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IT Department Notifies TDS Disclosure Requirements for Crypto, Virtual Digital Assets

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By Press Trust of India | Updated: 23 June 2022

The Income Tax Department has come out with detailed disclosure requirements for TDS deductions for virtual digital assets, under which date of transfer and mode of payment will have to be specified.

From July 1, tax deducted at source (TDS) of 1 percent will be levied on payments towards virtual digital assets or cryptocurrencies beyond Rs 10,000 in a year, as the Finance Act 2022 has introduced Section 194S in the I-T Act.

In the run up to implementation of the new provision, the Central Board of Direct Taxes (CBDT) on June 21 notified certain amendments in I-T Rules with respect to furnishing TDS returns in Form 26QE and Form 16E.

CBDT has notified that the TDS collected under Section 194S shall be deposited within 30 days from the end of the month in which the deduction has been made. Deposit of tax so deducted shall be made in the challan-cum-statement Form 26QE.

Nangia Andersen LLP Partner Neeraj Agarwala said to furnish Form 26QE, the specified persons would be required to maintain details like date of transfer of virtual digital assets (VDAs), value of consideration, mode of consideration — whether cash or kind or in exchange of another VDA etc.

“These forms are in line with the recently introduced provisions of Section 194S. Complying with these sections, the forms require detailed disclosures.

“The specified persons should be well-equipped to understand and obtain the information required for compliance, as well as maintain the appropriate documentation to support these transactions,” Agarwala said.

AKM Global Tax Partner Amit Maheshwari said since only a few days are left for the new TDS provisions like Section 194R and 194S to come into play, there was a greater need to have a clarity on the procedural compliances.

“The new forms such as 26QE require detailed information for payments on transfer of VDAs such as the date of transfer of VDA to amount paid/ credited either in cash or kind or in exchange of another VDA. This will help the tax department to trace the VDA transactions,” Maheshwari said.

But it will also increase the compliance burden on taxpayers, he added.

The finance ministry is also working on an FAQ on taxation of cryptocurrency, which will give nuanced clarifications on applicability of income tax on virtual digital assets.

The 2022-23 Budget has brought in clarity with regard to levy of income tax on crypto assets. From April 1, a 30 percent I-T plus cess and surcharges, is levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.

A 1 percent TDS on payments over Rs. 10,000 towards virtual currencies has also been introduced which will kick in from July 1. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.

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Bitcoin falls below $19,000 as cryptos creak under rate hike risk

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By: Reuters, Updated September 19, 2022

SINGAPORE, Sept 19 (Reuters) – Cryptocurrencies fell to fresh lows on Monday on regulatory concerns and as investors globally turned shy on risky assets with interest rate rises looming around the world.

Bitcoin , the biggest cryptocurrency by market value, fell about 5% to a three-month low of $18,387.

Ether , the second largest cryptocurrency, dropped 3% to a two-month low of $1,285 and is down more than 10% in the last 24 hours. Most other smaller tokens were deeper in the red.

The Ethereum blockchain, which underpins the ether token, had a major upgrade over the weekend called the Merge that changes the way transactions are processed and cuts energy use.

The token’s value has fallen amid some speculation that remarks last week from U.S. Securities and Exchange Commission Chairman Gary Gensler implied the new structure could attract extra regulation. Trades around the upgrade also were unwound.

“It’s speculation as to what might or might not happen,” said Matthew Dibb, COO of Singapore crypto platform Stack Funds, on the regulatory outlook.

“A lot of the hype has come out of the markets since the Merge,” he said. “It’s really been a sell-the-news type of event,” he added, given the nervous global backdrop, and said ether could test $950 in coming months.

“Looking at the landscape right now, both fundamentally and technically, it’s not looking great. There’s no immediate bullish catalyst that we can see that’s going to prop up these markets and bring in a whole lot of new money and liquidity.”

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Bitcoin once again slips below $20,000

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By: Reuters, September 18, 2022

Sept 18 (Reuters) – Bitcoin on Sunday dropped 1.54% to $19,804, slipping from the 20,000 mark after losing $310 from its previous close.

The world’s biggest and best-known cryptocurrency is down 58.9% from the year’s high of $48,234 on March 28.

Ether , the coin linked to the ethereum blockchain network, dropped 3.2 % to $1,422.1 on Sunday, losing $47 from its previous close.

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U.S. seizes $30 mln in crypto from North Korea-linked hackers

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By: Reuters, September 9, 2022

Sept 8 (Reuters) – The United States has seized over $30 million in cryptocurrency stolen by North Korean-linked hackers Lazarus from the popular online game Axie Infinity, crypto intelligence firm Chainalysis said on Thursday.

The company said in a blog post it played a role in the recovery with U.S. law enforcement and other crypto organizations, without naming them, in the first ever recovery of stolen cryptocurrency by a North Korea hacking group.

Chainalysis and North Korea’s mission to the United Nations did not immediately respond to requests for comment. The FBI did not immediately respond to a request for comment.

The seizures represent about 10% of the total funds stolen in March from Ronin Network, a sidechain built for the play-to-earn game Axie Infinity, Chainalysis said.

Ronin said in March hackers stole about $615 million in cryptocurrency.

“We estimate that so far in 2022, North Korea-linked groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols,” Chainalysis said. He was referring to decentralized finance protocols, an umbrella term for financial services offered on public blockchains.

The U.S Department of Treasury in May sanctioned virtual currency mixer Blender, saying it was used in the laundering process for the Axie Infinity heist.

The Treasury Department in April also linked Lazarus to the attack.

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Crypto gaming firm Animoca Brands raises $110 million

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By: Reuters, September 8, 2022

LONDON, Sept 8 (Reuters) – Hong Kong-based blockchain gaming developer Animoca Brands has raised $110 million from investors, the company said in a statement on Thursday.

The company said the fund raising values the company “similar to its previous funding round” but did not specify its new valuation.

In July, Animoca said it had a valuation of around $5.5 billion. read more

(This story corrects paragraph 1 to read Hong Kong-based not Singapore)

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Binance to convert users’ USDC into its own stablecoin

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By: Reuters, September 6, 2022

Sept 5 (Reuters) – Binance, the world’s largest crypto exchange, said on Monday it is introducing “BUSD Auto-Conversion,” which will be used to convert any existing user balances and new deposits of USD Coin (USDC), Pax Dollar (USDP) and True USD (TUSD) into its own stablecoin.

The move is intended to enhance liquidity and capital efficiency for users, the company said in a statement.

Binance said it will remove and cease any trading on spot pairs that include USDC, USDP and TUSD; it will start the conversion on Sept. 29.

USDC, which is principally operated by Circle Internet Financial and is the second largest stablecoin, has a nearly $51.9 billion market capitalization. Binance’s stablecoin, BUSD, is valued at about $19.4 billion, according to crypto data provider CoinGecko.

USDC products affected include saving accounts, DeFi staking subscriptions and crypto loans, which will be closed and liquidated on Sept. 23.

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Crypto Exchange FTX Ordered to Halt ‘False and Misleading’ Claims by US Bank Regulator

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By Reuters | Updated: 20 August 2022

A US bank regulator ordered crypto exchange FTX on Friday to halt what it called “false and misleading” claims the exchange had made about whether funds at the company are insured by the government. The Federal Deposit Insurance Corporation said a July tweet by Brett Harrison, head of FTX’s US operations, contained misleading claims that funds held at and stocks purchased through FTX were FDIC insured, and ordered the company to remove any misleading language from its social media accounts and websites.

In the tweet, which Harrison has since deleted, he stated that direct deposits from employers to the crypto exchange are “stored in individually FDIC-insured bank accounts” and that stocks purchased via FTX US “are held in FDIC-insured” brokerage accounts. The FDIC said in its cease and desist letter to FTX US that those statements implied that FDIC insurance was available for cryptocurrency and stock holdings, and that the agency does not insure brokerage accounts.

The order, one of five sent to crypto firms by the FDIC on Friday, comes as regulators have ramped up efforts to police crypto firms that may be misleading investors on whether their funds enjoy a government backstop. The issue has come to a head of late, as turmoil in the crypto market has led to stress and the collapse of some high profile firms.

The bank regulator issued a similar cease and desist letter to bankrupt crypto firm Voyager Digital, arguing that the company had misled customers by claiming their funds with Voyager would be covered by the FDIC. Later, the FDIC issued an advisory urging banks dealing with crypto companies to ensure that customers are aware of what types of assets are government-insured, particularly in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products.

© Thomson Reuters 2022

In a tweet on Friday, FTX CEO Sam Bankman-Fried emphasised FTX is not FDIC-insured, and apologised if anyone misinterpreted previous comments.

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