From crowdfunding to cryptocurrency regulation, here is a summary of the main stories from the last week of July.
Tether under investigation for possible fraud
Bloomberg reported Monday that the Department of Justice (DOJ) is investigating Tether for its conduct in the company’s early days. Citing three anonymous sources, the outlet said investigators are looking into whether Tether executives may have misled banks by failing to disclose that certain funds they moved were linked to cryptocurrency activity.
Tether denied the report and said it remains in ongoing discussions with relevant authorities. Questions about Tether arose after customers and industry experts noted that much of the company’s alleged reserves were held in short-term commercial paper, raising doubts about whether Tether actually held the U.S. dollar reserves it claimed.
The controversy intensified in February when New York Attorney General Letitia James announced that Tether had misrepresented that its entire portfolio of tokens was backed by fiat currency. The company was scrutinized for allegedly moving funds to conceal millions of dollars in losses; the investigation resulted in an $18.5 million settlement. Tether plays a unique role in the digital asset ecosystem, and any DOJ action could influence markets given Tether’s position as one of the largest crypto tokens by market capitalization.
Binance to end margin trading against euro, pound and Australian dollar
Binance announced Monday that it will stop offering margin trading for crypto pairs quoted in the Australian dollar, British pound and euro, effective August 10. The exchange said it will automatically close open positions, cancel remaining orders and delist the affected pairs two days later.
Earlier in the week, Binance CEO Changpeng Zhao said the company began implementing new rules on July 19 that lower initial margin leverage from 100x to 20x. The limits were first applied to new users, with plans to roll them out to existing users over time.
Binance has been making changes as it faces heightened regulatory scrutiny from multiple jurisdictions. The exchange recently announced the end of support for its stock tokens, which had come under regulator fire for potentially being offered without proper authorization.
Senate bipartisan infrastructure deal targets crypto taxation
A bipartisan U.S. Senate infrastructure agreement proposes tapping cryptocurrency transaction reporting as a source of revenue and would subject digital asset investments to stricter reporting requirements. The package, intended to raise roughly $550 billion for infrastructure projects including transportation, names crypto as one potential funding source.
CoinDesk reported Wednesday that a fact sheet suggested the bill aims to raise about $28 billion through increased crypto reporting requirements, although the report did not specify the exact time frame for these receipts. The fact sheet indicates the proposal would require businesses to report transactions exceeding $10,000 to the Internal Revenue Service.
Creating clearer rules for the crypto industry has been an administration priority. President Biden’s proposed Fiscal Year 2022 budget, published in May, recommended expanding cryptocurrency reporting requirements and contemplated raising the top long-term capital gains tax rate — a move that could affect digital-asset taxation.
FTX moves toward carbon neutrality
FTX CEO Sam Bankman-Fried said Tuesday that the company is making progress toward its goal of carbon neutrality. In May, FTX pledged to offset its environmental footprint; the company has since spent $1 million on carbon offsets and another $1 million on permanent carbon capture initiatives.
Bankman-Fried also said FTX funded climate research, and the FTX Foundation launched a new climate program called FTX Climate to support policies and projects focused on carbon removal solutions.
In an interview on CNBC Squawk Box, Bankman-Fried acknowledged that Bitcoin and Ethereum are among the largest energy consumers in the crypto sector, and he suggested that energy usage should decline as major crypto assets migrate toward less energy-intensive chains.
Senator Warren says crypto could serve the unbanked
Senator Elizabeth Warren, a long-standing critic of cryptocurrencies, offered a more nuanced view during an interview on CNBC Squawk Box, noting that parts of the current banking system have excluded many people. She argued that digital currencies and a central bank digital currency (CBDC) could help bring low-income and unbanked individuals into the financial system because of lower transaction costs.
Warren emphasized that adoption must account for risks and potential impacts on the broader financial system. She also said regulatory measures are needed to rein in exploitative behavior by major crypto players and maintained that cryptocurrency wealth should be subject to taxation like other forms of income and assets.