Coverage: Concerns about Bitcoin may lead to regulation

The dramatic price increases in cryptocurrencies, primarily Bitcoin, has regulators examining whether trading needs to be regulated.

David Meyer of Fortune.com has the news:

There’s been a flurry of reports in the last day about the U.K. cracking down on bitcoin, with some claiming that the news was responsible for a “tumble” in the famously volatile cryptocurrency’s value—the value of one bitcoin was nearing $12,000 but is now down to around $11,350.

So what’s actually happened that’s new? The answer is: not a lot. But that doesn’t mean there aren’t changes coming.

The British government actually announced more than two-and-a-half years ago that it intended to extend anti-money laundering (AML) rules to cover cryptocurrency exchanges—a move that is apparently surprising and worrying some people now, but that was at the time described as a legitimizing “stamp of approval” for bitcoin.

But the really big change is the amendment of the European Union’s rules on “the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.” The European Commission proposed this in July last year and (as is the way with the EU) the amendment is slowly crawling through the legislative process.

Thomas Heath of The Washington Post reported that Nasdaq plans to offer bitcoin futures trading in 2018:

The floor value of bitcoin is zero. It does not pay interest. There is no asset value attached to it except what the market gives it. It has no central bank supporting it.

What it does have is value, just as gold has had for thousands of years.

Bitcoin has value because a community believes it has value, said Christian Catalini, who studies bitcoin and other cryptocurrencies at MIT. This is not unlike other forms of currency through history. With bitcoin, you are replacing trust in the solvency of a government and its institutions with trust in the codebase, cryptography and incentives used to run the decentralized network, Catalini said.

Jay Blaskey, a digital currency specialist at BitIRA, a retirement option for cryptocurrencies, said the biggest driver has been the large institutional acceptance.

Stan Higgins of CoinDesk reported that the SEC just filed its first charges in a coin offering:

Quebec-based Dominic Lacroix and Sabrina Paradis-Royer, along with a firm called PlexCorp, have been charged with violating U.S. securities laws and defrauding investors, according to a new filing dated Dec. 1. The agency also obtained an emergency asset order, citing the movements of the ICO funds – estimated to constitute $15 million “from thousands of investors” – into different accounts.

The charges were filed by the SEC’s Cyber Unit, an enforcement arm created in September in part to more closely police ICOs, among other areas. In statements, the SEC said that last week’s complaint was the first to be filed by the unit.

“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing. We acted quickly to protect retail investors from this initial coin offering’s false promises,” Robert Cohen, who heads up the unit, said of the charges.

The agency alleged that Lacroix and Paradis-Royer made false statements to prospective investors, as well as purposefully hiding the involvement of Lacroix, who the SEC branded a “recidivist securities law violator in Canada.”