Банкеръ Daily

Finance Digest

The SEC Lowers the Boom on Bitcoin

BY JAMES RICKARDS, The Daily Reckoning

I’ve warned repeatedly that government regulators would be putting the squeeze on bitcoin and other cryptocurrencies.

Well, the noose just got tighter.

The Securities and Exchange Commission (SEC) announced yesterday that bitcoin and many other cryptocurrencies meet the government’s definition of a security and are therefore subject to regulation. Importantly, crypto exchanges must register with the SEC.

Here’s what the SEC said:

If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC…

The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.

Bitcoin fell about 10% on the news, back under $10,000. That’s less than half its December 2017 highs around $20,000.

Yesterday’s announcement follows action the SEC took late last month, when it issued a number of subpoenas and information requests to companies dealing in the crypto markets.

Christian Catalini, a professor at MIT, estimates that $270–317 million of the money raised by coin offerings has “likely gone to fraud or scams.”

“We’re seeing the tip of the iceberg,” said Dan Gallagher, a former SEC commissioner, adding, “there is going to be a ton of enforcement activity.”

I agree, and I’ve been saying that for months. But it’s not just U.S. regulators that have made the news.

Shortly after the SEC announcement, Japan’s Financial Services Agency ordered two exchanges to suspend activities for a month. It also penalized four other exchanges.

Japan’s crackdown comes a month after the Tokyo-based exchange Coincheck lost about $500 million in a massive cybertheft.

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