To remain competitive, companies find themselves increasing their efforts to digitally transform their businesses by developing new offerings based on emerging technologies and integrating these technologies into existing product and service offerings.
This is our sixth monthly bulletin for 2021, aiming to help companies identify important and significant legal developments governing the use and acceptance of blockchain technology, smart contracts and digital assets.
While the use cases for blockchain technology are vast, from copyright protection to voting, most of the current adoption is in the financial services section and the focus of this bulletin will be primarily on the use of blockchain and or smart contracts in that sector. With respect to digital assets, we have organized our approach to this topic by discussing it in terms of traditional asset type or function (although the types and functions may overlap), that is, digital assets as:
- Virtual currencies
- Deposits, accounts, intangibles
- Negotiable instruments
- Electronic chattel paper
- Digitized assets
Digital assets can themselves be assets or instead can reflect the ownership of an underlying asset. For example, electronic records that are the equivalents of negotiable instruments and electronic chattel paper would be digital assets, as would an electronic recording of a security interest in the underlying asset, such as recording title to real or personal property and the use of tokens to represent revenue streams from otherwise illiquid assets such as patents and commercial real estate (sometimes referred to as a tokenized or digitized asset).
In addition to reporting on the law and regulation governing blockchain, smart contracts and digital assets, this bulletin will discuss the legal developments supporting the infrastructure and ecosystems that enable the use and acceptance of these new technologies.
Each issue will feature in-depth insight on a timely and important current topic. In this issue, we discuss how cryptocurrency assets are addressed in the Biden Administration’s tax compliance plan.
Biden Administration tax compliance plan targets cryptocurrency assets
In The American Families Plan Tax Compliance Agenda issued by the US Treasury Department on May 20, 2021, the Biden Administration announced its intention to cut the annual tax gap by doubling the size of the Internal Revenue Service and providing the IRS with greater authority to collect information on Americans’ financial assets and transactions, including cryptocurrency transactions. Find out more.
Bi-partisan group of senators launch US Senate Financial Innovation Caucus. Senators Cynthia Lummis (R-WY) and Kyrsten Sinema (D-AZ), as co-chairs, launched the US Senate Financial Innovation Caucus to highlight responsible innovation in the financial system and using financial technologies to make markets more inclusive and safe. The caucus will focus on a number of critical issues, including:
- Distributed ledger technology (blockchain)
- Digital assets
- Artificial intelligence and machine learning
- Consumer protection
- Combating money laundering
- Faster payments
- Central bank digital currencies
On June 3, Senator Lummis published an editorial entitled Why I’m Founding the Financial Innovation Caucus further explaining her reasons for establishing the Caucus.
FDIC issues request for information and comment related to digital assets. On May 21, 2021, the FDIC issued a request for information and comment regarding insured depository institutions’ current and potential activities related to digital assets. The FDIC stated that digital asset use cases may fall into one or more broad categories:
- Technology solutions
- Asset-based activities
- Liability-based activities
- Custodial activities
The FDIC is asking insured depository institutions for responses to questions regarding (i) current and potential use cases;…