The cryptocurrency market is currently experiencing the biggest struggle in its 10-year history, with Bitcoin at the forefront. A combination of major fundamental factors of bearish nature showed up simultaneously, which resulted in immense pressure on this emerging industry.
While the hash war following the Bitcoin Cash hard fork has its portion of negative influence, the market is also strained because of raising concerns over increased regulation. In the past few weeks, the US Securities and Exchange Commission (SEC) revealed through its actions that it was ready to get serious about the crypto market and show no mercy on initial coin offering (ICO) projects that don’t comply with the rules.
The precedents from SEC
On Nov. 16, the SEC penalized two ICO firms for not registering their tokens as securities and required them to do so. Besides, Airfox and Paragon, the two startups targeted by the US regulator, have to return the ICO funds to investors. This represents the first cases of civil penalties involving ICO companies violating the SEC’s registration requirements, and judging by the regulator’s sentiment — these won’t be the last ones.
A week earlier, the American securities regulator penalized EtherDelta’s founder for failing to register the platform as a securities exchange. Thus, Zachary Coburn agreed to pay about $388,000 in fines.
Justin Litchfield, chief technology officer of crypto fund ProChain Capital, commented on the current cryptocurrency disaster in an interview with Bloomberg:
“The sell-off is related to enforcement, which is almost certainly underway. Projects are being made to return investor money, which, after having spent a ton of money marketing their $100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough.”
However, not everyone agrees with this position. As we reported earlier, Stephen Palley of Washington, D.C.-based law firm Andersen Kill told the same Bloomberg that the SEC’s decision against Paragon and Airfox was not a bearish signal at all.
On the contrary, Palley says that the securities regulator is pro-blockchain and that the recent enforcement actions were justifiable.
Italy is taking action too
While we don’t know whether the US SEC triggered a general trend, the regulators from other countries became more severe against crypto companies, too. On Monday, Nov. 19, the Italian Companies and Exchange Commission (CONSOB) halted the local activity of three crypto firms — Crypton, Cryptoforce, and Eagle Bit Trade — for a period of three months. The three entities are suspected of violating the financial law.
Crypton is providing investments in its cryptocurrency with the same name. The firm runs a website that promises Italian residents monthly returns of up to 40%, the regulator notes.
While Paragon and Airfox might be providing real use cases, the three firms suspected by the Italian regulator are dubious indeed.
Other cases of enforcement actions and regulatory
This month was very abundant in regulatory decisions against crypto and ICO firms. Recently, the US Department of Justice started to investigate crypto exchange Bitfinex and stablecoin issuer Tether, which are suspected of manipulating the price of BTC.
Elsewhere, the securities commissioner of North Dakota has banned a fake ICO project known as Union Bank Payment Coin (UBPC), as the entity was violating the state’s law by imitating a genuine crypto project backed by Liechtenstein-based Union Bank.
In Spain, the Ministry of Finance is inspecting 15,000 taxpayers who have been conducting crypto transactions in an effort to fight fraud and tax evasion.
In India, the special committee formed by the local government last year is ready to propose a draft regulation touching upon cryptocurrencies. The committee said that the draft bill would be presented by the end of 2018.
The general sentiment in the crypto space is bearish, with the total market cap falling to its lowest level since September 2017.