Arthur Hayes Warns of Potential Threat from Spot Bitcoin ETFs; Japan Eliminates Corporate Tax on Unrealized Crypto Profits; Base Network Achieves Steady Growth, Surpassing $735 Million TVL
Arthur Hayes Raises Concerns Over Spot Bitcoin ETFs, Warning of Potential Threat to Bitcoin’s Nature
Spot Bitcoin exchange-traded funds (ETFs) have become a topic of concern for Arthur Hayes, the co-founder of BitMEX. In a detailed blog post on December 23, Hayes expressed his apprehensions about the potential consequences of the success of these ETFs, emphasizing that they could pose a significant risk to the functionality and existence of Bitcoin.
Hayes, a prominent figure in the crypto space and the co-founder of BitMEX, which was established in 2014, argues that Bitcoin’s intrinsic value lies in its ability to move freely within the network. However, spot Bitcoin ETFs, designed to accumulate and store assets like a “metaphorical vault,” may hinder this fluidity.
His primary concern revolves around the scenario where ETF issuers amass the majority of Bitcoin, and investors prefer buying derivatives instead of holding the actual cryptocurrency. This, Hayes warns, could lead to a decline in the number of transactions on the Bitcoin network. Consequently, miners might lose their incentive to validate transactions, potentially resulting in the network’s demise.
In his blog post, Hayes went on to state that if ETFs managed by traditional financial asset managers (TradFi) become too successful, they could fundamentally destroy Bitcoin. He speculated that this could prompt the emergence of a new cryptocurrency monetary network, potentially expanding upon Satoshi Nakamoto’s original vision of peer-to-peer electronic money.
Interestingly, Hayes’ reflections come just ahead of the anticipated approval of several pending spot Bitcoin ETF applications. Analysts from Bloomberg predict a decision from the U.S. Securities and Exchange Commission (SEC) between January 5 and January 10, 2024. Major financial institutions such as BlackRock, Grayscale, Fidelity, and others are eagerly awaiting the SEC’s decision on their spot Bitcoin ETF applications.
Japan Eliminates Corporate Tax on Unrealized Crypto Profits
Starting from April 1, 2024, Japanese companies will reportedly no longer be required to pay tax on “unrealized gains” from cryptocurrency holdings, following the approval of a revision to the national tax regime for digital assets by the Cabinet. The new tax reform was unveiled on December 22, after a cabinet meeting, and is set to take effect at the beginning of Japan’s financial year.
Previously, corporations holding cryptocurrencies received from third parties had to report them based on the difference between market value and book value, irrespective of whether the firm sold the cryptocurrency. Under the new rules, corporations will only be taxed on profits realized from the sale of cryptocurrencies, aligning with the tax obligations for retail investors under Japanese tax laws.
The Japanese government outlined the details of its 2024 tax reform in a document published on December 14. These relaxed tax regulations could encourage more companies to explore Web3-related initiatives in Japan. Notably, stablecoin issuer Circle, the team behind USD Coin (USDC), recently collaborated with Tokyo-based financial services firm SBI Holdings to promote stablecoin adoption and Web3 services in Japan.
This development comes amid increased scrutiny by Japan’s tax authorities, which identified 548 cases of cryptocurrency-related tax violations out of 615 investigations in 2022, marking a 35% increase from 2021. However, the average value of undeclared cryptocurrency holdings decreased by 19%, from 36.5 million yen ($245,000) in 2021 to 30.7 million yen ($206,000) in 2022.
Base Network Achieves Steady Growth, Surpassing $735 Million TVL
Base Network, a project associated with Coinbase, continues to experience consistent growth, surpassing a Total Value Locked (TVL) of over $735 million, marking a 4% increase in the past week, according to the latest data from L2Beat.
Since its official launch in August 2023, Base Network has shown a positive trajectory in its TVL, starting from $592 million at the end of November and surpassing $600 million. The platform’s user engagement has also seen a notable rise, exceeding 3 million cumulative users by December 22, according to DUNE analytics.
The daily active users on Base have steadily increased, with over 70,000 users recorded in most of November and December. The daily trading volume of Ethereum on the network has seen significant growth, reaching 36,942 ETH in November and nearly doubling to 79,354 ETH by December.
Base Network, utilizing the optimistic rollup framework, serves various decentralized applications and achieves a daily transaction speed (TPS) of 3.45, with over 6.97 million transactions completed in the last 30 days.
Despite its growth, Base Network has faced challenges, including scam tokens and a major outage lasting 43 minutes on September 5. In comparison to industry leaders like Arbitrum One and OP mainnet, Base’s growth is notable, with a TVL of $8.70 billion and $5.73 billion, respectively.
While Base’s expansion is stabilizing, fluctuations in its TVL could be attributed to its recent launch, a limited selection of available DeFi protocols, and initial issues with fraudulent tokens and rug pulls.
