14th February 2022 > > Fidelity’s support of BTC and NFT related tax issues.

Market Snap (at time of writing)

Market Wrap

European gas and electricity prices jump 10% overnight, as the day of Ukraine’s submission to Russia draws closer. How’s that policy of outsourcing carbon emissions to Putin and his murderous henchmen in the false claim that this gets the UK to net zero going exactly?

Wall Street down 300 points in the last hour and a half with cryptos proving resilient, for now at least.

Occasional Series – Apologies

For the absence of the CCC yesterday. Real life does get in the way sometimes. I hope you are not too disappointed with my lack of application to the task in hand.

Curious Cryptos’ Commentary – Fidelity and BTC

Fidelity Investments, with $4.2 TRILLION assets under management (AUM) has long been a supporter of cryptos.

Back on 14th July 2021, the CCC reported Fidelity Digital, the crypto subsidiary, was to hire another 100 people, a 70% increase in its headcount, to cope with its expanding crypto business. This expansion was in direct response to demand from institutional investors, especially for ETH as opposed to BTC, according to the press release.

It was also reported that Fidelity intended to extend the crypto trading week from 5 days to 7, with a 24-hour service. That is a significant shake-up of traditional financial trading hours.

Chris Kuiper, Head of Research at Fidelity Digital Assets, has come out fighting for BTC in response to two key concerns from their clients. The first of these is the risk of BTC being replaced by some other crypto, the second that there is lower upside potential compared to other coins.

Though Chris agrees, not unreasonably with the second of those concerns, he claims that BTC is unique as the most decentralised and censorship resistant network:

“You can't reinvent something that's already been invented in terms of the most secure, most decentralized and what we consider as the best monetary good in the digital asset space”.

I have long maintained a 60/30/10 ratio for BTC/ETH/alts for my own portfolio (NOT investment advice, merely an observation) or thereabouts. Chris might think that a more conservative approach may be more appropriate.

Curious Cryptos’ Commentary – Non-fungible tokens (NFTs) and the Taxman

HMRC have seized three NFTs and £5k of crypto assets as part of an investigation to defraud the taxman of £1.4mm. The scheme involved 250 fake companies and “sophisticated” methods to hide the identities of the fraudsters.

There has been the usual moral panic emanating from some quarters, exemplified by Chris Etherington, a tax partner at accounting firm RSM:

“The NFT space is probably in that arena where it’s difficult to be certain, if you’re transacting with somebody, where they got their funds from. With cryptocurrency in general and blockchain, there has been a historic association with criminal activity.”

What Etherington fails to point out is that USD has traditionally been the medium of choice for crooks and gangsters, though I seem to recall reading that for a while its hegemony was disrupted whilst the EUR 500 note was still being printed by various European central banks.

Etherington would benefit from an annual subscription to the CCC, before the crypto revolution leaves him behind.

Reserve Treasury Protocols (before they all go to zero)

Reminder – Olympus and Wonderland are, to the best of my knowledge, live viable projects. XEUS, FORT and JADE turned out to be scams, though they are still live scams. Scams are not uncommon in these Wild West fringes of Decentralised Finance (DeFi).

Point of order – a staunch and loyal supporter of the CCC has asked that I make clear that it is only my belief that JADE is a scam. The project is still very much alive, and there is a wide body of opinion that does not concur with my view. I am very happy to make this point – the CCC believes that consenting adults are allowed to have different opinions on a wide range of topics.

Photon appears to have won the prize for being the most extraordinary scam. In under 18 hours it went to zero. And as far as I can tell – and I am no blockchain analytics expert – they walked away with less than $30k.

It is very upsetting we have scumbags like that around.

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