Trademark registrations point to F1 NFTs
In recent years, fans have paid close attention to international trademark registrations to get an early opportunity to see what their favorite brands plan to offer. We’ve seen it recently with international trademark registrations for Marvel Studios movies that, at the time of filing, hadn’t been announced yet.
Now, Formula 1 (F1) recently filed trademarks for the 2023 Las Vegas Strip Circuit Grand Prix, which cited NFTs and cryptocurrencies in a number of potential products offered through trademark registrations.
The trademarks were registered with the United States Patent and Trademark Office on August 23, 2022, and include the Las Vegas Strip Circuit trademark and logo as well as a number of specific nods to NFTs and blockchain-powered transaction facilities.
The trademarks indicate that any new NFTs will represent ownership of a wide variety of tangible items, including vehicle equipment, decorative items, clothing, bags and wallets. We have seen a similar offering in the 2022 Australian Open, where NFTs were sold that represented a tangible part of the playing field.
The trademarks also point to:
downloadable computer software for managing cryptocurrency transactions using blockchain technology.
Another clause in the trademark described the facilities capable of covering cryptocurrency and blockchain-based payment systems:
Financial services including e-wallets and cryptocurrency; electronic transfer of crypto-assets; currency exchange services; currency trading; virtual currency services; electronic money transfer provided via blockchain technology; financial transactions via blockchain; cryptocurrency services, namely providing a digital currency or digital token for use via a global computer network; delivery of tokens; provision of non-fungible tokens.
This could be an indication that F1, as well as suppliers participating in the Grand Prix, will accept cryptocurrency payments. Las Vegas is set to host its first F1 race in just under a year, and will be the third US stop for the F1 roadshow.
Australian Federal Police form crack crypto unit
The Australian Financial Review reports that the Australian Federal Police has formed a crack crypto-investigative unit to improve the police’s ability to deal with crypto-assets that form part of seized assets and to investigate money laundering and other crimes that have involved crypto- assets.
The AFP’s Criminal Assets Confiscation Task Force was established in February 2020 and since then has blown past its target of seizing AUD$600 million in assets by the end of 2024, reportedly seizing to date:
[AUD]380 million dollars in residential and commercial real estate, [AUD]$200 million in cash and bank accounts, and [AUD]$35 million worth of cars, boats, planes, artwork, luxury goods and cryptocurrencies.
Without their own segment, we don’t know how much cryptoassets have been seized, but that alone shows what a small component of criminal asset seizures involve any meaningful amounts of cryptoassets (well under 5% of those seized). assets). Given their highly technical nature, it only makes sense that the AFP has a dedicated team that can be trained on and understand crypto and can use leading edge tools like Chainalysis and Elliptic to trace transactions and catch criminals foolish enough to use an immutable record of transactions for their ill-gotten gains. This is consistent with Chainalysis reports that only 0.15% of crypto transactions by volume involve illegal actors in 2021. This is of course around 4 times the level of illegal transactions identified in the banking system, a point that AUSTRAC has raised as a warning sign, but a small fraction of the estimated illegal transactions involving cash (which is estimated between 4-8%).
As cryptocurrencies increasingly become mainstream, fueled in part by the rapid growth of the NFT space as well as a potential thawing of crypto winters, better education among law enforcement is key to ensuring criminals are brought to justice, and long-weary troopers approx. crypto that is only used by criminals is put to rest.
Treasury consults on crypto tax legislation
In June this year, Australian Treasurer Jim Chalmers released a media statement with Assistant Treasurer Stephen Jones confirming that the Labor government planned to introduce legislation clarifying the existing tax treatment of digital currencies as a response, in part, to El Salvador’s decision to recognize Bitcoin as legal tender.
This week, the Treasury released an exposure draft of the legislation that seeks to clarify that digital currencies (other than CBDCs) will not be taxed as foreign currency under Australian law. The Ministry of Finance also released explanatory material outlining the proposed changes.
The Department of Finance has opened a short consultation period on the draft legislation which ends on 30 September 2022 and coincides with the response deadline for the Tax Board’s wider review of the tax treatment of digital assets and transactions in Australia.
The Finance Ministry’s proposed legislation would exclude digital currencies that are legal tender but not issued by any government from the definition of foreign currency for tax purposes. This means that taxpayers will not be able to benefit from any foreign currency tax election in relation to Bitcoin.
The explanatory material contains a number of interesting observations:
- The changes are intended to ensure that Bitcoin, which has been recognized as legal tender in El Salvador, continues to be treated as a digital currency (and not a foreign currency) under tax law;
- It describes Bitcoin as decentralized and not issued or controlled by any government and the only current example where there is a potential overlap between the definition of money and digital currency under legislation.
- The new definition of digital currency will exclude any digital currency issued by or under the authority of the Australian Government or a foreign government agency (ie CBDCs including, presumably, e-CNY, Nigeria’s e-Naira and the Bahamas’ Sand Dollar) . Accordingly, it appears that government-backed CBDCs will receive preferential tax treatment over stablecoins which will continue to be treated as digital currencies for tax purposes.
- The proposed amendments include a power to make regulations to provide further exemptions from the definition of foreign currency in the future to enable other digital currency-like assets to be excluded through regulation.
- The proposed legislation is intended to take effect retrospectively for the purpose of preserving the existing tax treatment of digital currencies (excluding CBDC) for the 2021-2022 tax year.
While the Ministry of Finance’s move to clarify the existing tax treatment of digital currencies is welcome, the draft law raises a number of interesting and unanswered policy questions regarding the differential tax status given to different types of currency and the impact of this status on the development of the digital economy. These questions will hopefully be dealt with more broadly as part of the Tax Board’s review. Once implemented, these changes will mean that traditional fiat-backed currencies and CBDCs will be treated as foreign currency for tax purposes, while privately issued digital currencies (including stablecoins) will not be even where they are adopted as legal tender in a foreign country.
You can read the draft law and explanatory material here. Submissions must be submitted by September 30, 2022.
Any Celsius crypto to go to custodians?
Controversial cryptocurrency business Celsius Network, currently under US bankruptcy protection, is seeking court approval in New York to allow a small group of custodians to withdraw digital assets that were held in separate custody to other assets. Earlier this year, Celsius froze withdrawals, exchanges and transfers of customer funds before filing for bankruptcy in July.
In a filing with the United States Bankruptcy Court for the Southern District of New York, Celsius demanded that customers’ digital assets held in the Celsius Custody Program and imprest accounts be released to those customers.
About $50 million in crypto assets will be included in the proposed release. The proposed release does not include customers who had Celsius Earn and Borrow accounts. According to Celsius’ lawyers, users did not maintain legal ownership of cryptocurrencies deposited into income or loan accounts, such as the Earn and Borrow accounts.
To further complicate matters, Celsius added to the proposal that users who transferred assets in excess of a statutory minimum from Earning or Loan accounts to the custody program or an escrow account within 90 days of Celsius filing for bankruptcy would also be ineligible to take out their belongings.
The treatment and protection offered to the client’s cryptocurrency holdings is a key issue that needs to be considered when a crypto business is in trouble. We expect further developments in this area globally as a number of recent high-profile insolvencies move through the courts in the US and elsewhere.
Closer to home, and relevant to this issue, when New Zealand-based crypto exchange Cryptopia shut down in January 2019 and subsequently went into liquidation, one of the questions raised was whether cryptocurrencies deposited by clients should be classified as trust property under New Zealand’s the Companies Act and thus must be distributed to account holders, or whether the cryptocurrencies are to be considered Cryptopia’s assets and used to repay creditors.
In that case, the court found that the cryptocurrencies were held in trust for the account holders and Cryptopia had no right to use the assets to repay creditors in the liquidation.
