If you think that 2017 was the year of digital currencies and blockchain technology, all of its hype came to an end after regulators entered the picture. It is true that part of cryptocurrency’s allure is the fact that it operates in a grey area. It is an unregulated space that government used to not bother checking. But after Bitcoin reached $20,000 and more people invested their money on anything involving the crypto market, it was only natural for regulators to come in.
And now, US Securities and Exchange Commission mentioned that many operating online trading platforms for digital currencies should be registered and should be subjected to additional rules and regulations. Could this actually be a sign that regulators are cracking down on players that are operating in the digital currency sector?
According to the statement released by the SEC, “potentially unlawful” platforms may provide an unearned sense of safety just by labeling their business as “exchanges”. SEC mentioned that these platforms should be registered with the SEC as either a regulated national securities exchange or an alternate trading system.
This has been the latest action by the SEC in order to apply federal securities laws to the crypto market. And it doesn’t actually stop there. Chief Jay Clayton mentioned his concerns over ICOs or initial coin offerings. He expressed for investors to be more careful when investing in ICOs. The agency mentioned that “The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not”.
Bearish After the Announcement
Bitcoin along with other cryptocurrencies fell down in value after the announcement was made. Bitcoin fell by 11.9% and ended up in $9,450 after being able to surpass $10,000 range for the past few days. Ethereum and Ripple lost 9% and 8% respectively as well.
Strict Rules on ICOs
Clayton has mentioned that ICOs are considered to be securities offerings and should be subject to regulatory requirements. SEC also went further that secondary market trading that is used for those digital tokens should also be part of their jurisdiction.
That only means that trading of digital assets that behave like securities should be within the jurisdiction of the SEC. Among the different trading platforms, there was actually just one that has registered with the SEC as ATS and that is Liquidity M.
This move is said to protect investors from the potential harm that could be brought by ICO providers. According to Dina Ellis Rochkind, a lawyer at Paul Hastings in Washington, “The SEC statement foreshadows that it will be cracking down on the numerous platforms that are operating illegally and could be subject to market manipulation. This is a positive step because it will shut out bad actors and further legitimize the industry as it matures”.
Though the SEC isn’t banning crypto exchanges, this move is another tough blow to the world of cryptocurrencies. It is possible that a number of notable crypto exchanges could actually close if SEC continues towards this path of regulatory changes.