipate spectacular gains in 2017, this year should set the floor for a monumental price run coming in the near future.”

Ethereum vs. Ethereum Classic, round 2

Cassidy notes that the fight between Ethereum and Ethereum Classic is far from over and will continue for some time. While refusing to reveal who he believes will win the battle, in the end, Cassidy expects to see some major news coming out of both camps this year, which will get global attention. “Ethereum, whether it be the original chain or a forked version, is here to stay,” he says. 

Traditional investment vehicles + crypto = harmony

Another observation made by Cassidy is the estimation that the current financial system holds several quadrillion dollars worth of wealth, particularly in the unregulated sectors of the derivatives market.

He says that be it due to organic adoption or through a disaster in the current financial system, capital will be flowing into the cryptocurrencies and Blockchain assets:

“Consider how much money exists in the current system and how few traditional investment vehicles exists today as on-ramps for that money to enter into our industry? 2017 is the year that traditional financial vehicles meet Bitcoin.”

Cassidy also expects mutual funds, hedge funds and ETF's to all make big splashes. “Expect institutional players to use these on-ramps to gain exposure to these new markets,” he says. 

Global Blockchain awareness

Cassidy says that there are too many good things happening in the Blockchain space to not permeate into the collective unconscious of society. Everything from identification to talent recruitment is being positively disrupted.

“Bitcoin is doing to money what I expect other Blockchain technologies will do for key areas of life outside of finance,” he concludes.

While China Inspections Deal Blow to BTC Price, Bitcoin Hits $1080 in India

News on the Chinese Central Banks' inspections of Bitcoin exchanges led to a significant decline in the price of Bitcoin. Yet, some markets remain unaffected, including India, which demonstrated an all-time high value of Bitcoin at $1,080.

Media reported that Chinese Bitcoin exchanges including BTCC, Huobi and OKCoin were under scrutiny. Bitcoin has already begun to recover after the reports.

In the midst of this chaos, the Indian Bitcoin exchange market observed a consistent growth in daily trading volume and demand. The worsening financial turmoil and the uncertainty of the nation’s economy have raised serious concerns on both long and short-term performance of the Indian rupee.

As the circulation of the national currency of India was cut in half within months since the announcement of demonetization, Indian investors and traders began to search for safe alternatives other than gold, which is also being confiscated and seized by the local government.

Robust Indian Bitcoin infrastructure

Unlike many regions, the Indian Bitcoin market has a robust Bitcoin infrastructure, with reputable and regulated Bitcoin exchanges including Zebpay, Coinsecure and Unocoin. The three venture capital-backed exchanges have provided the necessary infrastructure for local investors to trade Bitcoin with ease.

Reliable services and trading platforms of the above-mentioned exchanges simplified the process of pivoting away from traditional banking systems and fiat-based services.

Unocoin has even reported that its user base doubled in the past two months, demonstrating the rapid growth of the Bitcoin user base in India and the demand for the digital currency.

Sathvik Vishwanath, co-founder of Unocoin stated:

"Two years ago, I had to explain to people what a Bitcoin was. Today, people are more aware and we have over 1.27 lakh users. Just in the last two months, those numbers have doubled.”

Currently, the price of Bitcoin on the Indian Bitcoin exchange market remains strong at $972, a value that is approximately 17 percent higher than the price of Bitcoin at global Bitcoin exchanges on average.

If this economic uncertainty and financial instability in India stemming from the demonetization of banknotes continues, it will likely cause the value of Bitcoin to rise further. The World Bank went as far as downgrading India’s growth forecast earlier this week, which led to a further devaluation of the Indian rupee and stronger performance of Bitcoin on the Indian Bitcoin exchange market.

“Continued tailwinds from low oil prices and solid agricultural output were partly offset by challenges associated with the withdrawal of a large volume of currency in circulation and subsequent replacement with new notes,” said the World Bank.

China’s Central Bank is Inspecting Bitcoin Operators, Bitcoin Price is Tumbling

China’s Central Bank is Inspecting Bitcoin Operators, Bitcoin Price is Tumbling

In a statement released by the People’s Bank of China, the central bank of China has announced that they are going to be carrying out inspections on Bitcoin enterprises in the country. The statement was posted in Mandarin on Jan. 11, 2017 on the PBOC website.

Sudden ‘inspections’ on Chinese Bitcoin companies

The PBOC will check by carrying out onsite inspections if the Bitcoin enterprises within China are operating under the regulations of the country.

The central bank is on the lookout for companies that they deem to be operating “beyond the scope of the enterprise and the market.”

PBOC is also going to be checking licenses and if the companies are actually allowed to carry out credit, payment, exchange and other related businesses.

A more worrying aspect of these ‘raids’ would be that the PBOC is going to hunt down anyone that they believe is manipulating the market. Compliance with anti-money laundering system implementation and financial security risks is also on the agenda.

BTCC: Inspection, not raid

BTCC has released this comment on Chinese social media platform Weibo:

"The afternoon of January 11, 2017, the Shanghai headquarters of the People's Bank of China, Shanghai Finance Office and other units to carry out on-site inspection of Bitcoin China.

At present Bitcoin China is running normally, is actively cooperate with the regulatory department of inspection, and in accordance with laws and regulations to provide information, if received specific guidance, we will notify the user the first time.

Bitcoin China promises that we will, as always, strictly comply with the relevant laws and regulations and regulatory requirements, compliance business; maintenance Bitcoin market stability, and resolutely protect the interests of investors."

Is China tightening the screws?

Bloomberg had reported on Jan. 9, 2016 that there are rising concerns that China is increasing pressure on Bitcoin companies to curb capital outflows. Bloomberg had quoted QQ.com as saying:

“The People’s Bank of China’s Shanghai branch said in a statement late Friday that its officials, along with the city’s financial office, asked Bitcoin trading platform BTCChina.com to conduct self-checks and rectify any problems. The State Administration of Foreign Exchange has scrutinized some major bitcoin exchanges, possibly to investigate the use of the digital asset to evade capital controls.”

Follow up action?

The inspections, raids or scrutiny on-site of Bitcoin operators in China could be termed as a follow-up action after the PBOC had called in companies like BTCChina.com, OKCoin and Huobi.

We had reported earlier that the Renminbi had been under considerable pressure and the Chinese have been taking measures against capital flight. We have no certainty of saying as of this moment if these actions by the Chinese central bank are merely a follow-up of their earlier warning to companies that had advised a course of self-correction or if they signal a shift in the thinking on Bitcoin viz-a-viz capital flight out of the People’s Republic.