Bitcoin’s price plummeted below $9,000 early this morning as fears of a cryptocurrency crackdown by the Securities and Exchange Commission and the CFTC escalate. The price of one bitcoin traded for $8,851 as of this writing, down 4.8% from 24 hours earlier, according to WorldCoinIndex. That’s a plunge of 24% this week.
Similarly, the price of all top 10 most valuable cryptocurrencies by market cap also tanked, with Ripple, Bitcoin Cash, Tron, Eos and Ontology registering losses over the past 24 hours.
In the past, bitcoin prices have fluctuated wildly seemingly based on nothing, but this week, increased regulatory scrutiny has fueled the sell-off. (See also: SEC Chair Says Cryptos Are Unregistered Securities.)
“Cryptocurrencies have seen more fallouts today for fears of regulations,” CNBC’s Bob Pisano reported. “Bitcoin price has now fallen 18% over the last two day as watchdogs weigh in on the digital currency space.”
Pisano said recent SEC warnings to consumers alerting them that cryptocurrencies are not regulated by the agency may have had a chilling effect on the decentralized, unregulated market. (See also: Japan’s Regulators Crack Down on Crypto Exchanges.)
“The SEC seems to be setting up for a crackdown. They want exchanges to register with the SEC. They have previously said initial coin offerings (ICOs) are securities and that anyone selling ICOs to the general public should register with the SEC. But this goes further, the SEC thinks even the exchanges listing ICOs should themselves register. It’s another move toward further regulation.”
Judge: Cryptos Can Be Regulated As Commodities
Moreover, a federal judge in New York ruled this week that cryptocurrencies can be regulated as a commodity by the Commodity Futures Trading Commission (CFTC).
U.S. District Judge Jack Weinstein in Brooklyn made the statement while ruling that the CFTC had standing to proceed with a fraud lawsuit against New York resident Patrick McDonnell and his company CabbageTech Corp. d/b/a Coin Drop Markets.
“The CFTC already had the power to regulate trading in bitcoin futures and other derivatives, but this ruling implies the CFTC has jurisdiction in the case of fraudulent activity involving any kind of cryptocurrency transaction, including the cash markets,” Pisano pointed out.
In a lawsuit filed in January 2018, McDonnell was accused of scamming gullible crypto enthusiasts by making bogus promises to provide expert crypto advice. The CFTC noted:
From January 2017 to the present, McDonnell and CDM engaged in a deceptive and fraudulent virtual currency scheme to induce customers to send money and virtual currencies to CDM, purportedly in exchange for real-time virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers under McDonnell’s direction.
In fact, as charged in the CFTC Complaint, the supposedly expert, real-time virtual currency advice was never provided, and customers who provided funds to McDonnell and CDM to purchase or trade on their behalf never saw those funds again.
All this regulatory scrutiny is not going down well with crypto evangelists, many of whom like the unregulated nature of the virtual currency market (See also: $10 Billion Lawsuit Filed vs Man Who Claims He’s Bitcoin Inventor Satoshi.)
However, that’s all about to change, as governments around the world are realizing that consumers need protection from potential scams in this opaque ecosystem, whose combined market cap tops $366 billion. (See also: Russia to Criminalize Bitcoin Use as Money Substitute: Putin Rolls Out Laws.)
Bitcoin prices hovered at $9,136 as of this writing.