While the US government hasn’t come straight out and said they’re going after cryptocurrencies (yet anyway), recent rumblings seem to suggest that the powers plan to move against what they increasingly view as an existential threat to their financial system. These vague stirrings in the regulatory weeds gained substantial momentum in December 2017 with the publication of a statement by SEC Chairman Jay Clayton (right around the time Bitcoin was flirting with a dizzying high of nearly $20,000) which had the effect of acting as a very cold and very wet blanket on speculation. Bitcoin has since lost nearly 40% of its value and is currently trading in the $11,000 to $12,000 range.
The speculation that Big Brother was/is planning a full frontal assault on digital currencies has as much to do with other, lesser-known altcoins as it does with Bitcoin, however, and can be traced at least in part to a rash of recent government interventions resulting is invalidated ICOs, forced refunds and class action lawsuits.
For instance, the Munchee ICO was invalidated when the SEC determined their product was a form of securities. Munchee was then forced to refund ICO participants. Tezos was slammed with a number of class action lawsuits by ICO participants alleging the same thing (that their product is a form of securities).
Meanwhile, the founder of PlexCoin was arrested and jailed after failing to heed government warnings about the nature of his product. These are just a few of the tea leaves that have crypto speculators and legit investors alike worried that more robust sanctions are on the way to be followed by straight up regulation.
Of course, when it comes to digital currency crackdowns, no one tops the Chinese who announced last year that they were banning centralized exchanges; a move they subsequently followed up on. That action sent shockwaves through the cryptoverse, although things finally settled down and recovered somewhat. The long-term effect of the Chinese crackdown, however, seems to have been to encourage other governments to take a more hard-line approach toward the emerging digital currency economy and that, of course, includes the US.
That hard-line approach came in the form of a statement (mentioned above) issued on December 11, 2017 by SEC Chairman Jay Clayton that suggested the government does, in fact, view all cryptocurrencies as securities and will be treating them as such going forward. At the same time, Clayton was coy about whether or not his warnings were holy writ or merely the SEC trying to discourage the hype without getting directly involved. Sentences in his statement such as "Is [the cryptocurrency purchased during the ICO] subject to regulation, including rules designed to protect investors?" seemed to tip the government's hand by implying there are already regulations in place that govern digital currencies which came as news to most investors.
At the end of the day, however, Clayton did not directly come out and say that was the case, which left a lot of people scratching their heads which may be exactly the effect Clayton wanted to achieve to begin with.
While the SEC Chairman’s cryptic message regarding cryptocurrencies didn’t come right out and say that cryptocurrencies are all subject to government regulation, there was enough of an implication that that is where the US government is heading to raise doubt in the minds of many crypto users and investors. That, coupled with the recent Chinese actions - and the fact that governments in some countries including South Korea, the Philippines, Malaysia, India, and Mexico are currently debating various types of regulation - point to potentially stormy waters ahead.
If the government's intention was to nip the speculation in the bud by sowing doubt in the If the government intended to nip cryptocurrency speculation in the bud by sowing doubt in the minds of investors, the strategy seems to have worked. As we mentioned at the beginning of this piece crypto bellwether Bitcoin is down some 40% since Clayton's statement was made public. At the same time, however, the Trump administration has shown more than a passing interest in blockchain technology and the man Trump appointed to lead the OMB is well-known Republican crypto believer Mick Mulvaney. So what exactly is the government trying to tell us here?
Well, Trump is well-known for being an avowed enemy of regulation and so expecting his government to adopt new regulations on technology with as much promise as blockchains is probably unrealistic. At the same time, however, voices at the SEC, the Fed, Treasury and more are likely whispering in his ear about the threat they believe cryptocurrencies pose to traditional fiat currencies like the dollar. So something will likely be done. And it will likely be done at the state rather than federal level.
Starting in 2017 a number of US states introduced legislation that would result in some measure of cryptocurrency regulation, although truth be told they seem just as confused about the best way forward as the federal government.
Arizona, for instance, passed a bill that states for the record that blockchain data is considered a type of "electronic record." In and of itself that seems like a fairly innocuous statement of fact but it's likely that the real intent of the bill is to lay the groundwork for future bills that will impose new regulations on "electronic records"; and by extension, cryptocurrencies.
As of this writing, however, it all seems like so many picadors maneuvering around the bull, trying to take its measure and soften it up for the matador, who in this case would be the aforementioned Jay Clayton or his successor. As a result, there remain significant questions about the government's true attitude toward digital money while the confusion and sowing of doubt has had the effect of staying the hand of many Americans who otherwise wish to play an active part in the emerging economy.