Taxes are just the start for crypto regulation

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: the Treasury Department wants more crypto transfers reported, Stripe likes it written down, and even Diddy's a banker now.

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The Big Story

Uncle Sam wants crypto

The Treasury Department is ratcheting up enforcement on cryptocurrency traders as part of a broader clamping down on tax evasion.

The department proposed Thursday that the Internal Revenue Service require businesses to report receiving transfers of crypto worth $10,000 or more.

"Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion," the agency said in a release. "This is why the President's proposal includes additional resources for the IRS to address the growth of cryptoassets."

The IRS had previously raised concerns about crypto, particularly non-fungible tokens, as another means of tax evasion. NFTs are typically purchased with cryptocurrencies like ether; if those assets appreciated in value before getting swapped for an NFT, the buyer owes taxes on the gain.

For the White House, ramping up tax enforcement is considered an easier win than raising taxes. While tax evasion is on the IRS's front burner, some in the crypto industry have been calling on the IRS to make other changes. Those include:

  • Defining the tax implications of crypto-specific events such as airdrops and hard forks. Some believe there is confusion on how to treat them. This week, Rep. Tom Emmer reintroduced a bill that would require the IRS to create a safe harbor until it clarifies it.
  • Some in the industry also believe cryptocurrency should qualify for a de minimis exemption. Such an exemption for crypto would be similar to an existing law for foreign currency. A bill had been proposed to make gains from cryptocurrency equal or less than $200 not taxable.

The Treasury Department's proposal got crypto Twitter buzzing Thursday, but it's just one of many issues that federal agencies are considering as they increasingly focus on crypto as an area of concern. Here's a rundown of a few issues.

  • Exchanges: Who's responsible for regulating them? Right now, they're only regulated on a state level through money transmitter licenses, not as equity markets. One bill was proposed in April to study some of this confusion and come up with recommendations, and another bill was proposed last year that would make bigger changes and place crypto exchanges under the CFTC's purview, but that has not been reintroduced in the new Congress.
  • Personal information gathering: FinCEN proposed a rule that would require gathering counterparty information, which the crypto industry opposes.
  • Stablecoins: Despite their rapid growth, there hasn't been much change in how they're regulated yet. The OCC approved their use by banks in payments, and Visa is testing the USDC stablecoin, but regulations may be in flux since the OCC still lacks a permanent head.
  • The OCC is also considering an interagency "sprint team" with the Federal Reserve and FDIC on crypto regulation.
  • The Financial Action Task Force is working on guidelines for its 200 member countries on crypto regulation, which touch on privacy, personal information gathering and other issues.

There's clear momentum around regulation for crypto. Expect a mad scramble for lobbyists as the industry tries to get ahead of Washington's plans.

— Tomio Geron


Relative to a traditional portfolio composed of 60% large-cap stocks and 40% bonds, a portfolio with a 30% allocation to private real estate would have generated a higher return with more annual income and lower volatility over the past 5, 10, 20, and 40 years. Power your portfolio with Fundrise.

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From Protocol | Fintech

More than SaaS: Pipe, a marketplace for recurring revenue streams, raised $250 million.

First of its kind: China Merchants Bank has launched a $50 million blockchain investment fund.

But, but: China effectively banned the use of crypto by financial institutions this week.

Buying into IPOs: Robinhood said it would allow customers to purchase pre-IPO shares.


  • "There's no farming here: We're a sandbar, for Christ's sake." —Joe Mancini, mayor of Long Beach Township, talking about fake businesses with names like "Beefy King" and "Deely Nuts" set up to get PPP loans through Kabbage.
  • "I had an epiphany. I realized the money was, in fact, in the garbage late-night coins you would never consider hooking up with unless you were half in the bag.''Eric Hackney, who bought 20 billion Australian Safe Shepherd, or ASS, coins for $500.
  • "Where capital is abundant, having that edge in sourcing is what allows you to be one of the world's best."Nishi Somaiya, one of the leaders of Goldman Sachs's effort to invest in private companies.

3 Questions With...

Harry Hurst, CEO, Pipe

What's most exciting to you in fintech now, outside of your own business?

The payments space is interesting. Stripe is a phenomenal company. I'm excited to see them go public so I can become a shareholder.

I'm really interested in the rise of banking as a service: not so much the business model, but rather it's the existence of that platform layer. I'm really interested to see what's built on top of it that can service specific niches. I'm an investor in a startup building a bank specifically for immigrants who don't necessarily have a credit history.

Why do you like that company?

I can relate because I came to the U.S. and I had credit in the U.K., but I didn't have a credit profile here. It's really interesting with many neobanks popping up as a result of banking services infrastructure.

What fintech trend worries you?

Predatory lending is rife — there's merchant cash advance and revenue finance players. Our mission has always been to help companies grow on their own terms, giving an efficient, aligned marketplace. A fantastic byproduct of that is we can contribute to solving that issue.

Need to Know

  • Robinhood's ready. The brokerage plans to reveal its IPO filing next week, with a listing slated for late June.
  • Stripe's winning culture. The payment company moves fast and writes things.
  • Ransomware attacks worsening. Ransomware-linked addressed have banked $81 million in crypto so far this year, according to Chainalysis.
  • Crypto promotion. CoinFlip COO Ben Weiss took over from Daniel Polotsky as CEO of the operator of bitcoin ATMs.

Deal Flow

  • Diddy, 3LAU and Kevin Durant joined Eco's round. The celebrities backed a neobank that loans out deposits to stablecoins. Other investors include comedian Tiffany Haddish, NFL player Larry Fitzgerald and NBA star Carmelo Anthony.
  • Figure's now worth $3.2 billion. The blockchain startup co-founded by Michael Cagney wants to take on Ethereum.
  • Hearth raised $23 million. The provider of an app that lets home repair contractors offer loans to customers raised a round led by Human Capital.
  • Informed.IQ grabbed $20 million. The startup's technology verifies income, assets and other loan data for financial institutions. The round was co-led by Nyca Partners and U.S. Venture Partners.

Data Point

$600 million

The four-week rolling average of capital into Bitcoin funds at its peak in late January. In May the net outflow was about $100 million.


Relative to a traditional portfolio composed of 60% large-cap stocks and 40% bonds, a portfolio with a 30% allocation to private real estate would have generated a higher return with more annual income and lower volatility over the past 5, 10, 20, and 40 years. Power your portfolio with Fundrise.

Learn more

Thanks for reading — see you Tuesday.

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