🕹️ Metaverse to avoid tax?

All Things Flooz newsletter is for innovators, creators and traders.

Flooz

6 min read Sep 5, 2023


Talking points

  • 🚨 China forces CBDC usage

  • 🕹 Metaverse to avoid tax?

  • 👀 Gala Games face court theft trouble

👀 Quick market outlook

While things are looking rough again, we are continuing to see some altcoins start to make some impressive moves. Is that a sign of things to come? Here's some insight into what we could expect to see:

Could we see some nice moves on altcoins in the near future? It is certainly a possibility and with the Bitcoin halving fast approaching, who knows what we could expect. But as always, there are no guarantees and having a plan is super important as emotion can easily take over.

🚨 China forces CBDC usage

In a dynamic twist to China's digital financial landscape, Changchun Mu, the Director of the Digital Currency Research Institute at the People's Bank of China, announced significant upgrades to the digital yuan at the China International Service Trade Fair.

Mu's statement emphasized the need for wallet providers to adapt to these changes and ensure seamless payment options across all retail scenarios.

He further revealed that the digital yuan had recently undergone substantial upgrades in terms of its organizational structure and business model. However, the spotlight now shines on the payment tools that support this digital currency.

One of the key points addressed in Mu's speech was the role of commercial banking apps like WeChat and Alipay. He underscored the importance of these platforms complying with regulations, highlighting their short-term responsibility of implementing QR code compatibility for the central bank digital currency (CBDC). In the long term, these platforms are expected to further enhance their payment tools to accommodate the evolving landscape of digital transactions.

In a move to modernize and streamline the digital payment ecosystem, Mu also brought wholesale payments into the conversation. He stated that there's no immediate need to overhaul the existing interbank payment and settlement systems entirely. Instead, integrating the CBDC payment option into the existing framework would suffice. However, technical specifics regarding this integration were not provided during the speech.

China's dedication to bolstering its digital infrastructure is unmistakable. In August, Chinese government officials unveiled a groundbreaking data exchange platform powered by blockchain technology. Known as the Hangzhou Data Exchange, this innovative platform is set to revolutionize the exchange of corporate information technology data by harnessing the potential of distributed ledger technology.

As China continues to push the boundaries of what's possible in the digital financial realm, it's clear that the digital yuan is at the forefront of these developments. Wallet providers must rise to the occasion, aligning their services with the upgraded digital currency to offer consumers a seamless and secure payment experience.

In conclusion, the recent upgrades to China's digital yuan signify a significant leap forward in the country's digital financial landscape. However, the unknowns from CBDCs are still a cause for concern and is something that will need time to see how it turns out.

🕹 Metaverse to avoid tax?

The metaverse seems to be in a unique position and yes... it involves taxes. Which for many will be intriguing as it has been described as a 'potential tax haven' and that alone could light some eyes up.

In a groundbreaking research paper titled "Taxing the Metaverse," renowned legal scholar Christine Kim, who holds positions at both Harvard and Yeshiva University, introduces a thought-provoking argument for not only imposing taxes within the metaverse but also using it as a testing ground for innovative policy measures.

Kim's paper dives into the heart of the matter, highlighting the unique wealth creation potential within the metaverse's digital ecosystem. She asserts that this burgeoning wealth sector should fall under the purview of taxation, a viewpoint she supports with compelling reasoning:

"Because economic activity within the Metaverse satisfies the Haig-Simons and Glenshaw Glass definitions of income, its exclusion will create a tax haven."

Kim's assertion stems from the metaverse's extraordinary ability to meticulously record all digital transactions and track individual wealth. This means that governments could, in theory, track and tax income almost instantaneously upon its accrual. Such a shift has the potential to disrupt the conventional landscape of United States tax law.

One of Kim's central recommendations revolves around altering the realization of taxes. Currently, metaverse users in the U.S. are subject to taxation only when they realize gains or engage in taxable events, such as withdrawals from the virtual realm.

Under Kim's proposals, taxation would occur immediately upon the receipt of gains, including unrealized gains and income, even if these assets remain within the metaverse.

However, implementing such a tax regime raises a pressing issue: enforcement. Kim presents two plausible methods for enforcing tax laws within the metaverse. The first method involves individual platforms acting as tax intermediaries, withholding taxes on behalf of their users.

The second, less favored approach, referred to as "residence taxation," relies on platforms transmitting tax-related information to users. These users would then be responsible for filing and paying their own tax obligations—an approach Kim considers less efficient.

Beyond the realm of taxation, Kim's paper underscores the broader implications of regulating the metaverse. She argues that this novel digital frontier offers lawmakers, including those not traditionally engaged with Web3 and metaverse technology, a unique opportunity to experiment with policy measures.

"The Metaverse can be a laboratory for experimenting," Kim writes, noting that it "has the potential to simulate scenarios that are unlikely to ever occur in the physical world."

In conclusion, any kind of tax haven could cause issues and further problems for the Web3 world as it would likely have to be corrected and this in turn could create issues, but we shall see what occurs on this matter as time goes on.

👀 GALA Games face court theft trouble

There has been a massive turn of events in the world of GameFi and Web3, as Gala Games CEO Eric Schiermeyer has thrown down the gauntlet, filing a lawsuit against his own co-founder, Wright Thurston.

The explosive allegations revolve around the alleged theft of a jaw-dropping 8.6 billion GALA tokens, a stash worth a staggering $130 million, all the way back in early 2021.

But that's not where the drama ends; the lawsuit also takes aim at Thurston's track record. It claims that Thurston has a penchant for founding companies that often find themselves insolvent, bankrupt, or entangled in legal battles.

Schiermeyer's lawsuit, filed on August 31, has sent shockwaves through the crypto and gaming communities. However, Thurston isn't taking these allegations lying down. He's counterpunched with a lawsuit of his own, accusing Schiermeyer of commandeering Gala Games for personal gain, even going so far as to allege that Schiermeyer used the company's resources to finance his own private jet.

Gala Games, a GameFi Web3 startup, was originally birthed by Thurston and Schiermeyer in 2019, with each holding a 50% stake in the venture. The company has recently made waves with the launch of Champions Arena, a mobile turn-based RPG game. In addition to gaming, Gala Games operates in the realms of blockchain-based music, film, and digital collectibles.

The heart of the matter lies in Schiermeyer's assertion that Thurston's allege GALA token heist essentially held Gala Games hostage. Going public with the theft could have sent shockwaves through the GALA ecosystem, potentially leading to its collapse. To prevent this, Gala Games issued Gala v2 tokens in May 2023. However, Schiermeyer claims these tokens were engineered to render Thurston's GALA tokens obsolete while preserving the integrity of the overall ecosystem.

In Thurston's corner, his lawsuit paints a different picture. It accuses Schiermeyer of mismanagement and self-serving actions that purportedly tarnished Gala Games' reputation and eroded its assets, causing losses that, according to Thurston, run into the hundreds of millions of dollars.

Notably, Thurston is no stranger to legal entanglements. In the past, he found himself in hot water with the U.S. Securities and Exchange Commission (SEC) over Green United LLC, an alleged fraudulent "green" crypto project that misled investors.

This is certainly a worrying sign...

The repercussions of these legal showdowns have already made waves in the GALA token market, with its price plummeting by a significant 19% in the last seven days and a whopping 35% over the past month. The big question now on everyone's mind: Could GALA price trajectory ultimately lead it to an even bigger drop?

As this high-stakes battle between co-founders unfolds, the crypto and gaming communities will undoubtedly be watching with bated breath, eager to see how the GALA Games saga reaches its climax.

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