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3 key elements for crypto in estate planning

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Stephen J. Lacey

You have probably heard the horror stories of massive and devastating personal cryptocurrency losses.

A recent story that has garnered international attention centered on the untimely death of Matthew Mellon, the bank heir and former chairman of the New York Republican State Committee’s finance committee. In the early years of cryptocurrency, Mellon purchased $ 2 million worth of XRP, a US-founded cryptocurrency. Mellon died unexpectedly in 2018 after a long battle with bipolar disorder and substance abuse. At the time of his death, the cryptocurrency he bought was worth $ 500 million. Mellon distributed the private keys for accessing this cryptocurrency in vaults at several banks, unfortunately none of which was documented. To this day, this fortune is inaccessible.

Stephen J. Lacey Attorney:

While this story serves as an extreme example, scenarios like this one are becoming more common as the popularity of the cryptocurrency grows exponentially. A new study shows that 46 million Americans own the most popular cryptocurrency, Bitcoin. And to be honest, these investments make people rich. In the last year alone, the value of Bitcoin rose astronomically by 440%. Therefore, developing an estate plan to include crypto assets is absolutely essential.

What are the key elements in developing an inheritance plan for your crypto assets?

The most obvious and important part of setting up crypto assets for an inheritance plan is documenting the location of the crypto asset and the passwords or “private keys”. (2) a hardware wallet, (3) a mobile wallet, (4) a local software wallet.

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Regardless of the storage chosen, access to the cryptoassets is controlled by the private key. The big advantage of the private key is that it is almost impossible to hack. The disadvantage is that if you lose, misplace or forget your personal private key, your crypto assets will be completely inaccessible. not even the cryptoasset exchange can restore your key.

Next, it’s important that you communicate with your estate planner to understand where crypto assets are kept and how to access them. Your trustee (ie, executor or trustee) should be given specific authority to access digital assets and online accounts in accordance with the Florida Trustee Access to Digital Assets (“FFADAA”). The estate planning documents should specify to whom the assets are to be transferred and, if necessary, select a special trustee who is familiar with this type of asset to manage these assets. Due to the nature of the information provided to the trustee about the private key information, very careful consideration is required in selecting a trusted trustee. This is also extremely important when choosing a power of attorney in the event of disability.

Stephen J. Lacey

After all, the IRS views cryptocurrency as an asset. Therefore, careful consideration must be given when determining the basis of such a property, as capital gains tax will be due on its sale. Under current law, if beneficiaries receive these assets as part of an inheritance, the cryptocurrency may receive a “top-up”, erasing the increase in value of the lifelong capital gain.

The world is changing fast. Cryptocurrencies are another example of this. Like any other asset, cryptocurrencies need to be protected. Without careful planning and regular updates with your estate planning attorney, immeasurable wealth can be lost.

Stephen J. Lacey, JD, LL.M-Tax, Executive Director, is with the Lacey Lyons Rezanka law firm.

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Cryptocurrency: Here’s How the Top 5 Coins Have Performed Since April 2021

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Cryptocurrencies have got off to a slow start this year, largely due to an order from the Reserve Bank of India (RBI) to banks telling them not to trade crypto. Cryptocurrency trading accelerated after the Supreme Court lifted the RBI ban in March and allowed coins such as Bitcoin, Ethereum, Dogecoin, and others to be traded. Since then, several online exchanges such as CoinSwitch Kuber and CoinDCX have flourished. But investing in these virtual assets requires due diligence given the extreme volatility of most cryptocurrencies. One way to do this is to look at the historical dates of these coins.

How cryptocurrencies have behaved in the past few weeks and months can give an idea of ​​their potential in the near future and whether a person should invest now or wait.

This is how the top 5 digital coins have behaved since the beginning of this financial year (as of April 1):

Bitcoin

Bitcoin is the oldest cryptocurrency in the world. Since its introduction in 2009, it has remained an undisputed leader in the cryptocurrency market. It was Rs. 42 lakh on April 1st of that year, but by the end of May, when the market collapsed massively due to a Chinese crackdown on mining, it had hit a low of Rs. 22 lakh. However, Bitcoin has recovered. On September 17th it was Rs. 37 lakhs.

ether

Experts say this is the only virtual currency that has a chance to challenge Bitcoin’s dominance, but it is far from realizing its true potential. At the beginning of this fiscal year, Ethereum was trading at Rs. 1.40 lakh. It broke the Rs. 2 lakh barrier by early August. This was the time when the Ethereum blockchain had the big London upgrade. Since then, it has grown in value continuously. As of September 17, at the time of writing, it was Rs. 2.76 lakhs.

Cardano

Launched in 2017, Cardano is a relatively new cryptocurrency coin that has skipped the line to find its place in the top 5. Billed as a third-generation blockchain (Bitcoin and Ethereum are the first and second generation, respectively), Cardano achieved a return of almost 150 percent in just one month. On July 20, it was trading at Rs. 79.71 but by August it had peaked at Rs. 191.41. It saw further gains over the next few weeks, hitting an all-time high of Rs. 227 earlier this month. But profits have since started to decline. On September 17, at the time of writing, it was Rs. 187.82.

Tether

Tether is a stablecoin pegged to the US dollar. As the first coin, it is the most popular stablecoin. Since it is pegged to the dollar, meaning that each Tether coin should be backed by actual dollars in Tether Limited’s reserves, it is very stable compared to other cryptocurrencies. If this stability is predictable, it also limits the ability to grow wealth quickly. It stayed within the Rs. 73–75 this fiscal year. It was about Rs. 77 on 09/17.

Ripple

It is the fifth ranked cryptocurrency in terms of market capitalization. Technically, Ripple is not a cryptocurrency. It facilitates open source payments and XRP is the cryptocurrency that runs on this network. The price has doubled from Rs since April 1st. 41 to Rs. 80 now. But it hasn’t seen a rally similar to what it did in late 2017, which hit its all-time high of Rs 242 in early January 2018. At the time of writing, it was Rs. 84.

Interested in cryptocurrency? We discuss everything about crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music, and anywhere you get your podcasts.

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financial: Cryptocurrency Hyper Fund under government scanner

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NEW DELHI: The government is closely monitoring the cryptocurrency in the market based outside of the country after alerting that the authorities responsible for investigating financial fraud are watching a company called Hyper Fund.

Sources said Hyper Fund, a DEFI from the Hyper Tech Group, recently got under the radar. The group claims to have launched the Hyperfonds to provide a decentralized financial infrastructure. Hyper Fund was announced in mid-2020.

However, according to the company’s website, it is run by Ryan Xu, however, using the Multi-Level Marketing (MLM) model, Hyper Fund has attracted investors with higher returns and such offers, a common practice with Ponzi programs that have alerted authorities first place.

According to sources, complaints against such funds are piling up in several states. In India, the RBI, the Union Finance Ministry and SEBI had warned against trading in cryptocurrencies. The RBI plans to launch India’s official digital currency – E rupee – shortly.

The Treasury Department has made it clear that virtual currencies are not legal tender either. Therefore, VCs are not currencies. The RBI has also made it clear that it has not granted any company / company a license / authorization to operate or trade in Bitcoin or a virtual currency.

In June 2018, Amit Bhardwaj and his brother Vivek Bhardwaj were arrested by Pune police at Delhi Airport in connection with an alleged pyramid scheme. Bhardwaj, started his own Bitcoin mining operation and reportedly defrauded more than 8,000 people across the country for Rs 2,000 crore.

He has filed a complaint with the Delhi Police Department’s special cell alleging that he received a blackmail call and was asked to pay protection money on September 6, 2021 in exchange for promised higher returns.

UK regulators have issued warnings about such funds, and the Financial Conduct Authority (FCA) has issued warnings for both hyper-funds and fund advisers.

On its website, first published March 23, 2021 and later updated on August 31, the FCA said, “We believe this company may offer, advertise or sell financial services or products in the UK without our approval Any financial service or product required in the UK must be authorized or registered by us. This company is not authorized by us and is aimed at individuals in the UK. ”

She warns investors against such a fund and goes on to say, “You do not have access to the Financial Ombudsman Service or are protected by the Financial Services Compensation Scheme (FSCS), so you are unlikely to get your money back if something goes wrong . ”

The website used by these companies under the FCA is http://thehyperfund.online, https://thehyperfund.com/

Decentralized finance offering (DEFI) via blockchain technology from HyperTech Group, which is said to be based in Hong Kong, sources said Indian regulators and agencies have started monitoring the situation.

Following actions by financial regulators such as the US Security and Exchange Commission and the UK Financial Conduct Authority, Indian regulators and enforcement agencies have started overseeing investments in Hyper Fund – a decentralized financial offering powered by blockchain technology from the HyperTech Group.

Financial regulators around the world recognize the fact that Ponzi program organizers often use the latest innovations, technologies, products, or growth industries to attract investors and promise high returns on their program. Potential investors are often less skeptical of an investment opportunity when they judge something new, new or “current”. On its website, Hyper Fund claims to be “the strongest rocket in blockchain funding”.

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A Lawyer Beginner’s Guide to Cryptocurrency Exchange

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A cryptocurrency exchange is a platform that enables users to trade different currencies and Cryptocurrency Types.

A crypto exchange has an interface similar to that of a bank or investment firm, but differs in a few notable ways. The exchange acts as a central platform that connects buyers and sellers of various cryptocurrencies. Its main value is that it provides near-instant liquidity around the clock for many cryptocurrency asset pairs.

Popular exchanges like Coinbase and Gemini hold billions of dollars in cryptocurrencies, some of which are owned directly by the company and some by users who use it Exchange’s cryptocurrency wallet.

There are some notable differences in the field of cryptocurrency exchanges that we will go into in detail.

  1. Is the cryptocurrency exchange centralized or is it completely decentralized?
  2. Is the exchange safe or not?

Here’s what every lawyer, and frankly everyone who interacts with the financial world, should know why choosing the right cryptocurrency exchange makes all the difference.

Is the cryptocurrency exchange centralized or is it completely decentralized?

As you may have learned from reading The Legal Examiner The Blockchain: A Guide for Lawyers Series, cryptocurrency like Bitcoin is completely decentralized.

This means that there is no central company or entity responsible for Bitcoin – there is no fancy San Francisco tech startup office or a 1-800 number to dial if things get mixed up.

This is in contrast to a centralized exchange, which is a formally established entity that must adhere to guidelines and regulations. Of course there are fraudulent centralized exchanges that do not conform to the “formally established” definition, per se, but the point remains valid.

A centralized exchange, such as Coinbase or many of its direct alternatives, has chiseled its value proposition to make cryptocurrencies much more accessible to the average person.

Instead of two individuals agreeing to send each other different currencies (e.g. BTC for ETH), a central exchange handles the transaction and takes a small cut. This fee, often referred to as the maker-taker fee, gives the centralized exchange (or liquidity provider as we will learn below) an incentive to participate in the market. Makers are the market makers who create the bilateral markets (the exchange) and the takers are those who trade at the prices set by the market makers.

If you’re curious about how much money an exchange like Coinbase can make with these relatively low fees, take a look at these S-1 statement It was released before it went public in 2021.

Now imagine taking centralized exchange out of the equation. With no intermediary, the trading parties would be responsible for setting the prices at which they would be willing to trade the assets and trusting that the other party would send their fair share of the transaction.

As you can imagine, without a structure, this is an incredibly inefficient and untrustworthy way to trade digital assets on a large scale.

This is where decentralized exchanges (DEX) come into play.

A DEX is basically a decentralized platform that allows users to trade directly and instantly through preprogrammed contracts. The DEX forwards the order and only completes it when both parties have signed the transaction and the blockchain validates the entire ordeal.

Companies like Shapeshifting and MetaMask allow users to instantly trade their funds with one another without ever giving intermediate custody of their assets.

How do DEXs make money? They sometimes charge fees (not to be confused with the actual blockchain network fees that are incurred on every transaction, centralized or not) that can be distributed to the token holders of that exchange’s token.

the DEX model gets a little hairy, but it’s a fascinating journey to experience, especially as it serves as a portal into the world of decentralized finance (DeFi).

Is the exchange safe or not?

As mentioned in the previous section, centralized exchanges (CEXs) differ from decentralized exchanges (DEXs) in that they hold user assets while DEXs do not.

To be technically more precise, the CEXs keep your private keys, as they are not actual ones “Coins” or “Tokens” exist somewhere in a vault. A DEX allows you to trade without revealing your private key to the DEX or the receiving party.

Custody exchanges pose a significant risk. For one, your private keys are at risk if the exchange is hacked or exposed as an elusive fraud.

Hacking Mt. Gox, a popular early exchange, posed an existential threat to the burgeoning bitcoin. In February 2014, hackers stole a whopping 840,000 bitcoins from Mt. Gox customers and the company itself, with only 100,000 owned by the company – which is today equates to about $ 33.6 billion.

Other notable centralized exchange hacks and glitches include: Bithumb ($ 30 million), Coinrail ($ 37.2 million), BitGrail ($ 195 million), Coincheck ($ 534 million) – each value being set in the period in which it was was hacked.

Hopefully, while today’s exchanges have learned from the mistakes of the past, the threat remains. These exchanges use a combination of Warm and cold storage to make sure a Mt Gox disaster doesn’t happen again.

When you use a DEX, you are the greatest threat for your money. Since you are keeping your assets safe at all times, you are the primary point of potential failure. If you lose your device and cannot recover your account, or if someone targets your wallet directly, you could lose your money indefinitely.

However, these events can be avoided almost entirely with proper digital safety hygiene.

Final Thoughts: How to Pick the Right Crypto Exchange for You

Your choice of cryptocurrency exchanges ultimately depends on convenience, assuming you choose from a handful of vetted and reputable companies.

If you fall into the absolute beginner archetype of cryptocurrency, it’s worth creating a Coinbase account and trying the beginner-friendly platform. It lacks much of the advanced trading functionality, but it does achieve what you’re looking for: buying your first bitcoin, ether, or any other cryptocurrency.

Coinbase Learn also gives you some options to find out about specific cryptocurrency projects and earn a small fraction of their tokens.

If you choose to buy cryptocurrencies on Coinbase, you will likely soon outgrow the comparatively high fees – they’re nothing to sleep on, but they add up and there are cheaper options.

The good news is that you don’t have to leave the Coinbase ecosystem to avoid the high fees. Coinbase Pro is the “Pro” version of Coinbase and belongs to the same company. Not only does it have much lower fees across the board, but it also has a lot more investment pairs and the ability to deposit and buy crypto directly with USD.

Other Coinbase alternatives are: Twins, octopus, and BlockFi.

However, each of the options listed above is a custody platform, which means that they will keep your private keys in their own cryptocurrency wallet. This removes (albeit abandoned) the responsibility of maintaining your private keys, which makes it a lot easier for a beginner in the ecosystem.

For those who are in line with the “Be Your Own Bank” ethos of cryptocurrency, consider a non-custodial exchange platform like ShapeShift, MyEtherWallet, or Metamask. You will still keep your private keys in custody, but you can trade for other assets and likely pay much lower fees than on a central exchange.

Platforms without custody usually also facilitate the connection to the world of decentralized finance (DeFi). However, if you’re just getting started, we don’t recommend jumping in here just yet!

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