The surge toward 19,000 in Bitcoin prices which was followed by the selloff down to 5,000 was a red flat to cryptocurrency investors and regulators. Many saw that type of price action during the dot.com in the late 1990’s which led to a massive selloff. Global regulation of the cryptocurrency market is this which is cause for concern. While there are some countries that do not allow any cryptocurrency trading, others have tight controls or even loose controls. An issue that investors face what kind of regulation is best for new coin offerings.
What Types of Regulation Exist
There are three types of regulation that can be observed. Open regulation in the United States is very strict. The Securities and Exchange commission oversees cryptocurrency trading. There are two different companies producing bitcoin futures contracts which are regulated by the Commodity Futures Trading Commission which is part of the SEC. This type of regulation is installed to protect the customer. If there are any initial coin offerings they need to pass the SEC smell test which would be similar to an initial public offering. Because this is so stringent, many new coin operators avoid trying to list their ICO’s in the United States.
Another type of regulation is close like in China. Here you cannot introduce a new ICO period. Trading is limited. Lastly you there is open regulation that is very liberal. In countries like Switzerland you can offer a new coin offering with little information. While most governments around the globe are focused on protecting the consumer, tight regulation has a way of hampering business development. As the trend toward digital currencies continues, ICO regulation will need to be come unified. The US will remain a strict regulatory environment, and many countries will likely follow in its footsteps.
ICO regulation continues to be an issue as regulation offered by countries around the globe still does not capture many fraudulent activities. This obviously is a problem. In the United States, old laws are being used to clamp down on fraud, instead of introducing new laws to handle a new product. Many believe this approach will hamper future business and does not take a good look at the long run opportunities that are available with cryptocurrencies. What strict regulation does is clamp down on market manipulation and helps protect the customers. The last thing that the SEC wants to hear about is fraudulent ICO’s where mom and pop lost all their savings due to large investments into cryptocurrency initial offerings. This has also kept many US institutions on the sidelines. Goldman Sachs recently announced they would participate in cryptocurrency custodial businesses but would not participate in sales and trading.
While its important for governments to regulate, there is fear that over-regulation of the cryptocurrency market will undermine innovation and reduce growth opportunities. There will be a need for growth- oriented regulation which has yet to make its way to the market. An open system that has moderate regulation will likely provide protections for customers and opportunities for businesses to expand.