Another week, another enforcement action against a major crypto exchange. At least it’s the CFTC rather than the SEC this time. Is the U.S. trying to kill crypto? It certainly feels like it, but we’ll just present the facts and let you decide.

In this entry, we’re covering:

  • The CFTC vs. Binance Lawsuit (and its implications for the industry)
  • The scathing remarks on crypto in the “Economic Report of the President”
  • Elizabeth Warren’s anti-crypto army
  • TL;DR of updated guidance from the FASB and IRS on crypto assets

“Calc”-you-later, 🧮


P.S. Welcome to our 69 new subscribers since last entry! Here’s a special welcome message just for you.

Binance Gets Busted

Binance finds itself in hot water, with the Commodity Futures Trading Commission (CFTC) accusing them of playing hide-and-seek with U.S. regulations. The CFTC isn’t mincing words, calling it “willful evasion of U.S. law.” While these allegations have yet to be proven in court, Binance CEO Changpeng Zhao has fired back, claiming that the allegations are an “incomplete recitation of facts.”

The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, accuses Binance of running a derivatives trading operation in the U.S. They allegedly offered trades for cryptocurrencies like bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT), and Binance USD (BUSD).

But wait, there’s more! The suit claims that Binance, under Zhao’s watchful eye, told its employees to play a high-stakes game of “Where’s Waldo?” by spoofing their locations with virtual private networks (VPNs). The CFTC is throwing the book at Binance, charging them with a laundry list of violations, like offering illegal futures transactions and failing to register as a futures commission merchant, designated contract market, or swap execution facility. As if that weren’t enough, Binance is also accused of poor supervision, turning a blind eye to know-your-customer (KYC) and anti-money laundering (AML) processes, and having a flimsy anti-evasion program.

According to the filing, Binance’s former Chief Compliance Officer Samuel Lim once told a colleague that terrorists typically send ‘small sums,’ since ‘large sums constitute money laundering.’ Lim’s colleague responded with, ‘you can hardly purchase an AK47 with 600 bucks.’ Furthermore, when discussing certain Binance customers, including those from Russia, Lim candidly admitted in a February 2020 chat, ‘Seriously, they’re here for crime.’ Binance’s money laundering reporting officer chimed in, agreeing, ‘We notice the wrongdoing, but we turn a blind eye.’


The CFTC’s allegations have caused confusion between the CFTC and the Securities and Exchange Commission (SEC), as some digital assets labeled as commodities by the CFTC are considered securities by the SEC. It seems these two agencies might need couples counseling to iron out their differences.

The case’s anti-money laundering and know-your-customer aspects also raise the possibility of further action from the Department of Justice (DOJ) and the Treasury Department’s Office of Foreign Asset Control (OFAC). You know it’s serious when even more government departments are invited to the party.

The lawsuit against Binance could be detrimental to the company during an uncertain time for the crypto industry. In the worst-case scenario, it could be a fatal blow to the exchange, or disrupt a significant portion of its revenue. CEO Zhao could also potentially be barred from running the company he founded in 2017 and from trading crypto altogether.

Is the U.S. Trying to Kill Crypto?

“First they ignore you, then they laugh at you, then they fight you, then you win.” This quote tends to circulate through crypto circles from time to time. If there was any doubt as to what stage we’re in, I think it’s safe to say we’re in the “fight you” phase.

First, it was the SEC enforcement actions beginning in Q3 2022 – which initially seemed harmless considering they targeted the likes of Kim Kardashian. Gary Gensler has recently characterized large swaths of the digital assets industry as “unregistered securities” and went after regulated U.S. crypto exchanges, including Kraken and Coinbase.

Next, it was Operation Chokepoint 2.0 – a coordinated effort by various government agencies to “de-bank” legal crypto businesses.

In the last two weeks, it was the CFTC going after Binance (see section above) and the Biden administration releasing the “Economic Report of the President” that totally slammed crypto:

“It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.”

And finally, good ol’ Liz Warren dispelled any disbelief by declaring that she’s “building a crypto army” as part of her re-election campaign (no, this wasn’t an April Fool’s joke).

Whether there’s a deliberate campaign against crypto or not might be beside the point. The perception is widespread: The U.S. is giving crypto the cold shoulder. It isn’t without consequence either; according to a new report by Electric Capital, the US is at risk of losing out on 1 million developer jobs and 3 million non-technical roles over the next seven years as web3 development moves overseas.

Accounting & Tax Update TL;DR

Two big crypto asset accounting and tax updates rolled in from the FASB and IRS since last entry. Accounting literature is drier than the Sahara desert, so we figured we’d save you the agony (and time) by giving you a TL;DR. But the TL;DR isn’t official guidance (obviously), so be sure to check out the official updates.

FASB – Accounting for & Disclosure of Crypto Assets

Enough people complained about how stupid the old cost-less-impairment accounting model was for digital assets, so we’re that much closer to changing it. The FASB released its exposure draft on Accounting for and Disclosure of Crypto Assets.

This is just an exposure draft, so it could change, but here’s the TL;DR of the proposed update.

350-60-15-1: Basically only applies to crypto tokens, not NFTs.

350-60-30-1: Transaction costs (like gas fees) should be expenses when incurred (unless they should be capitalized)

350-60-35-1: Crypto assets should be measured at fair value on the balance sheet, with gains and losses reported in net income.

350-60-45-1 & 2: Crypto assets should be presented separately from other intangible assets (on both the balance sheet and in net income) 350-60-50-1: For annual an interim reporting periods, entities have to disclose a bunch of stuff for each significant crypto asset they hold:

  1. Name of the crypto asset
  2. Cost basis
  3. Fair value
  4. Number of units held

350-60-50-2: Disclose cost basis method (e.g., FIFO, Spec Id, other) annually.

350-60-50-3: At annual reporting periods, entities need to reconcile activity from the opening and closing crypto balances, separately disclosing:

  1. Additions.
  2. Dispositions.
  3. Gains included in net income for the period (by individual crypto asset)
  4. Losses included in net income for the period (by individual crypto asset)

IRS – Tax Treatment of NFTs as Collectibles

The US Treasury Department and the Internal Revenue Service (IRS) issued a notice seeking feedback on their proposed tax treatment of nonfungible tokens (NFTs) as collectibles under the tax code. Let’s not jump the gun – they haven’t officially declared NFTs as collectibles yet, but they are looking for guidance on when NFTs might be considered as such and if they’re correctly grasping the diverse NFT use cases.

If the IRS treats certain NFTs as collectibles, it could have significant implications. Collectibles are a unique category of capital assets subject to a heftier tax rate. If your beloved NFT gets slapped with the “collectible” label, you’ll be coughing up a maximum tax of 28%, a far cry from the usual long-term capital gains tax rate. Remember, though, that the collectible tax rate only applies to long-term asset sales held for over 12 months.

The IRS plans to use a ‘look-through’ approach to determine whether an NFT is a collectible. In simpler terms, they’ll peek under the NFT’s hood to see what it actually represents (i.e., its rights and benefits) and then decide if it fits the collectible bill.

As per the IRS, a collectible is defined as:

  • A work of art,
  • A rug or antique,
  • A metal or gem,
  • A stamp or coin,
  • An alcoholic beverage, or
  • Any other tangible personal property deemed a “collectible” under IRC Section 408(m).

The million-dollar question (or, in this case, maybe a few thousand dollars) is whether ‘profile picture’ NFTs will be considered collectibles. While many might qualify as ‘works of art,’ others argue that they provide additional rights and benefits like access to digital communities. Only time will tell where the IRS lands on this one.

Spotlight 🔦 – Triple Entry Lunch Break Solocast

By now, you probably know the drill. It’s called “we do a little newsletter commentary on LinkedIn Live.”


  • The Triple Entry Lunch Break Live – a livestream version of this newsletter with extra sass from me as I talk to a camera all by myself.
  • TODAY at noon MST
  • ONLY on LinkedIn Live (hopefully you read that like a WWE announcer)

See you there! Event linked in the image below.

The Water Cooler 🚰

Things worth talking about at the office water cooler…if you 1) talk to people, 2) still work in an office, and 3) have a water cooler.

💲💲💲 F3 – Featured Funding Finds: EigenLabs’ $50M Series A

What’s this? EigenLabs, creator of the Ethereum restaking protocol EigenLayer, has closed a $50 million Series A round led by Blockchain Capital with participation from Coinbase Ventures, Polychain Capital, Bixin Ventures, Hack VC, and Electric Capital and others.

Why we noticed:

Bear markets are for building. We’re obviously not the only ones to say that, and we’re glad that people like Sreeram Kannan, founder and CEO of EigenLabs, recognize that. He has observed and remarked that lack of infrastructure yields a lack of innovation. In this case, he’s looking at the redundancy of processing on the Ethereum network, which makes it much less efficient than the centralized networks of an AWS or a Google.

The promise of EigenLayer is allowing programmers to create a division of computing labor, which developers for centralized networks have already been using for years.

But it goes deeper than that. We’re not going to go into the same amount of technical explanation as what you can find in this perspective from Blockchain Capital, but here’s a quick summary. Essentially, EigenLayer proposes to solve the supply side of staking for new networks. The challenge of launching a new network is finding all the validators and stakers that want to provide security to that network (since validating and staking is a key component of securing the Ethereum network).

But what if there was a way to leverage the vast supply network of validators already securing Ethereum? That’s what EigenLayer is doing. They’ve built infrastructure that allows new networks to tap directly into the security of Ethereum. Stakers can now secure Ethereum and whatever new network EigenLayer has provided, thereby allowing stakers to get paid to secure multiple networks. This is fittingly called “re-staking,” and among other reasons why we think this matters, we’d like to point out that there are already tax and accounting implications for just plain old staking. What happens when you’re staking on two networks at once? New questions to answer.

EigenLabs is one entry in a running list of infrastructure-focused companies getting funding during “crypto winter.” We’ve tried to feed you key updates on that list right here in our Featured Funding Finds. In the summer, we buy new toys. In the winter, we fix the plumbing.

Other Significant Findings

The headline: Elizabeth Warren Takes an Interest in Auditing

The hot take:

We’ve dedicated entire issues to reviewing some of the auditing failures that played a part in – if not outright caused – larger meltdowns in this industry, and we did so for a reason. The audits matter, and the sooner we start applying the same level of diligence to auditing in this industry as in traditional finance (for instance, going beyond the snapshot of just proof-of-reserve reports and getting further into things like proof of liabilities and assets as well), the better.

Even so, we can’t help but have ourselves a giggle when we tug on this particular string and see the sweater unravel. We have the Public Company Accounting Oversight Board (PCAOB), who recently said that the crypto sector’s reserve reports can’t be trusted, being urged to act with “broad responsibility to protect the integrity of the auditing system.”

Nice! We like it.

Who authorizes and oversees the PCAOB? Why, the SEC.

And who oversees the SEC? The Senate Banking Committee, which will have a non-trivial say in whatever crypto legislation comes out in the near future.

And who sits on that committee? Our on-again off-again paramour, Elizabeth Warren. We’re surprised and humbled that she would be so concerned about the integrity of the oft-overlooked but noble auditing profession, and we’re definitely sure this is not at all related to anything we wrote further up.

ChatTOM – Transaction Observation Monitor

We’d like to take this moment to check in with an accountant who is definitely not swamped in these last two weeks before the tax deadline.

ChatTOM’s advanced processing capability gives him a nearly infinite capacity to handle the toughest of busy seasons. So he has plenty of spare time to help you test your crypto accounting knowledge.

Welcome once again to Tom’s Transaction (aka ChatTOM – Transaction Observation Model), the section of Triple Entry based on a real-life Etherscan transaction, solved in real time by real Tom (real accountant).

Will you test your crypto accounting knowledge by solving Tom’s Transaction?

Today’s Tom’s Transaction:

What is this transaction and how would you account for it? As always, you can write in with your response, tag us on Twitter, or comment live during a livestream! Answers for all Tom’s Transactions are revealed in the next entry.

Speaking of, the answer to last entry’s transaction is… Liquidity Pool Stake!

Tell us why, ChatTOM! 👇

Extraordinary Items

By the time the next Triple Entry hits, tax day will be upon us (literally), hovering above like the eye of the storm (or maybe more accurately, the Eye of Sauron). So here’s a double download of tax memes to get you over the hump. Take heart, accountants – the end is nigh!

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