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.
