As we inch closer and closer to 2019, can we expect to see regulation grow to immeasurable lengths in the new year?
While “immeasurable” might be an overstatement, it’s likely that cryptocurrency regulations will undoubtedly become the big move for organizations like the Securities and Exchange Commission (SEC) and other financial bodies around the world. Whether a company abides by the SEC’s rules or not, present regulations are already taking a massive toll on present cryptocurrency businesses, and this is likely to increase tenfold in the new year.
Basis Closes for Good
The latest victim of securities registration protocols is Basis, a cryptocurrency project that in April, raised approximately $133 from an assortment of “high-profile” investors. Last Thursday, the company announced that it was closing its doors permanently and refunding all those who pledged money to its operations eight months ago.
The company cites present securities regulations as the big problem. Nader Al-Naji – chief executive of Intangible Labs, the parent company of Basis – explained in a recent statement:
“Unfortunately, having to apply U.S. securities regulations to the system had a serious negative impact on our ability to launch Basis. As such, I am sad to share the news that we have decided to return capital to our investors. This also means, unfortunately, that the Basis project will be shutting down. As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status.”
At the time, Basis was working on a new kind of stable coin.
Do You Want Crypto to Remain Legit?
The situation presents a two-sided plane. On one hand, both present and future regulations are likely to put a damper on innovation. We may see additional companies close their doors, while others avoid opening altogether. The crypto space is likely to go through a transition period where those who “can’t afford” to play by the rules will disappear into oblivion.
Read: What is the Howey Test?
At the same time, one of the biggest complaints surrounding the cryptocurrency arena is that it doesn’t possess the legitimacy it allegedly deserves. Granted this can be reversed, we may see more institutional players enter the market and bring bitcoin and its crypto-cousins to new heights. To gain legitimacy, lesser companies that either cannot or will not adhere to present laws pertaining to security, operations and customer protections must go elsewhere, and the crypto space can gain the attention everyone wants it to have.
Meanwhile, Across the Globe…
The SEC is just one example of a governing body cracking down on crypto-related problems. We’re seeing the same actions taken all around the world. In Italy, for example, the Commissione Nazionale per la Societa e la Borsa (CONSOB) – which operates very similarly to the U.S.-based SEC – has moved to protect investors by placing 90-day halts on two “shoddy-looking” initial coin offering (ICO) projects.
In a recent announcement, the organization released a list of websites and Facebook pages authorities claim are selling false or fraudulent tokens, including Bitsurge Tokens and Green Energy Certificates. The former, for example, is promising investors guaranteed returns of approximately six percent a month.
The latter is allegedly backed by plots of rainforest land in Costa Rica, which will be sold for roughly 80 percent above market value, allegedly earning investors approximately six percent each year distributed at about 0.5 percent each month.
Hong Kong Is Upping the Ante
3,000 miles away in Hong Kong, the country’s Securities and Exchanges Commission (SFC) has vowed to put a stop to phony ICOs and says it will be improving all its cryptocurrency regulations in the coming months. Up to this point, Hong Kong has been one of the more lenient regions in Asia when it comes to cryptocurrency operations, but this may be on the verge of changing.
Daisuke Yasaku – a research professional at the Daiwa Institute – believes this will be damaging to the country, and may cause some crypto-based businesses to pack up and move elsewhere:
“The cost of regulations will be high. The requirements of the SFC initiative may prove too burdensome for some operators.”