Amid the clampdown on ICOs by the Chinese regulatory, cryptocurrencies across the board are seeing a dip in value. The world’s most popular cryptocurrency, Bitcoin, fell over a $1000 from its all time high of $5000. It seems to have stabilized momentarily at $3900 but continues to garner negative sentiments from regulatory bodies and industry leaders. Here are some developments over the last three days, that can be attributed to the recent price plummet.
UK warns ICO investors
Following China’s ICO ban, UK has issued warnings to ICO investors and businesses alike. The Financial Conduct Authority released a consumer warning to potential ICO investors. The statement claimed that ICOs were “unregulated, potentially fraudulent and highly unlikely to provide investor protections.”
It also said, “you should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (e.g. business plan, technology, people involved) and prepared to lose your entire stake.”
While this makes sense and seasoned ICO investors and advisors adhere to these guidelines, the timing of this announcement has resulted in a negative sentiment for Bitcoin and other cryptocurrencies. Furthermore, the FCA has been known to have taken a hands off approach to cryptocurrencies.
But unlike China, they haven’t resorted to banning ICOs entirely. The FCA spokesperson said, “Whether an ICO falls within the FCA’s regulatory boundaries or not can only be decided case by case. Many ICOs will fall outside the regulated space. However, depending on how they are structured, some ICOs may involve regulated investments and firms involved in an ICO may be conducting regulated activities.”
Japan to supervise cryptocurrency exchanges
Earlier today, Japan, one of the biggest regulatory proponents of cryptocurrencies, announced that they will begin supervision of crypto exchanges. According to the Nikkei Asian Review, the supervision will be done by the Financial Services Agency; the country’s financial watchdog. The FSA’s spokesperson said that they are “investigating carefully on a risk basis to make sure bad operators do not creep in and hamper a healthy market,”.
Earlier this year, Japan passed a first of a kind law that recognized popular cryptocurrencies as payment methods, similar to the Yen. However, this law did not account for ICOs and their regulation. The volume of capital raised from ICOs this year alone has got the attention of many regulatory bodies. Furthermore, the lack of traceability has made it susceptible for money laundering and terror funding.
There are some regulations set by the FSA for exchanges, as of last month, not a single new exchange has been cleared by them. “We must be careful since we are dealing with a new technology. This is different from a regular business registration process,” the spokesperson added.
“Bitcoin is a fraud that will blow up” – CEO of JPMorgan Chase
Jamie Dimon, the CEO of JPMorgan Chase, said in an interview yesterday, that he thought that Bitcoin was not a real thing and that it would eventually blow up. CNBC reports that Dimon, in a conference organized by Barclays, likened Bitcoin to the 17th century Tulip Bulb craze. He even went as far as to say that he’d fire any JPMorgan Chase trader who traded Bitcoin. “It’s against our rules and they are stupid,” he added.
This statement coincided with the price of Bitcoin dropping even more. It must also be noted that these statements also resulted in JPMorgan Chase stocks falling off their session’s high. This can be attributed to the fact that noted Wall Street investors are embracing cryptocurrencies, with analysts predicting high growth for Bitcoin and investors like Bill Miller and Josh Brown reportedly own Bitcoin.
Cryptocurrencies were designed to work without third party regulatory bodies and it will be interesting to see how governments work with exchanges. ICOs can be fraudulent and we recommend it only for experienced traders who have done their research. To an extent, some regulations enacted by the US, like a mandatory product for ICO, can increase trust among investors.
As far as statements like the one Jamie Dimon, we think better understand of the currency and its impact so far will result in more well thought out statements. We believe crypto is here to stay.