Coin Market

Tax agencies will double down on crypto before Bitcoin hits $1M

Published

2 weeks ago

March 20, 2025

Opinion by: Robin Singh, CEO of Koinly

In the race between regulation and Bitcoin (BTC) all-time highs, there is no doubt tax agencies will double down on their crypto-tracking systems well before Bitcoin hits $1 million.

Crypto investors shouldn’t become complacent or assume they can skate by until the million-dollar price tag. In addition to their laser focus on the future, they are becoming skilled at scrutinizing the past. Many jurisdictions have the power to backtrack on previous years, and if tax authorities realize how much they’ve missed, they won’t just let it slide…

This could spell trouble for misinformed Bitcoiners who have already begun spending their profits.

Tax agencies will catch up through automated data-sharing

Governments are still in this weird gray area where crypto tax rules can change anytime. Take the US Internal Revenue Service (IRS), for example. In a shock move, as of 2025, the IRS now mandates that investors use the wallet-by-wallet cost tracking method, no longer allowing the universal wallet method. The latter is far more labor-intensive than the former but hands the IRS more data it craves.

Though automated data sharing with tax agencies might not be as extensive as stock market data, it’s only a matter of time before crypto data from centralized exchanges catches up. Several crypto exchanges, including Coinbase and Binance.US, issue Forms 1099-MISC to the IRS for users with more than $600 in rewards in a financial year.

An end to the honesty system

Then there’s the global village challenge, with each tax agency worldwide taking its own approach. For instance, the Australian Tax Office (ATO) automates stock cost and sale reporting through pre-filled data for taxpayers. Crypto data isn’t, however, included in the pre-fill.

Instead, any activity on a centralized exchange triggers an alert on the taxpayer’s tax return, indicating that the ATO is aware of the crypto activity. This leaves it up to the taxpayer to be honest about whether they’ve made capital gains or losses during the financial year.

Whether you’ve made any sales or simply bought crypto, consistent alerts over several years without reporting from the taxpayer will likely increase the risk of an audit.

Worldwide, the honesty system is on its deathbed. Once tax authorities have advanced their crypto monitoring systems, they can retroactively review previous years if they choose to. The ATO already has a reasonably intensive data-matching program with centralized exchanges in the jurisdiction.

If you value your sanity, a multi-year audit of your crypto portfolio is the last thing you want to deal with. Every tax authority is catching up, and accountants want to protect clients from getting caught out as compliance measures become more sophisticated.

Tax authorities to strengthen cooperation in the coming years

Over the coming years, we should expect to see an increase in global tax data sharing between jurisdictions, something we’re already starting to see. In March 2024, Australia’s and Indonesia’s governments reached an agreement to exchange tax information, with one of the key focuses being the use of crypto.

A few months earlier, in November 2023, 47 national governments, including the United Kingdom, Brazil, Germany and Japan, committed to the Crypto-Asset Reporting Framework (CARF) and planned to activate exchange agreements for information sharing by 2027.

Recent: Indian crypto holders face 70% tax penalty on undisclosed gains

Don’t operate under the assumption that decentralized finance and non-fungible tokens are flying under the radar, either. Tax authorities are fully aware of the gains made on decentralized exchanges. Agencies like the IRS have already introduced guidance to collect user data from non-custodial brokers, though this has been delayed until 2027.

While tracking might be more challenging, and some investors believe their assets are untraceable until they are moved to centralized exchanges, tax authorities are already catching on. It’s not a “crypto industry knows best” situation. Tax authorities are bringing in more experts from the crypto space to help them understand how people might try to bypass the system.

Opinion by: Robin Singh, CEO of Koinly.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Coin Market

Nakamoto coefficient explained: Measuring decentralization in blockchain networks

Published

6 minutes ago

April 2, 2025

Measuring decentralization in blockchain

Decentralization involves spreading control and decision-making across a network instead of a single authority.

Unlike centralized systems, where one entity controls everything, decentralized blockchains distribute data among participants (nodes). Each node holds a copy of the ledger, ensuring transparency and reducing the risk of manipulation or system failure.

In blockchain, a decentralized network provides significant advantages:

Security: Decentralization reduces vulnerabilities associated with central points of attack. Without a single controlling entity, malicious actors find it more challenging to compromise the network. Transparency: All transactions are recorded on a public ledger accessible to all participants, fostering trust through transparency. This openness ensures that no single entity can manipulate data without consensus. Fault tolerance: Decentralized networks are more resilient to failures. Data distribution across multiple nodes ensures that the system remains operational even if some nodes fail.

So, decentralization is good, but it’s not a fixed state. It’s more of a spectrum, constantly shifting as network participation, governance structures and consensus mechanisms evolve.

And yes, there’s a ruler for that. It’s called the Nakamoto coefficient.

What is the Nakamoto coefficient?

The Nakamoto coefficient is a metric used to quantify the decentralization of a blockchain network. It represents the minimum number of independent entities — such as validators, miners or node operators — that would need to collude to disrupt or compromise the network’s normal operation.

This concept was introduced in 2017 by former Coinbase chief technology officer Balaji Srinivasan and was named after Bitcoin’s creator, Satoshi Nakamoto.

A higher Nakamoto coefficient indicates greater decentralization and security within the blockchain network. In such networks, control is more widely distributed among participants, making it more challenging for any small group to manipulate or attack the system. Conversely, a lower Nakamoto coefficient suggests fewer entities hold significant control, increasing the risk of centralization and potential vulnerabilities.

For example, a blockchain with a Nakamoto coefficient of 1 would be highly centralized, as a single entity could control the network. In contrast, a network with a coefficient of 10 would require at least 10 independent entities to collude to exert control, reflecting a more decentralized and secure structure.

Did you know? Polkadot‘s high score on the Nakamoto coefficient is largely due to Polkadot’s nominated proof-of-stake (NPoS) consensus mechanism, which promotes an even distribution of stakes among a large number of validators.

Calculating the Nakamoto coefficient

Calculating this coefficient involves several key steps:

Identification of key entities: First, determine the primary actors within the network, such as mining pools, validators, node operators or stakeholders. These entities play significant roles in maintaining the network’s operations and security.Assessment of each entity’s control: Next, evaluate the extent of control each identified entity has over the network’s resources. For instance, in proof-of-work (PoW) blockchains like Bitcoin, this involves analyzing the hashrate distribution among mining pools. In proof-of-stake (PoS) systems it requires examining the stake distribution among validators.Summation to determine the 51% threshold: After assessing individual controls, rank the entities from highest to lowest based on their influence. Then, cumulatively add their control percentages until the combined total exceeds 51%. The number of entities required to reach this threshold represents the Nakamoto coefficient.

Consider a PoW blockchain with the following mining pool distribution:

Mining pool A: 25% (of the total hashrate)Mining pool B: 20%Mining pool C: 15%Mining pool D: 10%Others: 30%

To determine the Nakamoto coefficient:

Start with mining pool A (25%).Add mining pool B (25% 20% = 45%).Add mining pool C (45% 15% = 60%).

In this scenario, the combined hashrate of mining pools A, B and C reaches 60%, surpassing the 51% threshold. Therefore, the Nakamoto coefficient is 3, indicating that collusion among these three entities could compromise the network’s integrity.

Did you know? Despite Bitcoin’s reputation for decentralization, its mining subsystem is notably centralized. The Nakamoto coefficient is currently 2 for Bitcoin. This means that just two mining pools control most of Bitcoin’s mining power.

Limitations of the Nakamoto coefficient

While the Nakamoto coefficient serves as a valuable metric for assessing blockchain decentralization, it possesses certain limitations that warrant careful consideration.

For example:

Static snapshot

The Nakamoto coefficient provides a static snapshot of decentralization, reflecting the minimum number of entities required to compromise a network at a specific point in time.

However, blockchain networks are dynamic, with participant roles and influence evolving due to factors like staking, mining power shifts or node participation changes. Consequently, the coefficient may not accurately capture these temporal fluctuations, potentially leading to outdated or misleading assessments.

Subsystem focus

This metric typically focuses on specific subsystems, such as validators or mining pools, potentially overlooking other critical aspects of decentralization. Factors like client software diversity, geographical distribution of nodes and token ownership concentration also significantly impact a network’s decentralization and security.

Relying solely on the Nakamoto coefficient might result in an incomplete evaluation.

Consensus mechanism variations

Different blockchain networks employ various consensus mechanisms, each influencing decentralization differently. The Nakamoto coefficient may not uniformly apply across these diverse systems, necessitating tailored approaches for accurate measurement.

External Influences

External factors, including regulatory actions, technological advancements or market dynamics, can influence decentralization over time. For example, regulatory policies in specific regions might affect the operation of nodes or mining facilities, thereby altering the network’s decentralization landscape.

The Nakamoto coefficient may not account for such externalities, limiting its comprehensiveness.

To sum up, the Nakamoto coefficient is useful for assessing certain aspects of blockchain decentralization. It should be used alongside other metrics and qualitative assessments to gain a comprehensive understanding of a network’s decentralization and security.

Coin Market

7-Eleven South Korea to accept CBDC payments in national pilot program

Published

6 minutes ago

April 2, 2025

South Korea’s 7-Eleven stores will accept payments in the country’s central bank digital currency (CBDC) until June, as the retailer participates in the test phase of its CBDC project.

The convenience store chain will reportedly provide a 10% discount on all products paid for with CBDC during the test period. According to Moon Dae-woo, head of 7-Eleven’s digital innovation division, the company is making an effort to incorporate digital technology advancements in its operations.

The executive added that the company’s participation in the CBDC test will help accelerate the firm’s digital transformation.

Many stores will participate in South Korea’s CBDC testing phase, which runs from April 1 to June 30. The project also involves 100,000 participants who will be allowed to test payments using CBDC issued by the central bank.

Central bank digital currencies are digital assets issued by government agencies. Like other digital assets, CBDCs offer faster and more modernized payment features. However, unlike Bitcoin and other privacy-focused tokens that offer certain levels of anonymity, CBDCs are controlled and monitored by governments.

South Korea tests CBDC from April to June

On March 24, government agencies including the Bank of Korea, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced the CBDC test.

Participants can convert their bank deposits into tokens stored in a distributed ledger during the test period. The tokens hold the same value as the Korean won.

The government agencies said citizens aged 19 or older with a deposit account in a participating bank could apply to take part. Registrations were limited to 100,000 participants. KB, Koomin, Shinhan, Hana, Woori, NongHyup, IBK and Busan are among the banks participating in the CBDC tests.

Apart from 7-Eleven, participants can use their CBDCs in coffee shops, supermarkets, K-Pop merchandise stores and delivery platforms. However, users will be limited to a total conversion limit of 5 million won ($3,416) during testing.

The Bank of Korea first announced the retail CBDC testing for 100,000 users in November 2023 and was originally scheduled to begin in the fourth quarter of 2024. The FSS said the country’s CBDC test represents a step toward creating a prototype for a “future monetary system.”

Magazine: Ridiculous ‘Chinese Mint’ crypto scam, Japan dives into stablecoins: Asia Express

Coin Market

Sony Electronics Singapore accepts USDC payments through Crypto.com

Published

1 hour ago

April 2, 2025

The online store of a Singapore-based subsidiary of Japanese tech behemoth Sony is now accepting USDC payments through Crypto.com.

According to an April 2 announcement, Sony Electronics Singapore now accepts USDC (USDC) stablecoin payments through an integration with the Crypto.com exchange. Crypto.com Singapore general manager Chin Tah Ang said:

“We’re pushing to make paying in crypto more mainstream and partnering with a well-established and forward-thinking brand like Sony Electronics Singapore further raises awareness of how simple it can be to pay for everyday goods and services using crypto.”

This is far from the only high-profile partnership that Crypto.com has been recently able to score. At the end of 2024, the mobile-first crypto exchange partnered with Deutsche Bank to provide corporate banking services across Asian-Pacific markets, covering regions such as Singapore, Australia, and Hong Kong.

Singapore bets on stablecoins

The Singaporean Sony subsidiary allowing stablecoin payments may be the start of a new trend in the region. Late February reports indicate that Metro, a publicly listed department store chain in Singapore, has enabled its customers to pay for products using stablecoins like Tether’s USDt.

The initiatives also follow January reports that Singapore is becoming a key destination for Web3 companies after it issued twice as many crypto licenses in 2024 as in the previous year. William Croisettier, chief growth officer of ZKcandy, told Cointelegraph at the time:

“The country adopts a risk-adjusted approach to crypto regulation, focusing on the biggest digital currencies to protect investors. Singapore also makes it easy for new crypto firms to interact with local banking partners, a provision considered a luxury in other parts of the world.”

An emerging crypto hub

In late November, the crypto-friendly digital bank Singapore Gulf Bank reportedly sought a fund injection of at least $50 million as it plans to acquire a stablecoin payments company in 2025. The firm was motivated to pursue the effort, with alleged plans to sell up to 10% of its equity to fund it.

A study published at the end of 2024 revealed that its approach to regulation made Singapore a global champion of blockchain technology. The country scored the highest among all considered jurisdictions based on multiple factors.

The top blockchain jurisdictions ranked based on patents, jobs, and exchanges. Source: ApeX Protocol

Magazine: Singapore ‘not ready’ for Bitcoin ETFs, sneaky crypto mining rig importer: Asia Express