Can cryptocurrencies survive the start of government regulation?


On the same day the S.E.C. he released his statement last month, he also solved two cases with digital token issuers for violating the securities laws, requiring them to pay $ 250,000 penalties and work to repay the money to investors in their illegal offers.

In another case, Maksim Zaslavskiy, who has been accused of criminal fraud involving an I.C.O., pleaded guilty to a federal district court in Brooklyn. This was the first case in which a judge found that digital coins were a type of security and therefore subject to the associated anti-fraud rules.

The S.E.C. He solved a case against Zachary Coburn, the founder of a company called EtherDelta that facilitated digital coin trading, as it operated as an unregistered national stock exchange. For those looking to offer a trading platform in the United States, by registering with the S.E.C. as an exchange it is also an expensive and time-consuming process.

By the end of the month, the S.E.C. he had also accepted the charges with boxer Floyd Mayweather Jr. and music producer Khaled Khaled, known as DJ Khaled, for the promotion of digital tokens released by a start-up called Centra Tech. The men did not reveal that they had received payments to make online posts that advertised the digital currency, the regulators said. Mayweather agreed to return the $ 300,000 received, pay an additional $ 300,000 penalty and adhere to a three-year ban to promote other investments. Mr. Khaled will repay the $ 50,000 he got, plus a $ 100,000 fine.

But even before the government began its repression, it was a big sign that the euphoria was evaporating from the market: the decline of cryptocurrency mining that generates additional digital tokens. Giga Watt, a digital currency mining operation in the state of Washington, filed for bankruptcy recently due largely to the collapse of the Bitcoin price. Nvidia, which makes graphics chips important for cryptocurrency mining, expects a 20% drop in revenue in its next quarter due to the "sharp drop in cryptocurrency mining demand".

For opponents of cryptocurrencies and initial offers of coins, this is the early end of a speculative bubble, very similar to the tulip mania in Holland in the seventeenth century or the implosion of This does not necessarily mean that this type of investment will disappear, but greater government control will increase costs for trading platforms and could effectively eliminate initial money offerings if they are to be registered with the S.E.C.

Blockchain, the technology behind cryptocurrencies, is useful and will hardly disappear. But if cryptocurrencies survive as feasible means of conducting business, it is a different question. Nathaniel Popper recently pointed out in the New York Times that Bitcoin and its siblings were designed to simplify payments, but were "hampered by technical problems that make their tokens difficult to use in real transactions." Those working on cryptocurrencies have promised solutions, but they have been slow to produce them. "

Just like penny stocks, digital tokens have seen their fair share of scam artists and questionable uses. As the government invests more resources in overseeing the trade in digital goods, the decline in cryptocurrency prices may accelerate as those who fear being a target of fraudulent behavior are waiting for a time when there is more protection for investors. The question is: will cryptocurriers survive long enough to allow us to see that day?

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