Posted by Elizabeth Win.
Dollar bills might as well be worth as much as computer paper now. Cryptocurrency has been on the hot seat for the past few months because of its financially growing nature and easy accessibility. Now, as we are starting to see a slow downfall of people investing in Bitcoin; the I.R.S. is starting to detect serious problems with the millennial choice of currency. One of their main concerns is that this cryptocurrency fad has created another giant, financial bubble. If this bubble were to burst, this Bitcoin “bust” could wipe out millions of spectators leading to a huge loss in tax revenue.
A main contender to this potentially huge loss is Bitcoin’s anonymity. For those unaware, Bitcoin’s underlying technology, blockchain, thrives on anonymity. When a person makes a transaction, the transaction only links through an electronic address, making blockchain more attractive to buyers. Now, the I.R.S. has many problems with this missing identification of creative transactions. The anonymity fuels the underground economy, a significant factor in the source of lost tax revenue. Most of the underground economy is conducted through cash transitions; however, what the I.R.S. fears is that cash will slowly transition to cryptocurrencies because of its convenience. An anonymous buyer of bitcoin can easily pay fewer taxes by cheating the cryptocurrency system – also known as major tax evasion. The solution? The government might have to accept the hardships of directly taxing cryptocurrencies and raise tax rates in order to offset the loss of revenue. Understand that the public would highly disagree with this solution, they generated a smarter response: a switch from taxing income when it is received to taxing income when it is spent. Although this switch would require a “major overhaul of the tax code,” many economists support this decision and believe it is future of the economy.
On the contrary, the I.R.S. understands cryptocurrencies offer major reductions in the cost of financial transactions, making it very appealing to the lower classes. There would also be less reliance on banks, which would increase the power of the Federal Reserve to control money. However, the opportunities are too great for tax evasion and illegal operations that the I.R.S. cannot continue to allow it. Although the cryptocurrency economy is growing steadily, it will need to find a way to prevent tax evasion while preserving anonymity in order for it to survive and stay attractive to buyers. For cryptocurrencies to be successful, societies will have to learn to trust the government, a very difficult task for many to grasp. With the rise of extremely advanced technology, it is inevitable that the economy will eventually transition to the cryptocurrency movement. Figuring out how to smoothly transition from worthless green pieces of paper to slick, glassy pieces of technology worth thousands of dollars each, the challenge to adjust will be difficult by eventually necessary.
Elizabeth is a marketing and information technology major in the Stillman School of Business, Seton Hall University, Class of 2020.
Posted by Brandon Bartkiewicz.
It has been almost two years since the Wells Fargo scandal broke into the headlines. It is not out of the ordinary to see a bank involved in shady activities; just look at the recession. However, in 2016, Wells Fargo committed a truly unforgivable crime, identity theft and fraud on a massive scale. To refresh, Wells Fargo had “… secretly opened millions of deposit and credit card accounts that may not have been authorized by customers, and that ultimately harmed those who had entrusted their financial affairs with the bank”. The goal of this was to create an illusion of more “sales” (accounts being opened). They did this by transferring money between accounts without permission of the accountholder. These activities were highly encouraged by an incentive system in place that would reward employees for opening accounts. Everyone was in on this; bank managers pressured their employees, and the executive board of Wells Fargo knew this was going on and did not stop it. By August 2017, the investigation found that as many as 3.5 million unauthorized accounts existed in Wells Fargo’s records.
The news of this wide scale fraud fueled a settlement with the U.S. Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and Los Angeles legal officials, totaling $185 million in penalties. Along with this, Wells Fargo would give “… $80 million in refunds — $64 million in cash and $16 million in account adjustments — to more than 570,000 auto loan customers who were charged for auto insurance without their knowledge.” As it should be, the bank is now in financial trouble as it tries to cover all of the direct and indirect costs relating to the scandal. However, the Janet Yellen and the Federal Reserve is not done disciplining the bank. Due to their “widespread customer abuses and compliance breakdowns,” the bank is now restricted from growing any more than its total asset size in 2017. Along with this, the bank will remove some of the senior ranking executives in the company. This is done to ensure that Wells Fargo will have sound business practices before it can grow again.
Personally, I believe that punishments handed down by the Federal Reserve were suitable for Wells Fargo. It provides a clear message to all banks that business malpractice is unacceptable and will be punished by harsh penalties. No bank should be able to get away with using client money and creating unauthorized accounts for personal gain. I wish the American legal system were stricter with companies so it would deviate them from doing illegal acts like this in the first place. What I did not like about this case was the fact that there are still plenty of people who have been long time officials of the company and are still employed by Wells Fargo. If you keep many of the same old pieces in place at a company, something like this is bound to happen again.
Brandon is a finance major in the Stillman School of Business, Seton Hall University, Class of 2020.
Source:
Link: https://www.usatoday.com/story/money/2018/02/02/fed-limits-wells-fargos-growth-citing-consumer-abuses/302973002/
Posted by Alex Coyle.
This article is about U.S. regulators monitoring the oversight of bitcoin and other types of “cryptocurrency.” Regulators want more regulation for this kind of trade, due to the fact that “cryptocurrency trading has outgrown the state-based regulation that covers many platforms.” The goal is to create better laws to further protect anyone purchasing bonds and stocks in cryptocurrency form. In order for this to happen, the Securities and Exchange Commission might need some legislation help from the Treasury and the Federal Reserve.
The SEC Chairman, Jay Clayton, is mainly concerned with the lack of regulation, due to the fact that the “ability to manipulate the prices goes up significantly.” With prices for this type of currency being able to change so quickly, it is not fair to future investors. Many scandals have occurred in the past with other investments, and in order for this to stop, this market has to be carefully regulated.
I do not know a lot about Bitcoin and cryptocurrency, but I agree with the information in this article. It seems like cryptocurrency is an easy target for corruption, and innocent investors could get financially hurt from it. If I was investing in any type of market, I would want to be sure my money is protected and not just getting taken from me. I believe that the agencies should take care of this problem before it becomes worse.
Alex is an economics major at the Stillman School of Business, Seton Hall University, Class of 2018.
Source:
https://www.wsj.com/articles/patchy-bitcoin-oversight-poses-hazards-for-investors-regulators-say-1517913001
Business law students study the corporate entity and learn from the beginning that since corporations are legal persons they can be charged with crimes. Corporations cannot be imprisoned, because they have no physical body, but they certainly can face monetary penalties. Such was the recent fate of Credit Suisse.
Credit Suisse pled guilty to one count of “intentionally and knowingly” helping many U.S. clients prepare “false” tax returns. For decades, Credit Suisse bankers fabricated “sham entities” to help hide the identities of U.S. clients who did not claim the Swiss accounts on their tax returns. They also failed to maintain records related to those accounts, destroyed documents sought by the U.S. government, and helped U.S. clients draw money from those accounts in ways that would not raise a red flag to the IRS. Out of the $2.6 billion, $1.8 went to the Treasury Department, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Service.
The monetary penalty is the only punishment levied on the bank, as government officials feared anything further, such as ceasing operations, would have had a detrimental effect on the global economy. Moreover, top bank officials who were involved in the scheme will keep their jobs, even though there were calls for them to resign by their own statesmen.
Reportedly, the Department of Justice is looking to bringing charges against France-based BNP Paribas for similar offenses. But without some officer or director accountability, there will be no deterrence.