South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

“A government official, who spoke on the condition of anonymity, said the finance ministry has not finalized its plan to tax cryptocurrencies.” stated The Korea Times article.

Some have speculated that the government may categorize gains obtained through cryptocurrency trading as “other income” and not capital gains. The other income category also includes gains made from lectures, lottery purchases and prizes.

A clear scheme for crypto cryptocurrency taxation is much needed in South Korea. This became particularly apparent when, at the end of December, major local cryptocurrency exchange Bithumb announced that it was considering administrative litigation over an $68.9 million tax bill that it believes has no legal basis. More recent reports indicate that the firm decided to follow through and take tax authorities to court.

As an article on Cointelegraph exemplified, South Korea’s cryptocurrency guideline has seen noteworthy progress since Park Yong-jin, a member of the National Policy Committee from the ruling Democratic Party, presented the first-ever taxation policy for crypto in 2017.

In 2019, the National Assembly’s national policy committee approved a bill that would give more legitimacy to digital assets by subjecting them to more scrutiny and government oversight.

Will Blockchain Security Issues Be Dealt With, In 2020?

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The past few years have been a crisis for security in crypto. As the asset class has increased popularity, more and more security breaks have been highlighted and more institutions targeted.

The burgeoning industry is ripe with opportunity, but also with risk. Two incidents that highlight this lapse in security spring to mind.

Back in January 2018, Coincheck Japan was targeted, with attackers succeeding in stealing $530 million worth of NEM tokens from the crypto exchange. It is one of the biggest crypto exchange heists in the relatively short history of the industry and stands alongside the infamous attack on Mt. Gox, when around 800,000 BTC was stolen — a sum worth over $6 billion today.

Further back in February 2016, the Bangladesh Bank was targeted. Thieves tried to steal a total of $850 million via properly authenticated transactions in ordering the Federal Reserve Bank of New York to transfer the money through the SWIFT network. While “only” $101 million was transferred to final beneficiaries in the Philippines and Sri Lanka, this ended up resulting in a whopping total of $81 million successfully stolen during the incident.

What do these incidents have in common? The complacency of the victims — central banks and top crypto exchanges — and their management of security credentials (be it passwords or private keys) in giving access to the transfer of fiat money or cryptocurrencies.

The SWIFT network used for the Bangladesh Bank and other similar heists was not hacked, the users of the network were. The blockchains utilized to transfer the NEM out of Coincheck and the BTC out of Mt Gox were not hacked, the exchanges — i.e., the users of these blockchains — were. Their systems and credentials were so poorly protected that hackers were able to take control and impersonate their victims with ease.

The SWIFT community reacted to these events by reinforcing cybersecurity controls, by identifying the weakest players and by ensuring hackers’ modus operandi were shared among the community to prevent further incidents. Has the crypto industry done the same and learned from its mistakes? Probably not at the level this issue deserves. Will 2020 see more collaboration to prevent these incidents or to enable the recovery of stolen funds in case of successful hacks? The jury is still out.

In 2020, more education and awareness will be required. Exchanges, funds, projects, foundations, and all the other crypto players servicing underlying customers must put in place the proper transparent and secure processes around the safekeeping of the assets of their customers. Most will rightfully opt for the outsourcing of that critical task to third-party custodians whose job is to do precisely that.

This year will hopefully also be the year when digital asset service providers such as crypto exchanges and custodians will not only collaborate about the implementation of the Financial Action Task Force rules but also about the exchange of information on hackers’ modus operandi and blacklisting of addresses.

By the end of the year, the cashing out of hacked funds should be so difficult — thanks to a more formal collaboration between players — that thieves will be discouraged from targeting cryptocurrency organizations.

Beyond the adoption of the right established technology, it is only when common-sense operational and business practices — those of segregation of duty, focus on core activities and established risk management — are put in place that the digital asset industry will become mainstream. Today, it is not, and now you know why.

Dark Pool Explained

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Dark pools are an ominous-sounding term for private exchanges or forums for securities trading. However, unlike stock exchanges, dark pools are not accessible by the investing public. Also known as “dark pools of liquidity,” these exchanges are so named for their complete lack of transparency. Dark pools came about primarily to facilitate block trading by institutional investors who did not wish to impact the markets with their large orders and obtain adverse prices for their trades.

Dark pools were cast in an unfavorable light in Michael Lewis’ bestseller Flash Boys: A Wall Street Revolt, but the reality is that they do serve a purpose. However, their lack of transparency makes them vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders.

Why Use a Dark Pool?

Contrast this with the present-day situation, where an institutional investor uses a dark pool to sell a one million share block. The lack of transparency actually works in the institutional investor’s favour since it may result in a better-realized price than if the sale was executed on an exchange. Note that, as dark pool participants do not disclose their trading intention to the exchange before execution, there is no order book visible to the public. Trade execution details are only released to the consolidated tape after a delay.

The institutional seller has a better chance of finding a buyer for the full share block in a dark pool since it is a forum dedicated to large investors. The possibility of price improvement also exists if the mid-point of the quoted bid and ask price is used for the transaction. Of course, this assumes that there is no information leakage of the investor’s proposed sale and that the dark pool is not vulnerable to high-frequency trading (HFT) predators who could engage in front-running once they sense the investor’s trading intentions.

Types of Dark Pools

Broker-Dealer-Owned

These dark pools are set up by large broker-dealers for their clients and may also include their own proprietary traders. These dark pools derive their own prices from order flow, so there is an element of price discovery. Examples of such dark pools include Credit Suisse’s CrossFinder, Goldman Sachs’ Sigma X, Citi’s Citi Match and Citi Cross, and Morgan Stanley’s MS Pool.

Agency Broker or Exchange-Owned

These are dark pools that act as agents, not as principals. As prices are derived from exchanges — such as the midpoint of the National Best Bid and Offer (NBBO), there is no price discovery. Examples of agency broker dark pools include Instinet, Liquidnet and ITG Posit, while exchange-owned dark pools include those offered by BATS Trading and NYSE Euronext.

Electronic Market Makers

These are dark pools offered by independent operators like Getco and Knight, who operate as principals for their own account. Like the broker-dealer-owned dark pools, their transaction prices are not calculated from the NBBO, so there is price discovery.

Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds and pension funds, which hold that these benefits ultimately accrue to the retail investors who own these funds. However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms. HFT controversy has drawn increasing regulatory attention to dark pools, and implementation of the proposed “trade-at” rule could pose a threat to their long-term viability.

Cryptocurrency: A Source Of Passive Income

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In order to understand how crypto can become a source of passive income, we must first understand or define what passive income is.

What is Passive Income?

Passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, so dividends and interest would therefore be considered passive.

Passive income is a big step for cryptocurrency: it’s about time that people use digital assets productively. There are options that vary in time-intensity to fit one’s investor capacity and crypto needs at the same time.

Cryptocurrencies are complicated so you need to make the point that it could be very easy. It’s common knowledge that institutional investors, specifically from CME, are increasingly embracing the world of crypto. As far as passive income is concerned, institutional clients may be interested in these types of earnings in which case certain conditions are met. For example, the return on investment should be at one level or higher than the return on investment instruments in the classical market. At the same time, risk level must not exceed fiat market risks. Otherwise, investments will be deemed as risky and may be of interest only to highly speculative hedge funds that specialize in this domain.

Staking isthe simplest way to earn passive income, as the market pays you for holding cryptocurrencies for a certain period of time. It offers an investor a potential ROI which is more predictable than others and no investment in hardware is required. Technically, staking means a user stakes his coins to “forge” blocks by maintaining a wallet or node. When staking your coins, investors usually go through a lock-up period while voting — rules on this vary from project to project. After voting, investors get their coins back as well as the staking reward (up to 30% of the coins put in stack). Staking has been misrepresented as the equivalent of a bond in cryptocurrencies. In reality, it is much more of an instrument to participate in the corporate governance of a project and getting paid for it. As mentioned earlier, you don’t need mining hardware because staking is fulfilled via e-wallets.

Blockchain has two layers: application and implementation. The lightning network belongs to the implementation layer or Layer 2. The owner of lightning has the ability to quickly process a lot of transactions. This method does not offer an immediate return on investment; however, they offer transaction fees. Lightning network nodes have strong potential: they are expected to grow in demand within the market. So, if you invest in lightning nodes, your returns will increase in line with their usage maximization.

Here everything starts with setting up automated lending on a crypto exchange platform. AI is used to manage lending operations. Again, the income depends on the amount of your holdings: the more you own, the more AI works for you, and ultimately, the more your passive income is. While the process of lending is fully automated, an investor can take control of parameters — loans can be varied in size and length.

For beginners, here are a few tips to make cryptocurrency a profitable investment.

First of all, always assess the risks cold-headed. You should never invest in an asset if you have heard about or just because it is “hype”.

Secondly, rumours in the cryptocurrency market should be carefully filtered. There is no need to jump on every headline risk before properly checking the news provider and if the story has legs.

Finally, work with credible exchanges — your prudence matters a lot for your own safety and the stability of the entire ecosystem.

Psychology of Financial Markets

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Market psychology refers to the prevailing sentiment of financial market participants at any one point in time. Investor sentiment can and frequently drives market performance in directions at odds with fundamentals. For instance, if investors suddenly lose confidence and decide to pull back, markets can fall.

Greed, fear, expectations, and circumstances are all factors that contribute to markets’ overall investing mentality or sentiment. The ability of these states of mind to trigger periodic “risk-on” and “risk-off,” in other words boom and bust cycles in financial markets is well documented. Often these shifts in market behaviour are referred to as “animal spirits” taking hold. The expression comes from John Maynard Keynes’ description in his 1936 book, “The Theory of Employment, Interest, And Money.” Writing after the Great Depression, he describes animal spirits as a “spontaneous urge to action rather than inaction.”

While conventional financial theory, namely the efficient market hypothesis, described situations in which all the players in the market behave rationally, not accounting for the emotional aspect of the market can sometimes lead to unexpected outcomes that can’t be predicted by simply looking at the fundamentals. In other words, theories of market psychology are at odds with the belief that markets are rational.

THEORIES AND TRADING

Some types of trading and or investing approaches do not rely on fundamental analysis to assess opportunities. For instance, technical analysts use trends, patterns and other indicators to assess the market’s current psychological state in order to predict whether the market is heading in an upward or downward direction. Trend-following quantitative trading strategies employed by hedge funds are an example of investing techniques that rely in part on taking advantage of shifts in market psychology, exploiting signals, to generate profits.

Studies have looked at the impact of market psychology on performance and investment returns. Economist Amos Tversky and psychologist and Nobel prizewinner Daniel Kahneman were the first to challenge both accepted economic and stock market performance theories that humans are rational decision-makers and that financial markets reflect publicly available and relevant information in prices (so that it is impossible to beat the market). In doing so, they pioneered the field of behavioral economics (also called behavioral finance). Since then, their published theories and studies on systematic errors in human decision-making stemming from cognitive biases including loss aversion, recency bias, and anchoring have come to be widely accepted and applied to investing, trading, and portfolio management strategies.

PSYCHOLOGY AND CRYPTOCURRENCY

Psychology has a huge effect not only on how we use cryptocurrency but the rate of its adoption in the general marketplace. Understanding these factors can give you an edge in cryptocurrency trading.

While the psychology of traditional investments is well-known and has been comprehensively studied, there are many key differences in the emerging cryptocurrency trading. Still more psychological barriers exist for a widespread crypto adoption in the marketplace. We’ll take a look at some of these different factors, starting with investment in general.

One of the number-one pieces of investing advice you’ll ever hear is ‘don’t invest based on emotion.“ You’ve probably heard that before if you even have a passing interest in investment, but you may not have stopped to think about why.

Statistics show that the majority of people trading financial instruments in any given year lose money. But what separates them from those who consistently gain? The answer is complicated, but can be understood when you examine the psychology that affects our decision-making processes.

FEAR

Fear is one of the most powerful motivating factors in the human condition. Fear of (further) loss is what causes people to sell off during a market downturn or correction. How can you counteract that fear? One way is by not over-leveraging yourself.

That means, only trading, say, 10% of your assets at a time makes you less vulnerable to acting out of fear than if you have 50% or especially 100% of your assets tied up in one single investment.

Investing money that you can’t afford to lose also causes stress and fear to control your decision-making. Even with the best information available and a very sharp mind, you’re not going to make good decisions if you make an investment with your next month’s rent money.

Most consider investment to be a long-term strategy, but many let fear dictate their actions and sell off at the slightest hint of a downturn. Even day-traders follow strict guidelines to take emotions like fear out of the equation.

ATTACHMENT

Another emotion to avoid is attachment. If a stock or asset is performing well, it can sometimes lead you to hold onto it longer than you should. This all depends on your goals, and if that is to make a profit, then you should not get enamoured by a high value.

Remember, the value of stocks does not equate to cash. Set realistic earning targets and cash out your investments when the price meet targets. Then, take a percentage of that and reinvest if you want — but you will protect the majority of your gains.

The psychology of investing and trading financial instruments is a very complex and tricky thing to navigate. Adding cryptocurrency to the mix adds a new layer to these same concepts.

One of the most important things to remember is that you need to protect the bulk of your wealth. Having all your wealth tied up in a volatile investment will lead to decisions ruled by fear.

Focusing on the goal of a crypto-issuing company, and how it is working to achieve that goal are better ways to frame your thinking. If their goal is to build wealth, or just to see cryptocurrency succeed in disrupting the market, the way they achieve that should be the same.

5 Reasons To Invest In Cryptocurrencies

With prices rocketing back from the lows. In fact, many cryptocurrencies have doubled from their recent low prices over the last several weeks. Here are a few reasons why you should get your hands on cryptos, and make them one of your investment options:

The Market Is Still In Its Infancy

Cryptocurrency is less than a decade old. Bitcoin was launched in 2009, and other major crypto names are far younger. By way of comparison, the New York Stock Exchange began in 1792 and commodities have traded for many centuries.

Volatility is the hallmark of a new market. As exchanges and investors adjust to the new products, massive price swings are inevitable. This is why, despite my bullish bias, I say to only risk what you can afford to lose when investing in the novel cryptocurrency markets.

As the market matures, volatility will decline to create smoother equity curves for investors in both directions. Make no mistake, the inevitable decline in volatility will take much of the enormous profit potential out of the nascent market. This is why now remains an ideal time to buy despite the high risk for extreme return-seeking investors.

Regulations Are Not A Bad Thing

There is a broad fear among cryptocurrency adherents that regulations will ruin the market. Many of the early adopters and creators of cryptocurrency have a strong anti-authoritarian, anarchist bias. In other words, these folks hate the government, regulations, and anything that interferes with the free market.

The early adopter’s utopian worldview — the dream to live in a world where everyone interacts fairly and peacefully — remains nothing but fantasy in the real world. As unfortunate as it may be, regulations are a must for a smooth and fair operating exchange.

The anarcho-capitalist movement that spawned cryptocurrency, and the underground commerce sites like Silk Road, is quickly becoming less of a factor in the growth of cryptocurrencies. A strong argument can be made that regulations are a must for the continued success of the crypto market. The fear-based selloffs triggered by regulation announcements and rumours make ideal buying prospects for savvy investors. An example of this was the steep sell-off that occurred when South Korea announced a slate of regulatory measures. The move was way overblown, and crypto quickly recovered from the selling. This happens again and again, creating an exploitable pattern.

Real World Applications

Crypto has moved away from the anarchist’s preferred means of exchange into the mainstream. However, it is not entirely mainstream enough to squash the upside potential. This means now is the time to buy before it’s too late!

Everyone knows bitcoin is being accepted at more and more locations around the globe. Since it was the first mover in the space, it is the leading cryptocurrency and has gained relatively widespread acceptance in the real world of commerce.

Other crypto projects like Ripple serve to transfer fiat currencies around the world. Crushing legacy systems like SWIFT regarding time and cost, Ripple and XcelToken Plus are the leading players in the conversion of money transfer systems into the digital age. Rumours abound that even Starbucks has plans to accept Ripple and Litecoin as payment within the next five years. Should Starbucks come on board, expect a massive move by retailers in this direction. Ripple is just the tip of the iceberg coming to real-world applications of the blockchain and cryptocurrency.

Platforms like XcelTrip allow those holding cryptocurrencies, to travel anywhere with cryptocurrencies.

Bigger ICOs

Initial Coin Offering (ICO) has become a favorite way to raise capital over the past year. Often built on the Ethereum network, ICOs use vast numbers of tokens which, in turn, increase the demand for Ether, the cryptocurrency of the Ethereum network.

These types of offerings have reached the billion-dollar stage with Telegram, a messaging app, and the old school company Kodak both recently announcing plans to launch ICOs. We will only see ICOs grow more extensive and more legitimate over time, increasing demand for Ether and other backbone blockchain network cryptos.

The Banks And Institutions Are Coming

Primarily a retail investor phenomenon, cryptocurrency has attracted the interest of major institutions, banks and hedge funds. Multiple cryptocurrency hedge funds are springing up around the world, increasing the demand for the cryptocurrency. At the same time, considerable institutional money is starting to flow into the space. Attracted by the high return potential, institutions are in the early stages of accepting the asset class.

The amount of institutional money available for the new market is staggering. Should institutions, banks, and hedge funds embrace digital currency, the upside is truly unlimited.

Keep all these points in mind and invest in a token that has real world transaction usage and that also provides long term profits.

ADVANTAGES OF CRYPTOCURRENCY

The world is becoming more and more economically unsafe. This is not to say we are not growing. But as Nassim Taleb states in his book. Antifragile. Our economic mechanism is like a glass jaw. It all comes booming down when it gets hit with a small blow. Both long term and short term this is not good for you and all of the hard-working inhabitant of the world, so investing in cryptocurrency is the best option we have. Here are some of the advantages of cryptocurrency that one should keep in mind:

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Fraud: Cryptocurerncy is digital and cannot be forged or upturned arbitrarily by the sender, as with credit card back charges.

Identity Theft: When you give your credit card to a business, you give the business the admission to your full credit line, even if the transaction is for a small amount. Cryptocurrency use a “push” mechanism that lets the cryptocurrency holder to send precisely what he or she wants to the business or receiver with no further data.

Immediate Settlement: Purchasing real property characteristically involves a number of third parties (Lawyers, Notary),delays, and payment of fees. In numerous ways, the bitcoin/cryptocurency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts is intended and enforced to remove or add third party endorsements,reference exterior facts, or be finished at a future date or time for a fraction of the expenditure and time required to complete traditional asset transferences.

Access to Everyone: There are about 2.2 billion persons with access to the Internet or mobile phones who don’t presently have access to traditional exchange platforms. These persons are primed for the Crytocurrency market.

Lower Fees: There aren’t typically transaction fees for cryptocurrency exchanges as the miners are remunerated by the network. Even though there’s no bitcoin/cryptocurrency transaction fee, several expect that most users will involve a third-party facility, such as Coinbase, making and maintaining their own bitcoin wallets. These facilities act like Paypal does for cash or credit card users, offering the online exchange structure for bitcoin, and they are likely to charge fees.

With all these advantages of cryptocurrency in mind find a suitable currency to invest in and trade in cryptocurrency in order to make sure that you reap the benefits of this form of currency transaction and trade.

Pros of Investing in cryptocurrencies

Whether you have an important amount of investment or a little bit of extra cash, cryptocurrency is an investment value looking into. Here are a few of the pros of investing in cryptocurrencies ICO:

Pro No. 1: Massive potential for returns.

One of the data that makes everyone deliberate investing in cryptocurrency is that $1,000 invested in Bitcoin in 2013 would be worth over $400,000 today. Current ICOs have created an amount of enormous returns in a short amount of time.

Pro No. 2: Shorter time horizon.

Since cryptocurrencies are network-based and Datum has previously received a upsurge of support, stakeholders know it is prospectively that they can begin cashing out their assets comparatively quickly.

Pro No. 3: Increased liquidity.

If a cryptocurrency ICO is able to construct a solid adequate network, such as the 56,000-member Datum network, investors instantly have much more liquidity and can trade their cryptocurrency for ether or dollars almost immediately.

Pro No. 4: Clear direction for execution.

With a cryptocurrency ICO, when you capitalize you know precisely what the network does and will be doing. As such, you are able to more precisely assess the product–market fit for the platform, and can use that insight to regulate your investment.

Pro No. 5: If you invest in a utility token like XcelToken Plus, then you can use it to make everyday transactions. XcelToken is adopted into usage on XcelTrip– an online travel booking platform where you can check-in at over 800,000 hotels and book tickets with over 400 airlines, XcelPay– a merchant POS and digital payment wallet through which you can now recharge your phones with 900 different carrier services and in 160 countries, with cryptocurrency.

If these pros of investing in cryptocurrencies has swayed you into investing in crypto assets then invest in XcelToken Plus which allows do more than trade.