SEC warning to cryptoexchanges leads to 9% decline in Bitcoin!

SEC to begin regulating cryptoexchanges and require registration

Securities and Exchange Commission just announced that cryptocurrency exchanges must all be registered with the SEC. As far as I can tell, no official timeline has been set but it looks like regulation is coming.

The announcement was enough to lead to a staggering 9% decline in BTC and 4% decline in ETH almost immediately!

Does the SEC have this power?

Yes. The SEC in its announcement has effectively declared tokens and cryptocoins as securities and that they therefore fall under the SEC's jurisdiction. Furthermore, because each of the major exchanges are serving as trading and brokering platforms of such "securities", the SEC has the authority to require that they be registered with and regulated by the SEC to ensure a maintenance of standards.

Is this definitely a bad thing?

At first blush, there are a number of things to be concerned about. First, this only fuels concerns and pessimism in the market as evidenced by the price decline. More FUD is never a good thing. Second, blockchain is built around a promised future of less regulation and more decentralization, which this is clearly a move counter to. For some investors, this is a huge roadbloack to blockchain becoming a true "disruptor."

BUT - there are benefits to further regulation too. Most exchanges have their own rules and the lack of oversight has led to some uneven experiences amongst traders. For example, in December, Gemini had some inopportune shutdowns around when BTC was experiencing huge spikes in volatility. The lack of regulation meant traders had no recourse other than voicing their complaints on social media.

SEC regulation may also lead to exchanges at least partially insuring deposits on their sites. Some exchanges offer some forms of insurance on USD deposits and hacker protection but it's fairly uneven and you need to spend some time researching these to figure out what your actual coverage is.

So...yay or nay?

Overall, I'm more concerned than not. Until I see exactly what the SEC will do and what standards they intend to set,I'm skeptical of the move. That being said, do I think all this justifies an ~10% drop in BTC and a ~5% drop in ETH? No.

Time to buy the DIP!

Thanks for reading! Please feel free to leave any comments, advice, questions, or thoughts below!