Blockchain Bites: Coinbase Cuts Margin Trading, Binance Sweeps US Clients, OKEx Offers Discounts

Coinbase reduces margin trading. Binance wipes out US clients. OKEx is offering discounts to customers affected by its five-week hiatus.

Tax modification
Coinbase will no longer send customers 1099-K, the US tax form that led the Internal Revenue Service (IRS) to mistakenly think that traders had underestimated their earnings. The exchange will use the 1099-MISC form instead, at least for customers who earn interest on loans and similar products. However, the new module may have its own problems. According to Shehan Chandrasekera, Head of Tax Strategy at CoinTracker, “The threshold for obtaining a 1099-MISC is very low,” only $ 600 in transactions, meaning more customers can receive tax forms than strictly necessary. Customers who do not receive any forms from Coinbase and have sold or converted cryptocurrencies in 2020 are still responsible for reporting to the IRS and should consult a tax professional, Coinbase said.

Binance sweeps
Binance’s flagship exchange will cancel services for all US users in 14 days, according to emails sent to users advising them to withdraw their funds. “Because we constantly periodically check our existing checks, we have noticed that you are attempting to access Binance despite identifying yourself as a US person,” the notice reads. Binance also suggested that current users open an account with the Binance US registered exchange. The blockade noted that the bans could be based on IP addresses, although this was not the case with at least one unverified US user, CoinDesk learned. The bans, therefore, could be based on KYC data.

Chained together
IDEX, an Ethereum-based unsecured cryptocurrency exchange, announced Tuesday that it plans to expand to the Binance Smart Chain and Polkadot networks. Each IDEX Ethereum token holder will receive an equivalent number of IDEX tokens for each of the new chains on December 7th. CEO Alex Wearn said the measure is “to plant our flag early” in the event that one of the alternative smart contract platforms eventually competes with Ethereum on a significant basis. Next one? Multi-chain expansion, if and when it makes sense. However, Wearn notes, seamless cross-chain trading is still a long way off.

All right?
OKEx will offer a mix of compensation and rewards to users who have suffered from a five week suspension of services. Users who have made deposits, held tokens or traded during the withdrawal suspension period will receive 20% of OKEx’s total income from futures and perpetual swap transaction fees for the past seven weeks. The exchange will also provide discount cards to users with assets worth more than 10,000 bonds within a given window. According to data source Skew, OKEx is expected to be online before November 27, according to data source Skew, OKEx remains in the top spot for open interest on bitcoin futures, which is currently worth $ 1.27 billion.

Extension of the levy
South Korea’s National Assembly is pushing to delay the introduction of a specific taxation for digital assets until January 2022. According to a report on Wednesday by local news source DongA.com, it is expected to take effect. a proposed legal change introducing the tax regime from October 2021. However, the National Assembly said more time is needed to build the relevant tax infrastructure after cryptocurrency exchanges declared they could not be ready by the deadline . The Ministry of Economy and Finance presented the proposal in July, seeking to introduce a 20% levy – plus 2% local income tax – on cryptocurrency trading profits in excess of KRW 2.5 million ( about $ 2,260).

Bulls betting
Bitcoin is 2.8% shy of hitting a new high and options traders are betting it can get there. One-month implied volatility in the bitcoin markets has risen to 81%, the highest level since May, due to a recent surge in call buying (a financial contract that offers traders the opportunity to buy later. ), said Vishal Shah of Alpha5. . Additionally, put-call skews, which measure the spread between the cost of bearish and bullish bets, are hovering close to record lows. In other words, call options have attracted more robust demand than puts, a sign that investor expectations are skewed to the bullish side. “Investors are positioning themselves for a continuation of the bull market,” Shah said.

Effective delivery?
Coinbase announced the end of all margin trading starting November 25, 2020, becoming the first high-profile exchange to cut the profitable line of business. According to a report by CoinDesk’s Nikhilesh De, the San Francisco-based trading platform is following recent guidance from the Commodity Futures Trading Commission (CFTC).

Margin trading is effectively a line of credit offered by an exchange or brokerage to allow users to place bets with a high degree of leverage. Existing positions may close next month, although Coinbase will cancel any open limit orders not filled by 2:00 pm PT today.

In March, the CFTC clarified the meaning of “effective delivery” of digital assets. According to the guide, a customer has the legal rights, or actual delivery, of a cryptocurrency if they control it after purchase, even if it was acquired through a margin or leveraged product. This also means that the seller has no control over the cryptocurrency in question.

This is where it gets tricky for Coinbase’s margin trading business. Since the exchange uses cold storage and other custodial solutions as part of this line of business, it complicates the nature of the actual delivery of an asset in accordance with the updated rule.

At the time the guide was first proposed in 2018, then Chief Legal and Risk Officer Mike Lempres argued that affiliates and third parties should be able to hold cryptocurrencies on behalf of Coinbase customers. .

“Requiring unlimited ability to transfer digital assets would effectively mean that US entities and regulated entities, or entities using cold storage or other methods of asset protection, could not hold digital assets acquired through fringe transactions,” Lempres said. at the time.

“In essence, Coinbase would have to register with the CFTC as a commodity exchange if it is to continue offering leveraged products,” writes De.