The prices of just about all cryptocurrencies are down significantly on the heels of bad news aimed at exchanges.
The idea of increased regulation doesn’t sit well with the average crypto trader. That’s why news that the SEC is seeking to regulate exchanges, in the same manner, they do stock market exchanges is upsetting news to many.
ICOs have been fueling speculative frenzy for years, and the SEC is looking to regulate them the same way they would any “security,” despite many apparent differences. Currently, many exchanges list ICO coins, which drives a lot of interest and trading volume.
Rumors about potential action have been swirling for months. Now it appears that the SEC has sent out numerous subpoenas to companies that are selling crypto assets. Further, in a public statement, they are outlining a case that all “online trading platforms” effective sell “securities” that will land under their jurisdiction.
Part of their statement makes a not so compelling case that the average “investor” who buys coins on exchanges assumes that they are dealing with an SEC-approved entity. The agency rests their claim on the idea that since the names and trading activity are similar to those traditionally at use in the stock market, average people are confused and assume that they have the same protection when they trade on Bittrex as they do when on Ameritrade. For experienced cryptocurrency enthusiasts that rationale seems absurd, but there’s no telling just how the average newbie is reacting to the markets.
Naturally, Bitcoin took a beating on the news. However, it’s hard to imagine how BTC would be considered a “security” by reasonable people. Currently, commodities like gold don’t get regulated by the SEC. Instead, they are considered to be a “store of value.” One could argue that Bitcoin is very similar in functionality to gold. However, it appears that the SEC does not plan on making this distinction for cryptocurrencies. One thing is sure, running an exchange and remaining compliant will get a whole lot tougher.
The Japanese Government Cracks down on Seven Exchanges
Adding to the downbeat feelings was the news that the Japanese government is cracking the whip on seven exchanges. The government asked five exchanges to improve their operations significantly. The Government halted two others until they can shore up their defense. This news comes on the heels of massive hacks which saw investors lose tons of money as the exchanges failed to safeguard their coin vaults.
None of this news can come as a surprise to interested observers. The cryptocurrency industry is maturing. As such, more and more entities will arise to extract their pound of flesh. Regulation means that the exchange operators will need to bulk up their operations. On the bright side, this maturing also shows the push towards adoption is growing so fast that governments can no longer ignore it. For traders, these new developments should not have much impact. Those who are investing for the long-term will now need to think long and hard about how to calculate risk in an environment of escalating regulations. For ICOs, finding qualified attorneys to serve on their boards is more crucial than ever.
We’ll be keeping our eye out for more developments.