Two new regulatory developments are giving investors renewed worries
After a stratospheric rise in late 2017, bitcoin and other cryptocurrencies have hit a bumpy road so far in 2018. And many of the big downward swings can be attributed to regulatory uncertainty, both in the U.S. and around the world.
Thursday’s move is no exception. All but one of the 10 largest cryptocurrencies are in the red today, as two unsettling regulatory developments are weighing on the market.
Today’s cryptocurrency prices
As I mentioned, most major cryptocurrencies are negative today. Here’s a look at the 10 largest cryptocurrencies by market capitalization, and how much each has changed over the past 24 hours.
|Cryptocurrency Name (Code)||Price in U.S. Dollars||Day’s Change|
|Bitcoin Cash (BCH-USD)||$1,007.48||(1.8%)|
A leading cryptocurrency exchange faces potential scrutiny
The first major news item of the day involves Binance, one of the world’s largest cryptocurrency exchanges.
In a nutshell, unconfirmed reports indicate that Japan’s Financial Services Agency (FSA) is planning to warn Binance (which is based in Hong Kong) about operating without registration in the country.
Japan’s FSA did indeed make cryptocurrency exchange registration mandatory last year, but Binance denies any knowledge of the supposed warning. In fact, CEO Changpeng Zhao tweeted that the company has been in “constructive dialogs” with the FSA, and has received no such warning.
What’s in store for the U.K.?
Another regulatory news report today says that the U.K. is forming a cryptocurrency task force, to look into the benefits and risks of cryptocurrencies.
It’s worth noting that this is likely not as much of a drag as the Binance news, as the statement revealing the task force formation as well as other U.K. cryptocurrency comments have been generally positive. While the U.K. certainly wants to crack down on scams and warn investors of risks, the indication is that the intention is to make it as easy as possible for fintech firms to comply with any regulations and to capitalize on the potential benefits of these digital assets.
However, at this point, the eventual state of U.K. cryptocurrency regulations is uncertain.
Regulations could be good — but uncertainty is bad
To be clear, the problem isn’t necessarily that the cryptocurrency markets could be more strictly regulated. In fact, regulation could potentially help calm volatility and make cryptocurrencies more appealing as payment methods and stores of value.
Instead, the problem is uncertainty over what those regulations might be. At this point, there are simply too many unanswered questions. For example, are established cryptocurrencies going to be considered “securities,” or does that definition only apply to initial coin offerings (ICOs) meant to capitalize businesses?
Getting the answers to questions like this could provide some much-needed clarity. Uncertainty is generally an enemy of any type of investable asset, and cryptocurrencies are no exception.
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