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The U.S. government this week laid more groundwork for potential future cryptocurrency regulation.

Federal Reserve Chairman Jerome Powell spoke Wednesday, July 14 about the Fed’s interest in regulating stablecoins and the potential for a central bank digital currency (CBDC), while testifying before the U.S. House Committee on Financial Services.

Stablecoins (Tether and USD Coin, for example) are a category of cryptocurrencies that peg their value to an existing fiat currency, like the U.S. dollar. That helps stabilize their value, so they’re better suited for digital payments — unlike more volatile digital assets like Bitcoin. Ideally, these coins are underwritten by a reserve of the currency they’re tied to, but today there’s little official regulation enforcing that.  

Powell compared them to money market funds or bank deposits, which have a strong regulatory framework in the United States. “That doesn’t exist for stablecoins,” he said. “And if they’re going to be a significant part of the payments universe — which we don’t think crypto assets will be, but stablecoins might be —  then we need an appropriate regulatory framework, which frankly we don’t have.”  What Does This Mean for Crypto Investors?

Experts we’ve spoken to largely agree that long-term crypto investors should stick with well-known cryptocurrencies like Bitcoin and Ethereum. Unless you’re doing more active trading — and are comfortable with the risks of buying lesser-known coins — the two most popular currencies are the best options for most people.

Regulation like what Powell is talking about is more likely to impact stablecoins and other smaller altcoins, experts say. “They have different use cases,” says Mike Uehlein, founder and financial planner at WealthU Advisors, referring to Bitcoin versus stablecoins. 

If Bitcoin is “digital gold,” stablecoins are more comparable to the current money system, he says, having an infinite supply and centralization. Bitcoin is a store of potential value, while stablecoins are better suited for digital transactions and converting digital assets to and from “real” money.

“Investors buying Bitcoin as a store of value and buying stablecoins for a store of value are two different things,” says Tyrone Ross, a financial advisor and CEO of Onramp Invest, a cryptocurrency platform for other financial advisors. A central bank-backed digital currency would be a market competitor for stablecoins, but not Bitcoin, Ross says. 

Still, any new regulation has potential to affect your portfolio. 

While stablecoin regulation or a CBDC may not have a direct effect on Bitcoin — which is decentralized and operated by users across the globe —  it is likely regulation could bring more volatility to the crypto market. Already, we’ve seen crackdowns on cryptocurrency regulation from China play a role in Bitcoin’s recent $30,000 price drop. We’ve also seen how the price of coins often follow each other — when Bitcoin’s price takes a hit, altcoins often follow. Regulation could eliminate many cryptocurrencies available today, Uehlein says. 

Still, the regulations Powell mentioned would likely have a much bigger impact on the value of stablecoins or smaller altcoins, rather than Bitcoin. “DeFi, stablecoins, and other things are ripe for regulatory scrutiny,” Ross says. “Don’t make large bets in the space now, and stay educated on recent developments and news.”Why Regulate Stablecoins?

Because crypto trading and prices move very quickly, stablecoins can help traders move their funds within an exchange faster than if they were depositing cash from a bank account. Trading coins for actual dollars in and out of your bank account could take several days (and charge higher fees) than exchanging a coin for a stablecoin.

But without regulation, even these coins are risky. 

“Stablecoins are currently used as a replacement for the U.S. dollar, pegged 1:1 with the dollar,” Uehlein says. “Verifying this peg has been in question for many investors and regulators. Many investors would feel better knowing the dollars are backed by the U.S. treasury.” And that’s where a potential U.S. government-issued digital currency comes in — since it would have that backing.

What’s the Purpose of a Central Bank Digital Currency?

Powell’s testimony also reiterated the Fed’s interest in a central bank digital currency for the United States. A CBDC would make it easier to make transactions digitally. Because it would (hypothetically) work on a blockchain network, those transactions would also be secure and much faster than money transfers are today. 

While it’s generally unwise to use crypto to make a purchase, that’s exactly the purpose a potential central bank digital currency could serve. “A fed-backed CBDC could replace stablecoins such as Tether or USDC,” Uehlein says. 

As far as any real implementation of a CBDC, both Fed officials and the experts we spoke to believe there’s a long way to go before we reach that point, at least in the United States. While he says he’s very interested in seeing how CBDCs in countries across the world continue to evolve, Uehlein says “it is too soon to tell how serious the U.S. is about a CBDC.”

What’s Next In Crypto Regulation?

Now, all eyes are on a coming report from the Federal Reserve, which Powell expects to publish around early September.

“We’re going to address digital payments broadly,” he told the committee. “So that means stablecoins, it means crypto assets, it means CBDC. That whole group of issues and payment mechanisms, which we think we’re really at a critical point in terms of the appropriate regulation.” 

In addition, the Fed plans to ask the public about the risks and benefits of cryptocurrency and a potential CBDC, alongside consultation with national groups, including Congress. The purpose of the report, Powell said, is “to lay out the possible potential benefits and also the potential risks” of a central bank digital currency, and how regulators might weigh those costs and benefits. 

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Bitcoin (BTC) is trading above its 50-day simple moving average for the first time since May 12. The trading range since May 19 is from a high of 41,323.05 set on June 15 to a low of 28,800.01 on June 22, down 30.3%. The upside from this low reached its semiannual pivot at 35,643.29 on June 29. A secondary low of 30,400.00 was set on July 19. From this low bitcoin is now trading back and forth around its 50-day simple moving average at 34,183.35.

If bitcoin can stay above 34,183.35 the upside is to its semiannual and weekly risky levels at 35,643.29 and 36,863.07. Even with this upside, its weekly chart stays negative given a close on Friday, July 30 below its five-week modified moving average at 36,162.14.

The Daily Chart for Bitcoin

Bitcoin has been trading above a golden cross since May 26, 2020, when the 50-day simple moving average—then at 8,322.00—rose above the 200-day simple moving average at 8,052.43. Notice how the 50-day SMA was a buy level at 29,252.24 on January 27. The next time the 50-day SMA was tested it was 50,951.90 on March 25. On April 18, bitcoin closed at 55,550.00, below the 50-day SMA at 56,252.44.

Bitcoin traded below its 200-day SMA at 39,763.27 on May 19. The trading range since then has been down from 41,323.06 on June 15 to 28,800.01 on June 22.

The horizontal line at the top of the graph is this month’s risky level at 62,927.95. The horizontal line at the bottom of the chart is the annual value level at 18,892.52, which is the overall downside risk.

The three horizonal lines within the trading range are the weekly risky level at 36,863.07, the semiannual risky level at 35,643.29, and the quarterly pivot at 32,802.94.

The Weekly Chart for Bitcoin

The weekly chart for bitcoin is negative but oversold and is below its five-week modified moving average at 36,216.42. It’s well above its 200-week simple moving average or reversion to the mean at 13,939.59.

The last two longer-term buying opportunities came during the weeks of March 15, 2020 and the week of August 2. On March 15, bitcoin tested its 200-day SMA then at 5,540.89. On August 2 bitcoin broke above the down trend line at 10,128.28.

Trading Strategy: Buy bitcoin on weakness to its quarterly pivot at 32,802.94 and reduce holdings on strength to its semiannual and weekly pivots at 35,643.29 and 36,863.07.

Richard Henry Suttmeier is CEO and founder of Global Market Consultants, Ltd and a contributor to Forbes and Investopedia.com. Rich got his engineering degree from

Richard Henry Suttmeier is CEO and founder of Global Market Consultants, Ltd and a contributor to Forbes and Investopedia.com. Rich got his engineering degree from Georgia Tech and Masters from Brooklyn Poly. He has nearly 50 years experience as a trader, trading manager and research analyst at firms such as Bache and LF Rothschild, where he established that firm as a primary dealer in 1986. Writing research since 1984, he's been a market strategist at firms such as Smith Barney and William R. Hough. He's been a speaker for the Market Technicians Association, the American Association of Individual Investors, Wells Fargo Advisors, the Executive Forum at the National Arts Club, and Investors Roundtable of Wilmington N.C.  

Bitcoin and cryptocurrencies captured our rapt attention with their amazing gains, creating newly minted millionaires and billionaires. There’s also talk about the volatility associated with buying digital assets and the recent sell-off in Bitcoin, along with other coins. What’s left out of the conversation is the dire need for top talent to work at these fast-growing companies. 

The U.S. economy and job market have roared back to life. Businesses—ranging from small mom-and-pop restaurants to investment banks—are engaged in a heated war for talent. Companies complain that they can’t keep up with customer demands and find enough suitable workers to satiate their needs.  

The lack of experienced talent is particularly problematic within the turbo-charged crypto community. The exchanges need highly specialized professionals, such as software engineers, compliance, legal, risk management, marketing, sales and recruiting personnel to manage, scale their businesses and deal with the anticipatory tighter regulations and government oversight.

According to Bloomberg, crypto firms are finding it tough to find the appropriately skilled candidates for thousands of open roles across the world. This sector faces a number of challenges recruiting people. Since it's still an emerging area, there aren’t large numbers of job seekers with five or 10 years of relevant experience for the specific nature of most of the job openings. 

Some people are enamored with the space, but there is an equal—or larger—number of potential candidates that shy away from the crypto field. They are afraid of the unknown, concerned about career safety and would rather pursue more traditional roles. 

With cryptos going mainstream, there is now intense competition from major banks, investment banks, hedge funds, FinTechs and all sorts of other financial institutions. Apple, Facebook, Square, Tesla, MicroStrategy and other tech companies are looking to get in—or already are in—on the action. Even the country of El Salvador got in on the game, making Bitcoin legal tender. A large number of job openings seek software developers and engineers, and these folks are in high demand everywhere.

Frederick "Fred" Ernest Ehrsam III is an American business executive and investor who is the cofounder and managing partner of cryptocurrency investment firm Paradigm. He is also the cofounder of cryptocurrency exchange Coinbase. In an interview with Bloomberg, Ehrsam contends that the crypto industry has the potential to create as many or more jobs than the internet. 

A quick search on both Indeed and LinkedIn’s job boards shows thousands of listings for roles related to “bitcoin,” “cryptocurrency” and “blockchain.” Writer Sarah Butcher, in a piece for eFinancial, shares some crypto companies that are aggressively hiring.

Coinbase, the U.S.-based cryptocurrency exchange that recently went public, has been hiring from investment banks, like HSBC, Barclays and JPMorgan. At the end of last year, Coinbase employed 1,249 people globally. It plans to keep hiring “meaningfully" and currently has around 183 jobs open globally, including 26 for recruiters. 

Binance is one of the world’s largest cryptocurrency exchanges. Founded by Changpeng Zhao, a former head of Tradebook futures development at Bloomberg, Binance is currently advertising over 350 jobs globally. The job listings include software developers, data scientists, compliance, legal, marketing sales and human resources professionals around the world.

"We are hiring aggressively," Zhao, Binance CEO, told Bloomberg. He said, "We see the industry growing exponentially on a year-to-year basis, and we need to scale our team to cope with it," Zhao added, "We are a geo-equal-opportunity employer. We don't mind where people are, as long as they produce results." 

Blockchain.com runs a crypto exchange and says it's "rebuilding finance from the bottom up"  and is the "easiest and most powerful crypto wallet." The company has about 40 open headcounts, which could be based remotely. The jobs include low-latency developers, commonly found at high-frequency trading firms, data scientists, data analysts, quant developers, traders and even someone to work in M&A. 

BlockFi is a crypto-management platform that offers cryptocurrency trading, pays interest on cryptocurrencies and offers loans with crypto as collateral. It's currently hiring 100 people internationally, including both in-office and remote options.

Grayscale Investments, a crypto asset manager based in Stamford, Connecticut, seeks 15 people. The listings include positions for engineers and ETF professionals.

Anchorage Digital, the first federally chartered digital asset bank, has about 50 job openings globally, seeking traders, engineers and risk and compliance professionals. 

Gemini, the crypto exchange founded by the Winklevoss twins, has plans to increase hiring in Singapore. Crypto.com, based in Hong Kong, has over 200 openings—with more than half of them based in Asia.

To fight the war for talent, crypto firms are upping the compensation, promoting remote-work options across the globe and offering other incentives to entice people to join their companies.

I am a CEO, founder, and executive recruiter at one of the oldest and largest global search firms in my area of expertise, and have personally placed thousands of

I am a CEO, founder, and executive recruiter at one of the oldest and largest global search firms in my area of expertise, and have personally placed thousands of professionals with top-tier companies over the last 20-plus years. I am passionate about advocating for job seekers. In doing so, I have founded a start-up company, WeCruitr, where our mission is to make the job search more humane and enjoyable. As a proponent of career growth, I am excited to share my insider interviewing tips and career advancement secrets with you in an honest, straightforward, no-nonsense and entertaining manner. My career advice will cover everything you need to know, including helping you decide if you really should seek out a new opportunity, whether you are leaving for the wrong reasons, proven successful interviewing techniques, negotiating a salary and accepting an offer and a real-world understanding of how the hiring process actually works. My articles come from an experienced recruiter’s insider perspective.

As celeb-fronted campaigns bring cryptocurrency into the mainstream, is it time for clearer regulation of ads?

A harsh spotlight was shone on cryptocurrency ads this month. The UK’s ad regulator the ASA has said that it now will better police cryptocurrency content while TikTok has issued a warning to creators that it will not tolerate promotion of the divisive digital currency. At the same time, Google and Facebook appear to be opening the gate to more advertising from crypto companies having previously banned all ads. And even ads that do make it to air on the big screen have been quick to face criticism from the general public, wiser to the pitfalls of the crypto boom.

When Spike Lee – the famed director behind films like ‘Malcolm X’ – appeared on screens last week extolling the benefits of why “old money is out, new money is in” in a campaign for crypto ATM operator Coin Base, he faced a swathe of criticism for failing to spot the hypocrisies.

Lauding Bitcoin et al as “the digital rebellion” against a financial system that “systematically oppresses” people of color and women, he marched through Wall Street denouncing archaic financial systems and encouraging the nation to cash in their dollars for cryptocurrency.

“Do your research,” Lee says between hyperbole. Is it a warning? If not, it should be.

According to the Federal Deposit Insurance Corporation, 5.4% of US households do not have a bank account, with the primary reason being a lack of sufficient funds to open one.

Yet these 20 million Americans appear to be the exact target audience that Lee was encouraging to rush to a Coin Base ATM to exchange their “old money” for a new currency that’s “inclusive and fluid”.

Critics were quick to highlight that this group, arguably more than any other, is susceptible to the promise of making a quick buck without proper consideration for the risks involved with investing in something as volatile as cryptocurrency.

According to Glassnode, between May 17 and May 24, Bitcoin holders realized net losses of $2.56bn. Glassnode says most of these sellers were new ‘bitcoiners’ who had acquired and subsequently sold the currency within the past three to six months.

In a survey of UK consumers conducted by behavioral finance experts Oxford Risk, 36% cryptocurrency investors admit their understanding of the sector was poor or non-existent.

But emotional factors such as the ‘fear of missing out‘ are driving growth, with around 35% of adults saying they have read a lot about huge price rises while 15% say they have been encouraged to buy by friends or family.

Spike Lee isn’t the only celebrity to lend his star-power to cryptocurrency ads.

In the past, crypto companies had been used to marketing their products on pockets of the internet – Telegram groups, online chatrooms and invitation-only forums. But as Bitcoin hit headlines, large investors like Tesla and Square backed various Coins, and financial giants like BNY Mellon, Visa and Mastercard revised their policies to support crypto projects, the crypto sector began to experiment with mainstream advertising. And their marketing pockets are deep if the calibre of celebs they've signed on to front major ad campaigns is anything to go by.

Actor Neil Patrick Harris has bragged of the benefits of being an early Bitcoin investo for a CoinFlip campaign, Alec Baldwin has mocked those who think trading crypto on Etoro should be anything other that quick and easy, while Tom Brady and Gisele Bündchen have become brand ambassadors for FTX to encourage adoption of the digital currency.

These companies are also spending big on digital advertising, specifically with social media influencers.

Internet sensation Kim Kardashian West promoted Ethereummax – a so-called alternative-coin, or ‘alt-coin’, to the more established Bitcoin – to her 228 million Instagram followers last month.

Over on TikTok, young stars Charli and Dixie D’Amelio turned their combined 169 million followers’ attentions to cryptocurrency exchange Gemini as part of a sponsored campaign. In fact, the use of influencers by crypto companies on TikTok was so widespread they were given the moniker ‘Fintok advisors’.

But concern has been mounting within the walls of advertising regulators over the lack of scrutiny given to cryptocurrency ads, especially those targeting a young and financially naive audience.

The Advertising Standards Authority (ASA) in the UK recently said that it would be taking a more serious look at any crypto advertising. It came following the ban of an OOH campaign from UK-based exchange Luno, which ran a series of ads reading: “If you’re seeing Bitcoin on the Underground, it’s time to buy.”

The watchdog said it plans to offer guidance for companies in the coming weeks, and is ”considering whether further action is needed” around social media influencers promoting investments in the space without disclosing enough about the risks.

Further afield, the Advertising Standards Council of India (ASCI) said this week that it was looking into the rise of crypto ads after identifying it as an “emerging area of concern”.

But it’s slow progress. Arguably too slow for the fast paced nature of this sector, where scams and fraud are all too common.

”It is inevitable that digital asset investments and crypto currency ads in particular will face greater scrutiny and tighter regulation. It’s really a case of slow regulators catching up with fast-developing technology and greater public awareness,” says Rafe Blandford, chief product officer at Digitas UK .

“Focus is sharper on this sector because of the associated consumer risk with any investment instrument, especially in what currently feels like a Wild West atmosphere. Because country by country legislation can be slow, we can expect to see ad networks enacting their own policies and self-regulation.”

Atomic London is an advertising agency that counts Etoro – a trading platform that lists numerous cryptocurrencies – among its clients.

The agency‘s chief executive Jon Goulding said he is in no doubt that a clamp down in crypto advertising is coming. However, he raised concerns over how effective it would be when there remains no official regulation by the Financial Conduct Authority (FCA), agreeing with Blandford that ultimately we’ll see a network-level stance taken, rather than anything government mandated.

"With most crypto currencies not regulated by the FCA, how are consumers really going to be protected?,” says Goulding. ”It comes down once again to whether digital and social media platforms will self-regulate and block crypto-advertisers from accessing their inventory and not simply whether there is an arbitrary ‘warning, you could lose all of your money’ as a small print alongside advertising messages.”

But rather than a move to stricter regulation of crypto advertising, it appears some digital and social platforms are slowly opening up to it.

Facebook – which owns Instagram – introduced a harsh crackdown back in 2018 with a blanket ban on crypto companies using its ad product. It has since lifted those restrictions to allow some adverts from pre-approved brands, and has no policy on its site in regards to influencers promoting crypto.

Like Facebook, Google had also previously taken a firm stance on crypto ads in an effort to clamp down on scams. But it appears to be loosening those restrictions for crypto exchanges and wallets, with reports emerging that it has invited potential advertisers to apply for commercial opportunities this month ahead of a change in policy in August.

“Given the track record of those platforms I don’t hold out much hope that they’ll suddenly start clamping down on it,” says Goulding. ”Ironically, when going on to digital publishers sites to look at articles relating to the ASA banning cryptocurrency advertising, the first pop up ad was for a cryptocurrency.”

TikTok, however, is getting tougher. Earlier this month it updated its content policy to ban – among other things – influencers from promoting cryptocurrency.

Aside from the platform, the ability for crypto brands to market to the masses may also come down to the ethical values of the advertising agencies they want to employ.

Many agencies have committed to AdNetZero to help the industry tackle the climate change emergency. Spearheaded by the Advertising Association, it‘s aiming to reduce the carbon impact of developing, producing and running UK advertising to real net zero by end 2030 and asking agencies to commit to make practical changes in the way they run their advertising operations.

”The environmental impact of crypto currencies is significant. Between start of 2016 and mid-2018 it’s estimated that crypto mining was responsible for up to 15 tons of carbon dioxide emissions. The most prominent crypto currencies – Bitcoin, Ethereum, Litecoin and Monero – used more electricity in 2017 than Ireland or Hong Kong,” says David Edwards, chief customer officer at AMV BBDO, suggesting that agencies may need to take a stand on bringing cryptocurrency brands on as clients.

“It’s estimated that for every $1 of Bitcoin value created it was responsible for creating $0.49 in health and climate change – otherwise known, I think, as cryptodamages. It seems sensible that there should be tighter advertising regulation until cryptocurrencies are subject to proper global regulations – with all the checks and balances in place regarding personal and environmental protections.”

British police have confiscated around $250 million worth of cryptocurrency as part of an ongoing money laundering investigation, London’s Metropolitan Police announced Tuesday, marking one of the largest crypto seizures in the world and breaking a record the force set last month. 

The seizure, which follows a $160 million crypto haul the force made three weeks ago, is part of an ongoing investigation into international money laundering by the force’s Economic Crime Command.

It comes after a 39-year-old woman was arrested on “suspicion of money laundering offenses” on June 24 after the first cache was confiscated and the woman was subsequently released on bail, the force said.

The woman was interviewed again last weekend—this time under caution—after the latest discovery was made and has been bailed until late July.     

Detective Constable Joe Ryan said the “seizure is another significant landmark in this investigation which will continue for months to come as we hone in on those at the centre of this suspected money laundering operation.”

The force did not disclose what cryptocurrencies had been confiscated. 

Cryptocurrencies are traded digitally, relatively anonymous, have low barriers to entry, can be convenient to use and are international by nature, making them an attractive prospect to some criminals. While most crypto transactions are legitimate, the specter of financial crime has become a strong motivator for regulators around the world to bolster scrutiny of digital assets. With growing demand for cryptocurrency services, in part spurred on by a growth in value for many major assets and meme tokens during parts of the Covid-19 pandemic, many major financial institutions have moved into crypto markets, including JPMorgan, BNY Mellon, Morgan Stanley and BlackRock. Despite this, regulatory uncertainty hinders mainstream acceptance and leaves consumers relatively unprotected. Money laundering is a commonly-touted concern among regulators, as is tax fraud, terrorism, and drug trafficking. The digital assets are also the payment method of choice for ransomware hackers, which adds to calls for enhanced regulatory scrutiny.

While the “proceeds of crime are laundered in many different ways,” Deputy Assistant Commissioner Graham McNulty said, organized criminals are increasingly “using cryptocurrency to launder their dirty money.” However, McNulty added: “Cash still remains king in the criminal world.”

U.K. Police Seize $160 Million In Cryptocurrency In Money Laundering Investigation (Forbes)

Met police seize nearly £180m of bitcoin in money laundering investigation (Guardian)

Ransomware Hackers Demand $70 Million In Bitcoin, Claim Massive U.S. Attack As Biden Investigates Possible Russian Involvement (Forbes)

I am a London-based reporter for Forbes covering breaking news. Previously, I have worked as a reporter for a specialist legal publication covering big data and as a

I am a London-based reporter for Forbes covering breaking news. Previously, I have worked as a reporter for a specialist legal publication covering big data and as a freelance journalist and policy analyst covering science, tech and health. I have a master’s degree in Biological Natural Sciences and a master’s degree in the History and Philosophy of Science from the University of Cambridge. Follow me on Twitter @theroberthart or email me at rhart@forbes.com 

It is just after midnight in Hong Kong, and Sam Bankman-Fried stares at the trading data on his six monitors, watching a global cryptocurrency crash happening in real time.

Mr. Bankman-Fried, a 29-year-old from California, often works around the clock, as he was on that May evening. He naps on a beanbag set up near his computer. A folded up blanket sits on the floor. He’s worth at least $8 billion, on paper.

That is even after the downturn that started in the spring, where total global losses in the value of all cryptocurrency eventually topped $1.3 trillion. And as Mr. Bankman-Fried saw it play out, he knew his business played a role in the collapse.

Cryptocurrency — digital money not backed by any nation — is famous for its wild and frequent gyrations. But FTX, the cryptocurrency trading platform that Mr. Bankman-Fried runs, specializes in a kind of trade that was accelerating the global crash.

Most of his customers are betting on future cryptocurrency price fluctuations rather than buying and selling Bitcoin, and they are borrowing to make those bets even bigger.

It is a risky approach. But it can generate big wins.

Now, Bitcoin’s value was dropping — way down — crushing the highly leveraged bets of bullish traders on FTX and other exchanges, and forcing sales of their positions in wave after wave of account liquidations. These forced sales were helping undermine cryptocurrency prices.

“In terms of price movements, the biggest part of it is liquidations,” he wrote to The New York Times on May 24 from Hong Kong.

This is precisely the type of situation that United States regulators have tried to avoid by prohibiting cryptocurrency exchanges like FTX from selling high-risk futures to nonprofessional investors in the United States. And it is why Mr. Bankman-Fried moved to Hong Kong — as he wanted to offer these products, called derivatives.

Mr. Bankman-Fried is a crypto nomad: One of a group of industry leaders who once lived in the United States or Canada and have since set up companies with bases of operation where they are to some degree beyond the reach of American regulators.

Others include Changpeng Zhao, 44, the Chinese-Canadian founder of Binance, who now lives in Singapore, and Arthur Hayes, 35, a Buffalo-born trader who helped create BitMEX, which is based in the Seychelles islands.

It’s a tribe that never turns off — trading takes place 24 hours a day, 365 days a year. (Mr. Bankman-Fried said he sleeps when he has no meetings and works “the hours when this counterparty is awake and the hours when that counterparty is awake.”)

These crypto nomads have built a global playground, inspired by multiplayer online games, with “leader boards” for customers who go by aliases like Dark Crypto Lord and can win prize giveaways of Teslas or iPhones.

The highly leveraged form of trading these platforms offer has become so popular that the overall value of daily purchases and sales of these derivatives far surpasses the daily volume of actual cryptocurrency transactions, industry data analyzed by researchers at Carnegie Mellon University shows.

It’s all supposed to be off limits to U.S. investors, but it’s not. Trading data provided to The Times also shows that billions of dollars’ worth of investments from customers with ties to the United States have moved to at least one of these global sites, despite the ban.

“I am not saying this is going to cause the next financial crisis,” said Timothy Massad, a former chairman of the Commodity Futures Trading Commission, the federal agency that regulates derivatives trading. “But could this be something like the butterfly that flaps its wings in Brazil that sets off a tornado in Texas?”

Mr. Zhao, the founder of Binance, conceded, in an interview, that “volatility is amplified by the leverage. So that is for sure.”

But he and other industry advocates argue that highly leveraged futures trading is widespread on Wall Street and foreign currency exchanges. Some also say they had to relocate because U.S. regulators haven’t adequately embraced these creative investment opportunities.

“This is not going away,” said Mark Cuban, the billionaire entrepreneur, television personality and cryptocurrency enthusiast who is also a backer in a fund that is helping FTX raise capital. “But we’re losing a lot of jobs and a lot of financial depth by pushing it overseas.”

In fact, FTX just this past week raised $900 million in capital to help it expand its global operations, and it was valued at $18 billion. That transaction could push Mr. Bankman-Fried’s wealth to $16 billion, Forbes estimated, making him the “wealthiest known crypto billionaire,” given that he owns nearly 60 percent of the company’s shares.

Mr. Bankman-Fried was four years out of Massachusetts Institute of Technology when he entered the cryptocurrency industry.

He was still living in California — where both of his parents are law professors at Stanford — and he noticed that Bitcoin and other tokens were at times selling for different prices in different nations.

It was an open invitation for a creative player to make money, with a classic arbitrage maneuver: Buy it at the lower price in the United States and sell it at the higher price in Japan.

That ended up being complicated. As he tried to quickly transfer large sums of money, financial institutions moved to shut down his accounts. He also needed Japanese nationals to complete transactions in local banks. But he ended up making tens of millions of dollars on these early moves.

A three-day crypto conference he attended in China in 2018 led to two weeks of meetings and his effectively settling in Hong Kong. “I guess there’s a point at which I canceled my lease back in the Bay,” he recalled. He decided instead to create a new company, FTX, which specializes in derivatives.

In traditional markets, derivatives are used to help farmers or other businesses hedge against price changes in commodities like oil or grain.

There is some trading of cryptocurrency derivatives in the United States, on platforms like the Chicago Mercantile Exchange, which has long offered commodities options and futures in things as diverse as agriculture, energy and metals. But the CME is a classic exchange that has greater restrictions — and federal government oversight — with lower leverage caps available only to professional traders.

Cryptocurrency innovators like Arthur Hayes, one of the founders of BitMEX — short for the Bitcoin Mercantile Exchange — took this classic approach and turned it into a much more lucrative idea, at least for the platforms.

BitMEX began what Mr. Hayes called the perpetual swap — a bet on a future price change that does not expire — and eventually offered 100 times leverage. That meant a $1,000 investment could be instantly translated into a $100,000 bet on the future price of Bitcoin.

From inception, BitMEX was explicitly intended to attract not only professional traders but also retail investors with a taste for gambling and gamers inclined to risky play, as Mr. Hayes explained in an industry talk in 2016. “There are people who offer similar types of products but are focusing on degenerate gamblers, a.k.a. retail traders in Bitcoin,” he said. “So why don’t we do the same?”

The exchange targeted social media advertising to potential customers based in the United States and boasted that to “sign up takes less than 30 seconds.”

At least initially, there was minimal effort on the part of some exchanges like BitMEX to screen investors to determine their true identities, as banks and other trading companies in the United States are required to do, or to confirm their actual locations, despite the ban on U.S. participants. Many of the platforms, including BitMEX and Binance, have recently tightened enforcement to try to curb trades by U.S. investors.

This came after the Justice Department filed charges against Mr. Hayes late last year, with the government asserting that he and other BitMEX executives were illegally operating a cryptocurrency exchange that handled about $11 billion in transactions involving at least 85,000 user accounts with ties to the United States. He has since left the company.

But the business model he helped create has only grown in scale.

FTX and Binance are among more than a dozen global cryptocurrency platforms — most of them based in Asia — that now offer perpetual swaps. FTX alone has one million users across the world and handles as much as $20 billion a day in transactions, most of them derivatives trades.

Like their customers, the platforms compete. Mr. Bankman-Fried from FTX, looking to out promote BitMEX, moved to offer up to 101 times leverage on derivatives trades. Mr. Zhao from Binance then bested them both by taking it to 125.

Losses for traders can translate into big gains for exchanges.

The platforms earn a transaction fee based on the forced sales caused when the price of the underlying cryptocurrency moves against the trader. The crash in May was started by regulatory rumblings in China and a cryptocurrency move by Elon Musk. But liquidations then helped propel it.

Some executives, like Mr. Bankman-Fried, also own related companies that do algorithmic trading to instantly cash in on market distortions that occur during these sell-offs. Mr. Bankman-Fried said that he sees no conflict in his businesses playing the two roles, as these moves help keep the markets liquid during major declines.

FTX, Binance and BitMEX’s founders have each argued that only a small share of their customers actually use high leverage. But even for those making smaller bets, problems can crop up quickly if cryptocurrency prices start to fall. On May 18 alone, there were a total of $1.6 billion worth of liquidations on BitMEX, Binance and FTX, according to Bybt, a crypto derivatives data firm. Collectively, there were $20 billion in forced liquidations in mid-May.

“If you play poker, let’s say for futures trading, if you go all in on maximum leverage every single time, the markets are going to move at one time against you and you’re going to be wiped out,” said Mr. Zhao. “The professional futures traders, they manage risk.”

But Michael Green, a crypto critic and the chief strategist at Simplify Asset Management, said the derivatives market is inherently stacked against novice traders. “The math of highly volatile instruments is that the house almost always has to win,” Mr. Green said, adding that from his perspective, “these are unregistered casinos.”

Mr. Zhao is so focused on the branding of Binance that he has the company logo — two diagonal squares representing bids and asks in trading — tattooed on what he now calls his “crypto arm.”

He and his fellow crypto nomads have become global celebrities with millions of followers on Twitter, podcasts and even livestreams on YouTube of their poker games. They are the diplomats of a renegade industry, attached to no particular state.

Binance set up its offices in Shanghai in July 2017. But two months later, when the Chinese government announced a crackdown on crypto exchanges, the company moved to Tokyo.

Japan then announced new crypto exchange rules. “So we said, well, that doesn’t fit,” Mr. Zhao explained. “So we had to move again.”

The next stop was Malta, the tiny island nation in the central Mediterranean. Now Mr. Zhao does not identify any location as the company’s headquarters.

Binance’s shifting home base, in a way, reflects his own life story. Born in China to academics, he moved to Canada when he was 12, interned in Japan while studying computer science at McGill University and went on to jobs developing trading products in Tokyo, New York, Singapore, Hong Kong and Shanghai.

“I’ve been moving around quite a bit in my life,” Mr. Zhao said. This international exposure gives him “a broader worldview” that informs his business and its borderless mentality.

Other companies have also moved. The Dutch cryptocurrency exchange Deribit announced last year that it would be operated by a subsidiary company called DRB Panama, and several of its executives moved to Central America, company officials said. Palm trees and tropical vistas now feature in the executives’ social media posts. BTSE, another exchange that specializes in derivatives, moved its headquarters from Dubai to the British Virgin Islands.

But in some cases, the claimed offshore base of operations is little more than a ruse. BitMEX listed its headquarters as in the Seychelles, an island republic in the western Indian Ocean, yet federal investigators found that most of its employees worked in New York, Hong Kong and San Francisco.

Mr. Hayes, the founder, claimed it cost just “a coconut” to bribe Seychellois authorities — less than buying favors from regulators in the United States and elsewhere, federal prosecutors said when they charged him in late 2020. Mr. Hayes pleaded not guilty in April and his case is pending. He now lives in Singapore.

“Arthur Hayes and his co-defendants in this case are innocent and they look forward to defending themselves in court,” Nate Johnson, a spokesman for Mr. Hayes, said.

Until recently, Hong Kong was a gathering place for cryptocurrency gurus, who at least before the pandemic frequently met up at industry conferences held there or at local bars and cafes.

Mr. Zhao said the community was what sold him on cryptocurrency. What he found at conferences around the world, he said, “was a very geeky, honest community.”

These personal associations sometimes lead to financial ties. Mr. Zhao’s company was an early investor in Mr. Bankman-Fried’s exchange, while Mr. Bankman-Fried’s trading company is a client of Mr. Zhao’s platform. They talk to each other regularly.

“I think I met him in Taiwan, Hong Kong, Singapore and maybe even Europe,” Mr. Zhao said of his fellow crypto nomad. “But mostly in Asia.”

Mr. Bankman-Fried and Mr. Zhao said in separate interviews that they are committed to honoring United States regulations, even if their global exchanges are based abroad.

But globally, the cryptocurrency derivatives market continues to surge — and there are clear signs that major United States players are still pouring money into the game.

More than a dozen major private trading firms with U.S. roots have set up offices in the Cayman Islands and other offshore locations, creating new corporate entities to push money through Binance’s and FTX’s overseas derivatives platforms on a huge scale, traders involved told The New York Times.

“I’m not a U.S. person,” said one trader who has moved to the Cayman Islands on behalf of a major fund, and initially left his family behind in the Midwest to set up the operation. “But I’m still a U.S. citizen.”

The trader asked not to be named as he did not have authority to discuss the arrangement publicly.

This stateless approach to running these cryptocurrency exchanges — mixed with the constant introduction of new unregulated and often highly risky products — is now facing perhaps its most important test.

Just since June, Binance has been targeted by financial regulators with warnings or other enforcement actions in Britain, the Cayman Islands, Hong Kong, Lithuania, Italy, Poland and Thailand, many of them eying its high-leverage derivatives offerings or a new product line introduced this spring that allows customers to buy cryptocurrency-linked versions of stocks like Tesla and Apple.

Facing a backlash, Binance announced in mid-July that it was abandoning the new stock token products.

“The crypto industry is a very nascent industry and the landscape, including the way that cryptoexchanges are regulated, continues to evolve,” the company said in a statement to The Times. It attributed the recent scrutiny in part to mainstream embrace of crypto over the last year and said “it’s right” for regulators to examine the industry.

Mr. Bankman-Fried, toward the end of a three-hour series of interviews with The Times, said it may be time for the industry to pull back on its most extreme offerings, like leverage on derivatives trades as high as 125 times.

“It would just be easier to get rid of it than to keep having to talk about it,” he said, proposing a cap of perhaps 10 times, mostly, he added, to fight the perception that the industry is encouraging risky bets, a view he thinks is unfair.

Binance and FTX are also looking to secure a sanctioned space in the United States market. They have, within the last two years, opened United States-based platforms that do not offer derivatives but instead focus on the buying and selling of actual cryptocurrencies.

FTX also recently bought the naming rights to the Miami Heat arena and put its corporate logo on a patch worn by Major League Baseball umpires, as it works to build name recognition here. Mr. Bankman-Fried, via $5.6 million in donations, was also one of the biggest givers last year to help President Biden’s election effort — although he said in an interview that it was unrelated to his corporate endeavors.

For now, these operations in the United States generate little profit, compared to their overseas counterparts. They do follow U.S. rules, though. That does make a difference.

“It’s a much less exciting product,” Mr. Bankman-Fried said.

A portfolio strategist for American financial services firm Morningstar says that cardano could become a mainstream cryptocurrency alongside bitcoin and ether, forming a “big three” of mainstream cryptocurrencies.

Amy Arnott, a cryptocurrency-focused portfolio strategist at Morningstar, shared her views on crypto regulation, ether, and cardano in an interview with the Insider last week.

Noting that since many cryptocurrencies are not cash-generating, Arnott said it is difficult to determine a suitable price for them. However, she explained that ether has an in-built price to an extent because it is used to power decentralized finance (defi) transactions and support non-fungible tokens (NFTs). The strategist elaborated:

The fact that ether is used as a utility should provide some sort of price floor, but I’m not sure what that should be. A lot of people talk about a network effect where these currencies become more valuable as they are used more and there are more interdependencies and connections.

Arnott also believes that cardano (ADA) is a promising cryptocurrency that could join bitcoin and ether to form a “big three” of mainstream cryptocurrencies. She elaborated:

Cardano is similar to ethereum in that it’s a protocol that has a lot of potential technical applications. There’s a lot of enthusiasm about cardano, and also various stablecoins.

The Morningstar strategist continued to share her view on the institutional adoption of cryptocurrencies. “The interesting thing that’s happened over the past year or so is that institutional investors have been far more willing to adopt cryptocurrencies and look at them as an investment asset. As that trend continues we’ll see other cryptocurrencies become more mainstream,” she opined.

She noted that she would really like to see a diversified cryptocurrency index fund in the form of an exchange-traded fund (ETF). However, the U.S. Securities and Exchange Commission (SEC) still has not approved any crypto ETF, making it “very difficult for mainstream investors to gain exposure to cryptocurrencies.” Arnott opined:

Regulatory risk is a big issue – that’s been the driving factor behind a lot of the volatility over the past few months. If governments around the world clamp down on crypto in general, or bitcoin and ether specifically, that would be a large negative.

What do you think about the comments by the Morningstar strategist? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Investors are more interested than ever in cryptocurrency. Criminals are too.

Reports of cryptocurrency crimes have increased 312% per year on average since 2016, according to a report from Crypto Head, a cryptocurrency news outlet that used Federal Trade Commission data to analyze cryptocurrency crime trends in recent years. These crimes can include everything from hackers stealing investors’ coins to people falling for scams related to crypto investing.

A cold wallet — an offline device not connected to the internet— is the safest place to keep your crypto investment, according to experts.

Bitcoin has the most crime reports of any cryptocurrency, which makes sense since it’s also the oldest and most-widely held crypto. Beyond digital crimes, Bitcoin’s safety as an investment is often questioned thanks to the frequency and scale of its value fluctuations.

Despite an increase in fraud and theft, many experts tout the safety of Bitcoin investments — at least in terms of cybersecurity if not investment stability — thanks to secure blockchain technology. So, is investing in Bitcoin safe? Here’s what you need to know about Bitcoin’s safety as an asset and keeping your cryptocurrency secure if you invest.What to Consider Before Buying Bitcoin

First things first: The money you put into Bitcoin is not safe from value fluctuations.

Bitcoin is a volatile investment. If you’re looking for a “safe” investment with guaranteed returns, then don’t invest in Bitcoin — or any cryptocurrencies for that matter. Just over the past few months, the price of one Bitcoin has fluctuated between $30,000 and $60,000. Bitcoin isn’t the only volatile cryptocurrency, and other, smaller coins may be even riskier. 

“Understand that these are very volatile investments, so if big fluctuations cause you to lose sleep, this isn’t the space for you,” says Dan Herron, a CFP with Elemental Wealth Advisors in San Luis Obispo, California.

Experts recommend keeping any cryptocurrency investments to less than 5% of your portfolio for exactly that reason — and to make sure you’ve got a solid conventional retirement investment plan in the first place. It’s also recommended you have an emergency fund and pay down any high-interest debts before you put any money into Bitcoin or any other cryptocurrency.

(Read More: Here’s How Much of Your Investing Portfolio Should Be in Crypto, According to 5 Experts)

What Are the Risks Associated With Bitcoin?

The biggest security concern for many people when it comes to Bitcoin investing — like any other digital activity — is the risk of hacking and fraud. Cryptocurrency crimes are on the rise, according to data from the Federal Trade Commission, and resulted in a median loss of $1,900 per report between October 2020 and March 2021.

Often, reported crypto crimes involve scammers requesting payment in cryptocurrency, or sending unsolicited offers to help you make money or increase your holdings, according to the FTC. “One sure sign of a scam is anyone who says you have to pay by cryptocurrency,” the agency says. You should also avoid any unsolicited offers related to crypto; do your own research and buy your coins yourself using a reputable crypto exchange. Other types of scams to look out for

Initial coin offerings (ICOs) for fake cryptocurrencies

When a cryptocurrency is offered to investors before it’s launched to the market, it’s called an ICO (similar to a new stock’s IPO). But sometimes these new coin offerings can be fabricated, leading investors to put their money in a cryptocurrency that doesn’t actually exist. 

Always research any cryptocurrency before you invest. If it looks too good to be true, it probably is. Read the project’s white paper and check out the founders as part of your research. For most investors — and especially beginners — it’s smart to stick to established, popular coins like Bitcoin or Ethereum.

Crypto pump and dump schemes 

A small group of investors may pump a lot of money into a specific crypto, falsely inflating the price while convincing private investors to also invest. Then the original investors sell their shares for a profit before the price falls again. This type of scheme exists for more traditional investments, too.

Again, if an investment seems too good to be true, it probably is. Watch out for coins that have risen a lot in value without any clear reason why, the Crypto Head report recommends. This may be a sign of a pump and dump scheme.

How to Keep Your Bitcoin Safe

Hackers can gain access to individuals’ crypto wallets or breach entire cryptocurrency exchanges to steal their holdings. That’s why it’s essential to store your crypto in a safe place, and practice good digital security habits.

Cryptocurrency exchanges and third parties offer storage for your coins through hot wallets, which are secure, but still online (and therefore still susceptible to hacking). Crypto held on an exchange or in a wallet is not FDIC-insured like money in the bank. Make sure you trade and hold your crypto on a platform that offers robust security measures — including keeping a significant amount of holdings in its own cold storage and two-factor authentication for users. Some exchanges may even have private insurance policies in case of theft or hacking.

For the best protection against online fraud, many experts recommend cold storage through an offline device not connected to the internet, similar to a USB drive. But even cold storage comes with risks, like the possibility of losing access to your investment completely if you forget your password. 

(READ MORE: A Crypto Wallet Can Help Keep Your Coins Safe. Here’s How to Decide If You Need One)

Bitcoin Security vs. Privacy 

While you can take measures to secure your crypto holdings from hacking and theft, Bitcoin may not be any more effective at keeping your personal information private than any other traditional investment. 

“Security and privacy are two separate topics,” says Kiana Danial, author of “Cryptocurrency Investing for Dummies” and the personality behind @Investdiva on Instagram.

While trades you make in Bitcoin may be harder to trace than credit card purchases or direct bank withdrawals, Bitcoin transactions are not private. Bitcoin trades are tied to a hash code — a string of letters and numbers —  that are unique to you, says Ollie Leech, learn editor at CoinDesk, a leading cryptocurrency news outlet.  

“You’re really not anonymous, more like pseudonymous,” says Galen Moore, director of data and indexes at CoinDesk. While your activity isn’t directly tied to personal details like your social security number, the blockchain is public and there are ways that people can identify you.  

But even though Bitcoin transactions aren’t private, that doesn’t mean every user can see exactly how much everyone else has bought or sold. 

“In order to download the Bitcoin blockchain you would need massive, massive, computing capacity, like a supercomputer,” says Danial. “The day-to-day average Joe can’t go in and see what transactions are happening in the Bitcoin blockchain.” 

If you want total privacy when you transact, then neither Bitcoin nor Ethereum — the second largest cryptocurrency by market capitalization — are for you. Other smaller cryptocurrencies are designed for this total privacy, though experts recommend avoiding these lesser known cryptos as an investment.

(READ MORE: Ethereum: What You Should Know Before You Invest)

“With Bitcoin and Ethereum, all those transaction details being open is part of how the network is maintained as people watch,” says Moore. The open system helps the blockchain retain accountability. 

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Italy on Thursday joined the crackdown against cryptocurrency exchange Binance, the world’s largest.

The Consob financial regulator said Binance Group companies were not authorized to provide investment services in the country. The U.K. and Japan have taken similar moves against Binance.

The regulator noted that sections of the Binance website had been written in Italian and said savers “are invited to make use of their utmost diligence.” A message left with a Binance representative wasn’t immediately returned.

Consob extended the warning to crypto assets in general, saying trading “may imply the total loss of the sums of money invested.”

Consob said crypto risks include their complexity, volatility, malfunctions and cyber attacks.

Binance had the highest volume, by value, in both the spot and derivatives market for crypto in trading today, according to data from CoinMarketCap. Huobi Global, Coinbase COIN, -0.51% , FTX and Kraken round out the top five for spot exchange volume.

Bitcoin BTCUSD, +11.15% , the world’s top crypto asset, slipped 3%.

In its annual report released Thursday, the U.K. Financial Conduct Authority said “cryptoasset businesses pose increased risks of financial crime” and said a significantly high number of businesses aren’t meeting anti-money-laundering standards. The regulator added there were 138 firms that are trading without applying for registration.

Also read: Dogecoin co-creator blasts crypto as a scam

A virtual currency guidance and advisory issued by the U.S. Treasury Department’s anti-money laundering (AML) unit on June 30, 2021 clarified regulatory expectations, riled some cryptocurrency players and signaled a potential new global standard for combating financial crime.

The statement added that the guidance “does not establish any new regulatory expectations” and “consolidates current FinCEN regulations, guidance and administrative rulings.” FinCEN has broad international reach to any business doing substantive business with U.S. persons and therefore international businesses need to be paying attention if they source cryptocurrency from U.S. exchanges or interact with U.S. consumers.

Any time FinCEN issues an advisory, compliance officers in both banks and virtual currency companies will spend a fair amount of time over the next few days reviewing the advisory in the context of their businesses and customers. Concerns include another round of bank account closures, not because customers are engaging in illegal activity, but because compliance officers and managers lack an understanding of the technology underlying cryptocurrencies as the easy way out rather than invest the time and effort to learn more about the space.

           Although owners of blockchain based investments most commonly hold cryptocurrency, blockchain technology is expanding into non-currency areas. In both, however, there are risks mainly because 1) estate planners and family members are ill-informed about the presence and nature of blockchain assets,  2) clients fail to realize that wills and trusts must have specific language to allow Personal Representatives and Trustees to manage those assets after incapacity or death, and 3) the regulatory environment, taxation, reporting, application if intestacy laws and other issues have yet to be resolved.

Traditional planning entities also have a hard time owning cryptocurrency, especially if there is a fiduciary duty owed to beneficiaries to prudently invest assets.  Without specific language, a trust or other entity will not be able to hold cryptocurrency, but if that language is written too broadly, the fiduciary may be exempt from damages due to willful neglect. Also, cryptocurrency is treated as property rather than as currency by tax authorities for tax purposes meaning that the fair market value is set by conversion into the taxing authority’s currently, that is U.S. dollars for the IRS, at “a reasonable exchange rate” and transactions involving cryptocurrency are subject to the capital gains tax regulations. This can result in the cryptocurrency being taxed at one value in one country and another value in another country. 

On top of all this, care needs to be taken to preserve the benefits of cryptocurrency. Cryptocurrency is highly secure, but that security is in jeopardy if the private key or seed phrase is carelessly recorded. With the right private key or seed phrase, anyone can access the cryptocurrency, so planning and procedures have to include how to secure this information. Like cash, cryptocurrency is not traceable. There is no electronic or paper trail linking the parties together in a transaction involving cryptocurrency. To preserve that privacy, you will need to plan that other documentation in the transaction does not reveal these identities, or at least that information is privileged. Shorter transfer delay and lower costs. Unlike hard currency, transferring cryptocurrency takes only moments and there are few, if any, transfer costs. 

So, what to do? First, educate your estate planner and family about any blockchain based assets, especially cryptocurrency, you own. If the value of those assets exceeds $10,000, and the assets are in custody with a fiduciary or institution that is “offshore” Make sure that you are also reporting that investment annually and that the custodian that holds the assets has the capacity to invest the time and effort required to comply with the myriad changes as they occur.

As a fourth generation estate attorney and managing partner of Erskine & Erskine LLC, I provide creative estate and strategic tax planning for business owners,

As a fourth generation estate attorney and managing partner of Erskine & Erskine LLC, I provide creative estate and strategic tax planning for business owners, collectors, and their families.My true passion is customized planning for collections as well as legacy real estate and family businesses. A love for history and the law drive me to achieve the objectives of security, satisfaction, and growth. Counseling families since 1876, our firm has provided me great perspective in this area of law. Utilizing tools like personal trusts, dynasty trusts, private foundations, and family offices is our specialty. Based in the Worcester, Massachusetts area, I am an active member of the American Antiquarian Society, Worcester Economics Club, and the John J. Kittredge Numismatic Foundation. A Lawrence Academy alumnus, I received my B.A. in Medieval History from Carleton College, and J.D. from Suffolk University Law School.

Dolly Parton says that when she was born in the Smoky Mountains of Tennessee, the doctor was a missionary who rode in on horseback.

It was customary for the family to pay with whatever they had. The Parton family paid with a sack of cornmeal.

I’m pretty sure the tax law has never allowed a mileage rate for horse travel. Nevertheless, the doctor had income. Because he was paid with property, the measure of the income was the value of the cornmeal.

Dolly was born in 1946. The tax law formalized the treatment of property for services in 1969. The 1969 legislation was intended more for receipt of stock by corporate executives than for cornmeal. However, the law applies equally to both forms of property.

Because of the 1969 legislation, we know how to tax the receipt of corporate stock, options to receive stock, capital interests in partnerships, and funded deferred compensation arrangements. We could also cover cornmeal or livestock if needed.

As time marches on “progress” includes the creation of new forms of property. A service provider today may be paid in cryptocurrency. Cryptocurrency refers to convertible virtual currency that maintains peer-to-peer, decentralized records protected by cryptography.

Some young people talk of cryptocurrency as if it is currency. However, in the eyes of the federal government, and therefore the IRS, it is property.

If a service provider is paid in cryptocurrency, he or she has income. The measure of that income is the fair market value of the virtual currency at the time it is transmitted.

Cryptocurrency can create valuation issues that would be avoided if services were paid with U.S. currency. Because it is property, the payer may also have a gain or loss on the transfer to the service provider.

The service recipient’s gain or loss is measured by the change in value from the time they acquired the virtual currency and the time it was transferred. This value may be difficult to determine when the transfer is off an exchange.

It may also be a challenge to identify the unit of currency transferred. Virtual currency does have a unique identifying unit. The payer may specifically identify what was transferred or use an averaging convention to determine their cost.

Once the service provider reports income for the value of the virtual currency received, he or she now has a “basis” in the currency. Because the currency value will be changing, when it is later transferred for value a gain or loss will be realized.

This gain or loss will be capital in nature because the cryptocurrency is treated similar to an investment. The tax complexity at date or receipt and date of transfer of the cryptocurrency will probably be a surprise to the service provider.

It may get worse. So far, I have assumed the service provider is like Dolly’s doctor – an independent contractor.

If an employee is paid with cryptocurrency, the employer will need to ensure compliance with federal and state labor law. The Fair Labor Standards Act requires nonexempt employees to be paid a minimum wage and to be paid for overtime.

It is not clear how compliance with labor law is measured when payment is made in a medium other than U.S. currency. At least a few state employment laws require that wages be paid in U.S. currency.

The volatility of exchange-traded cryptocurrency could lead to employee claims that wage laws were violated if the value of the cryptocurrency drops shortly after conveyance. The outcome of such a claim is currently unknown.

With all these issues, why would a service provider want to, or be willing to, be paid in cryptocurrency? Perhaps the service provider thinks the receipt of cryptocurrency will not be taxable.

If the recipient is an employee, this is not likely. The employer has tax reporting obligations (Form W-2) and tax withholding obligations. The employer should be unwilling to agree to circumvent these obligations.

If the recipient is a contractor then the payer may or may not have a tax-reporting obligation. However, the recipient still has income.

Don’t assume the virtual currency is under the IRS radar. The IRS is very aware of how cryptocurrency is being used and its detection is a high priority item.

James R. Hamill is the Director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.

Last year, while bitcoin prices were booming so was crypto-related fraud.

In the U.S. alone 82,135 crimes involving cryptocurrencies such as bitcoin, ethereum, and other digital currencies got reported.

That’s up more than 24,000% from the 340 reported in 2016, according to new research from crypto education platform Crypto Head.

According to Crypto Head typical frauds include the following:

Similar patterns were seen in elsewhere in the world. In 2020 there were 9,689 crypto crimes reported in Australia compared to zero in 2016. In the UK last year 8,801 crypto-related crimes got reported up from 704 in 2016.

While these figures are startling, they don’t take into account all the scams and theft that involved crypto currencies that did not get reported. Sometimes people are too embarrassed to admit that they may have been duped or that they saw their crypto account hacked.

If those non reported crimes got added into the data then the level of crime involving digital currencies would no doubt be far higher.

With that level of crime going on its hardly surprising that investors seem to be bailing out of bitcoin and similar investments. The price of 1 bitcoin was recently fetching $35,920, down from $59,384 at the beginning of April, according to Yahoo finance data. Still, the price of bitcoin is up 291% from this time last year, as investors piled into the digital asset during the pandemic.

Simon Constable | Author | Broadcaster | Journalist | Commentator | Speaker. Author of The Wall Street Journal's 'In Translation' column. Fellow at the Johns Hopkins

Simon Constable | Author | Broadcaster | Journalist | Commentator | Speaker. Author of The Wall Street Journal's 'In Translation' column. Fellow at the Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise. Former staffer for General Motors Treasurer's Office. MBA from Darden Graduate School of Business at The University of Virginia. MA New York University. MA (Hons) University of St. Andrews, Scotland. Co-author of the award-winning book The WSJ Guide to the 50 Economic Indicators that Really Matter. Have written for Middle East Eye, TheStreet.com, The South China Morning Post, Barron's, Dow Jones Newswires, MarketWatch.