FM Wealth Management New Letters
We are getting many clients and readers asking about Bitcoin almost
on a daily basis. Bitcoin (COIN) (GBTC) has had a mixed start to the
year. Let’s Look at some of the reasons why.
South Korea
The price had fallen 19% from last weekends high, because of the news that South Korean regulators are cracking down
In a joint operation by the Financial Supervisory Service (FSS) and he Financial Services Commission (FSC) they announced that they are investigating six banks. In a press conference, FSC Chairman Choi Jong-ku told reporters that no wrongdoing is suspected, and the inspection simply aims to clarify if the banks are adhering to anti-money laundering rules and using real names for accounts.
The Korean regulator tightened regulations and anonymous crypto currency accounts were banned.
“Crypto currency is currently unable to function as a form of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said the PSC Chairman.
All the banks provide virtual currency accounts to clients who handle crypto currencies. The new legislation will allow regulators to shut down virtual coin exchanges. This is potentially serious the news that came out of South Korea overnight “will be deepening cooperation with agencies from China and Japan in curbing speculative transactions”. Should sentiment catch on in Japan, Bitcoin volume will really take a hit, but we see no signs that Japan will follow suit. Japan at the moment seems to be going in the other direction. Many Bitcoin exchanges are officially recognized and it has been made legal tender.
India Straddling the Line
In India the government struggles to find the right approach to a crypto currency mania it is obviously uncomfortable with.
At the end of November Finance minister Arun Jaitley said, “The government’s position is clear, we don’t recognize this as legal currency.”
On 29th December, the Ministry of Finance warned investors that virtual currencies might be a Ponzi scheme and they warned of a clampdown on exchanges:
Furthermore, the Government nor any other regulator in India has given license to any agency to work as exchange or any other kind of intermediary for any Virtual Currency. Anyone dealing in Virtual Currencies must consider these facts and beware of the risks involved in dealing in them.
Last weekend, one of India’s largest crypto coin exchanges, Koinex, had its withdrawals and deposits frozen only stating that “a tussle between our payment service partner and their bank has caused an indefinite delay in the settlement of a large portion of deposits to Koinex in the past 2 weeks”.
Coindelta has had similar issues.
This could spell the beginning of the end for these exchanges, and for crypto trading in India, which will likely migrate somewhere more receptive. As Quartz India pointed out earlier today:
“Regulators are following the same method used by China, where they haven’t explicitly banned Bitcoin, but made the regulatory environment around it so difficult by cracking down on other things that it is no longer a conducive environment for H
How About the US
Regulators in the US have done very little to stand in the way of crypto currencies despite the formation of a “Cyber Unit” and an increasing number of reminders and warnings. The latest halfhearted warning came on the 4th January from the North American Securities Administrators Association (NASAA), which also produced this animation to help investors.
It’s all been said before by the SEC (which soon released their own statement to commend NASAA’s statement) and there was almost no insight into how or if regulators were likely to get more involved. In fact, the only real reference to regulation:
“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a “high risk of fraud” involving crypto currencies”. Regulators were also unanimous in their view that in order to provide greater investor protection more regulation is needed for crypto currency.
It’s a far cry from what is happening in China, India and South Korea but if the SEC was serious about a clamp down, these countries illustrate how it could be done. It is clear to us that there is no imminent risk. Perhaps the SEC realizes and is afraid that crypto trading would simply migrate out of the United States if they got too heavy-handed too quickly. We should expect warnings from the SEC to get much more serious and explicit before they consider taking any action.
Your Take Away
Crypto currency trading in India and South Korea is becoming increasingly risky as regulators put exchanges and banks under pressure. This could put off would-be investors, but is unlikely to do much damage to crypto currency prices as people can still buy and sell elsewhere.
In the United States, the SEC and other regulators continue to issue reminders of the risks, but have taken very little action. The SEC’s Cyber Unit has halted two small ICOs since October and fined an investment firm in California to the tune of US400,000,000.00. At this point it will be worth monitoring if and how the communication changes throughout 2018 as it may warn would be investors of future actions.
South Korea
The price had fallen 19% from last weekends high, because of the news that South Korean regulators are cracking down
In a joint operation by the Financial Supervisory Service (FSS) and he Financial Services Commission (FSC) they announced that they are investigating six banks. In a press conference, FSC Chairman Choi Jong-ku told reporters that no wrongdoing is suspected, and the inspection simply aims to clarify if the banks are adhering to anti-money laundering rules and using real names for accounts.
The Korean regulator tightened regulations and anonymous crypto currency accounts were banned.
“Crypto currency is currently unable to function as a form of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said the PSC Chairman.
All the banks provide virtual currency accounts to clients who handle crypto currencies. The new legislation will allow regulators to shut down virtual coin exchanges. This is potentially serious the news that came out of South Korea overnight “will be deepening cooperation with agencies from China and Japan in curbing speculative transactions”. Should sentiment catch on in Japan, Bitcoin volume will really take a hit, but we see no signs that Japan will follow suit. Japan at the moment seems to be going in the other direction. Many Bitcoin exchanges are officially recognized and it has been made legal tender.
India Straddling the Line
In India the government struggles to find the right approach to a crypto currency mania it is obviously uncomfortable with.
At the end of November Finance minister Arun Jaitley said, “The government’s position is clear, we don’t recognize this as legal currency.”
On 29th December, the Ministry of Finance warned investors that virtual currencies might be a Ponzi scheme and they warned of a clampdown on exchanges:
Furthermore, the Government nor any other regulator in India has given license to any agency to work as exchange or any other kind of intermediary for any Virtual Currency. Anyone dealing in Virtual Currencies must consider these facts and beware of the risks involved in dealing in them.
Last weekend, one of India’s largest crypto coin exchanges, Koinex, had its withdrawals and deposits frozen only stating that “a tussle between our payment service partner and their bank has caused an indefinite delay in the settlement of a large portion of deposits to Koinex in the past 2 weeks”.
Coindelta has had similar issues.
This could spell the beginning of the end for these exchanges, and for crypto trading in India, which will likely migrate somewhere more receptive. As Quartz India pointed out earlier today:
“Regulators are following the same method used by China, where they haven’t explicitly banned Bitcoin, but made the regulatory environment around it so difficult by cracking down on other things that it is no longer a conducive environment for H
How About the US
Regulators in the US have done very little to stand in the way of crypto currencies despite the formation of a “Cyber Unit” and an increasing number of reminders and warnings. The latest halfhearted warning came on the 4th January from the North American Securities Administrators Association (NASAA), which also produced this animation to help investors.
It’s all been said before by the SEC (which soon released their own statement to commend NASAA’s statement) and there was almost no insight into how or if regulators were likely to get more involved. In fact, the only real reference to regulation:
“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a “high risk of fraud” involving crypto currencies”. Regulators were also unanimous in their view that in order to provide greater investor protection more regulation is needed for crypto currency.
It’s a far cry from what is happening in China, India and South Korea but if the SEC was serious about a clamp down, these countries illustrate how it could be done. It is clear to us that there is no imminent risk. Perhaps the SEC realizes and is afraid that crypto trading would simply migrate out of the United States if they got too heavy-handed too quickly. We should expect warnings from the SEC to get much more serious and explicit before they consider taking any action.
Your Take Away
Crypto currency trading in India and South Korea is becoming increasingly risky as regulators put exchanges and banks under pressure. This could put off would-be investors, but is unlikely to do much damage to crypto currency prices as people can still buy and sell elsewhere.
In the United States, the SEC and other regulators continue to issue reminders of the risks, but have taken very little action. The SEC’s Cyber Unit has halted two small ICOs since October and fined an investment firm in California to the tune of US400,000,000.00. At this point it will be worth monitoring if and how the communication changes throughout 2018 as it may warn would be investors of future actions.
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