Crypto Gets Regulated — What Now?

It finally happened. The big bad Securities and Exchange Commission finally took aim at the crypto markets…except it was more of a warning shot.

The SEC decided to address the recent spate of new digital tokens flooding the market. These initial coin offerings (ICOs) have been making quite the splash lately. But not everyone is happy with them.

The problem is, they’re lawless. Which is a double-edged sword. On the one hand, it’s a great way to secure funding in a timely fashion. But it also leads to money-grabbing scams.

We’re big supporters of ICOs here at Money Morning, but only when done right.

Cryptocurrencies… good or bad?

For most investors, cryptos are too daunting to even warrant thinking about. Throw in the potential to be scammed of your hard earned cash and, well, we can see why some people are wary.

But huzzah, the SEC is here to save us — or, rather, Americans — from digital highway robbery. Well maybe.

The SEC concluded that some ICOs will be considered securities. Circumstances will decide whether an ICO should be classified as a security, but on a case by case basis.

Coin Telegraph believes that this could result in increased legal input.

Token issuers may now have to turn to lawyers to confirm that the token they intend to issue does not qualify as a security under federal security laws.

SEC warning on cryptos..

All in all, it feels like this is leading down a path of increased red tape and bureaucracy.

Furthermore, the SEC put out an ‘Investor Bulletin’ on ICOs. Which actually gives a neat little summary of blockchain, cryptocurrencies and more. But also came with heavy handed warnings, such as:

Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities law, your ability to recover may be significantly limited.’

So what does it all mean? Well, potentially not much. New ICOs are facing classification, and that’s about it.

So what does a security classification mean? Well then they’re going to incur compliance costs, whether it be time, money or both.

All up it will likely mean we see fewer ICOs, but most likely fewer dodgy ICOs. If a company really does believe in their vision and is seriously devoted to their project, we can’t see this ruling having much impact.

We’re hopeful it’s a good thing. For now it appears to be that way.

It certainly didn’t seem to impact the market that hard. Bitcoin has dropped 10% since the announcement, while Ether is down 12%. Which sounds oxymoronic, I know. If we were talking about Commonwealth Bank of Australia [ASX:CBA] shares we’d be more concerned. But you’ve got to remember just how volatile cryptos are. This is a market that swings harder than anything you’ve ever seen.

In fact both coins are actually up over the past 10 days. Bitcoin is up 26%, while Ether is up 25%. Remember this is very much the wild west of investing.

If you’re still erring on the side of caution we think you might regret it. Even investing a small amount in cryptos could see huge returns in a couple of years.

If you want to learn more and get involved, we can get you started. Sam Volkering has been covering cryptos for years now, and his Secret Crypto Network is here to help. There’s never been a better time to start investing in Cryptos. To read more, click here.


Ryan Clarkson-Ledward,
Junior Analyst, Money Morning

Why Ethereum Could Be the One Coin to Rule Them All..find out here 

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

To find out more about the publications Ryan works on and how you can subscribe, please click on the corresponding link here:

Money Morning Australia