Bitcoin plunges after SEC warns about cryptocurrency exchanges
Virtual currencies may be a bold new technology frontier, but marketplaces where you can buy and sell them aren't exempt from regulation.
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Bitcoin value plunged after the SEC warned of regulatory scrutiny of virtual currency marketplaces billing themselves as exchanges.
Bitcoin and other cryptocurrencies plunged in value Wednesday after the US Securities and Exchange Commission warned of "potentially unlawful" exchanges where you can buy and sell the virtual currencies.
If a trading platform lets people buy and sell cryptocurrencies that are considered securities -- basically, something you can invest in -- then they must register with the SEC as an exchange, the SEC said Wednesday. That registration means regulation that's designed to protect consumers.
"The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not," the SEC said. If you're running one, get your lawyer on the phone, the SEC said, because SEC staff are focusing on your operations.
The news drove down prices of the granddaddy of cryptocurrencies, bitcoin, as well as several others, according to prices tracked by CoinMarketCap. Bitcoin, Bitcoin Cash and Ethereum dropped 9 percent over the last 24 hours, while Ripple and Litecoin dropped 8 percent.
Cryptocurrencies have been embraced by "crypto-anarchists" and others leery of centralized financial authorities and powers. But the SEC's move is the newest sign that cryptocurrencies and related fundraising techniques called initial coin offerings (ICOs) are becoming less Wild West and more business as usual.
The SEC also has taken several enforcement actions against various cryptocurrency outfits it labeled frauds, and reportedly has broadly issued subpoenas and requests for information from many other cryptocurrency-related companies.
For unregulated cryptocurrency exchanges, the SEC warned of shenanigans that can take traders by surprise: There's no guarantee they vet the assets that can be traded, set bidding and asking prices with integrity or use good trading technology.
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