Space which cryptocurrencies operate today is somewhat a Wild West environment. It offers a tremendous amount of risks and also a high potential for profits for a lot of individuals. Unfortunately, there are things that can affect investors from pump-and-dump traders to altcoins that are dubious in nature. These are just some of the things that you will have to deal with if you are serious about gaining profit from the world of cryptocurrencies.
Global Recognition and Acceptance
There are many organizations and individuals that are taking notice of blockchain technology as well as cryptocurrency’s potential in today’s financial world. However, in order to achieve global recognition and acceptance, there should be regulations in place.
The reality is that there is no way to tell if there is market manipulation at play especially when it comes to the world of cryptocurrencies. For instance, one of the main problems that everyone in the cryptocurrency world deals with is their source of information. You can never tell if someone is just after making a quick profit from their claims and announcements online whether it’s on Reddit or other websites. It is imperative for the near future to have unbiased research that comes with strict but reasonable regulations.
SEC Warns Cryptocurrency Investors
SEC Chairman Jay Clayton has issued warning towards investors putting their money on cryptocurrencies. This happened after SEC stopped an initial coin offering (ICO) from restaurant review app Munchee. This was after Munchee failed to register as a security.
SEC stopped Munchee’s plan to raise $15 million selling MUN tokens. These virtual tokens will be purchased or earned via writing restaurant meal reviews using the Munchee app. There was also a plan for the token to be used in restaurants in exchange for meals.
ICOs raise capital by issuing virtual currencies to its investors. And this 2017, there were a lot of ICOs that have surfaced mainly due to the fact that the market is unregulated.
What exactly does it mean? This simply means that SEC is going to step in to address regulatory concerns even if there are no claims of fraud.
Clayton mentioned that “A number of concerns have been raised regarding cryptocurrency and ICO markets, including that there is substantially less investor protection than in our traditional securities markets”. He also mentioned that this is the reason why both cryptocurrency and ICOs make it easier for investors to be prone to fraud and manipulation.
He also discussed that if an investment sounds too good to be true, then you should start to exercise caution and be aware of the possibility of losing your investment.
ICO and Federal Rules
ICOs in most cases will need to ensure that it adheres to the federal rules that are governing the issuance of securities. It includes registering with the SEC.
There is also a chance that platform trading offering cryptocurrencies may actually be in violation of certain laws. It is a must that these trading platforms are registered as an exchange or as an alternative trading platform.
Is this going to be the future of cryptocurrencies and ICOs in the coming months? Are institutions going to catch up to the world of virtual currencies and make it less of a Wild West? Of course, regulations might not be everyone’s cup of tea. Regardless, this approach allows us to take a step back and two steps forward.