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IRS to investigate Kraken users as OFAC seeks blockchain analytics solutions

2021.05.08 Adam James

Regulators and authorities in the United States are ramping up efforts to make sure cryptocurrency users are complying with the law.

As always, it's been a busy week in the world of blockchain and cryptocurrencies — particularly on the regulatory front. While banking giants Citigroup and Goldman Sachs make moves for clients, the IRS is set to serve cryptocurrency exchange Kraken with a John Doe summons in an effort to catch U.S. taxpayers failing to properly report their crypto-related transactions. Meanwhile, the U.S. Office of Foreign Assets Control is seeking blockchain analytics solutions.

Here's everything you need to know about these stories, and more, in this week's edition of OKEx Insights' News of the Week.

Citigroup considers launch of crypto services

Citigroup is considering the launch of its own crypto trading service — as well as custody and financing — according to the banking behemoth's global head of foreign exchange, Itay Tuchman.

"There are different options from our perspective and we are considering where we can best service clients," Tuchman the Financial Times.

Key takeaways

  • Citigroup's crypto-related considerations stem from a dramatic increase in client interest since the latter half of 2020.
  • Despite the increased interest, Citigroup's crypto services — should the bank launch them — are not expected to be available to clients anytime soon.
  • Tuchman also noted that he believes "crypto is here to stay and that we are just at the very beginning of the market."
  • Citi is not alone in its crypto considerations. Others on Wall Street — such as Goldman Sachs, Morgan Stanley and others — are moving to offer similar services to clients.

IRS to serve information request to Kraken regarding taxpayers

The Internal Revenue Service has been authorized by a federal court in the Northern District of California to serve an information request to cryptocurrency exchange Kraken. 

The John Doe summons aims to identify U.S. taxpayers who conducted a minimum of $20,000 in cryptocurrency-related transactions from 2016 to 2020.

Key takeaways

  • The actions from the IRS indicate that the U.S. tax authority is taking the failure to report cryptocurrency-related taxable transactions seriously. “There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions,” said the agency's Chuck Rettig.
  • The IRS has been aggressive in its efforts to serve requests to cryptocurrency exchanges, though it has been forced to narrow its scope, somewhat, in order to gain court approval.

Goldman Sachs offering BTC derivatives to clients

Goldman Sachs is offering BTC price-tied derivatives products to its clients in the form of non-deliverable forwards that pay in cash. According to Bloomberg, these NDFs have been available to the financial giant's clients since last month.

Key takeaways

  • Goldman Sachs' NDFs, in essence, allow its clients to speculate on the price of BTC.
  • The banking giant has taken a keen interest in offering BTC-related investment products to its wealth-management clients in 2021.

OFAC seeks blockchain analytics solutions

The U.S. Office of Foreign Assets Control is seeking blockchain analytics solutions from potential contractors. Specifically, the branch of the Treasury Department is in need of "address clustering, transaction flow mapping and graphing, wallet explorer, analysis of user behavior, and exchange rate, trade, and market data."

Key takeaways

  • Various departments of the U.S. government have been contracting blockchain analytics solutions, with firm Chainalysis being the most prolific contractor.
  • The OFAC has been aggressive with its moves of late, particularly in regard to sanctioning addresses pertaining to cyberattacks and election interference from entities tied to the Russian government.

Uniswap V3 launches

Uniswap's V3 — the third iteration of the leading decentralized exchange — went live this week. The upgrade primarily aims to allow liquidity providers to make markets within their own customized price ranges.

Key takeaways

  • Many expect Uniswap's latest upgrade to keep the DEX in the top spot among leading decentralized exchanges.
  • The next stop for Uniswap is the deployment of V3 on layer-two protocol Optimistic Rollup.
The total value locked in Uniswap is currently just under $7.5 billion. Source: DeFi Pulse


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