Regulators Continue to Crack Down on Digital Currencies

Crypto currency news continues to dominate the fintech space, as new concepts and ideas that are the future of technology continue to incorporate digital currencies. While many believe that crypto currency values will surpass 1-trillion in 2018, the crack down on regulatory compliance continues to be a fly in the ointment. Another interesting phenomenon is the number of hedge funds that have popped up that are completely dedicated to trading crypto currencies.  This will either provide additional liquidity and the advancement of the fintech space or be a failure that drains liquidity as the tulip market tumbles.

Regulation Could Constrain Advancement

While the Securities and Exchange Commission in the United States has yet to describe their concerns about crypto currencies, this is not the case for the European Supervisory Authority.  This group feels that investment into crypto currencies are risky and unsuitable as an investment vehicle. The ESA oversees banking, insurance and securities as well as pension and said that they were concerned about the number of speculators that were entering the crypto currency market without having an appreciation of the risks involved in trading these products.

The ESA warn consumers that digital currencies are highly risky and unregulated products within the European Union and should be considered an unsuitable as investment. Digital currencies should not be used for savings or retirement. The recent volatility in the bitcoin market gave the regulator all the ammunition it needed to provide a warning. Bitcoin prices have dropped by more than 55% since hitting a high of 19K in mid-December of 2017. There warns of a volatile security that could produce a high risk of loss as resonated amongst investors.

Operational Issues

European regulators are concerned about recent operational problems within the digital currency space. Consumer have been unable to liquidate their holdings as prices moved lower, enhancing the losses retail investors experienced.

Regulated Products

In the United States there are several regulated products. These includes wallets such as Coinbase which provides access to bitcoin, Ethereum, litecoin and bitcoin cash.  Coinbase is regulated by the U.S. government and is overseen by the Federal Reserve. In addition, the securities and exchange commission regulate futures that are bought and sold on both the Chicago Board of Options Exchange as well as the Chicago Mercantile Exchange.

In Europe, digital currencies and exchanges where they are transacted are not regulated by a European Union authority.  Investors are not protected if an exchange defaults or goes out of business. The European Union joins several governments that have voiced concerns over digital currency trading. For example, South Korea invoked measures that would reduce speculation in crypto currencies, eliminating the use of anonymous financial institutions that provide access to crypto currency trading. In India the Finance Minister recently took measures to curtail transactions that are based on crypto currency transactions.  They deem these activities as illegal, and not part of a legitimate payment system.


While there will likely continue to be a shakeup in the crypto currency arena, there continues to be objection to their use as both as an investment and a currency. While hedge funds and retail investors flock to these products, regulators are cracking down making the viability of this products an issue.