The month of August has been, as usual, a volatile one for digital currencies of all kinds. Early in the month, the price of bitcoin and ethereum, as well as other digital tokens, dropped to some of the lowest levels of the year. BTC has since recovered and is now trading above $6,700; ETH is still floundering as of this writing, trading significantly below $300. In retrospect, many analysts have suggested that the reason for the drop across the cryptocurrency industry early in August had to do with the actions of the U.S. Securities and Exchange Commission. The price declines mentioned above corresponded with the announcement that the SEC had decided to postpone its verdict on the approval of a bitcoin-linked exchange-traded fund (ETF) until the end of September.
This example is the latest of many cases in which the actions of the SEC seem to have impacted the prices of digital currencies. Indeed, over the past couple of years as digital tokens have become increasingly widespread and popular, the SEC has become a dominating presence in the daily crypto news cycle. Whether it is making a determination about the status of digital currencies, regulating new products like ETFs or futures, or doing any number of other things linked to the hot new space, the SEC has come to exert a huge influence on the price of digital currencies. Below, we’ll explore some of the most important recent SEC decisions and actions and how they affected the cryptocurrency market.
DAO Tokens as Illegal Securities
In July of 2017, the SEC announced its decision that DAO tokens, which had been distributed via initial coin offering in 2016, were in fact securities. These tokens had not been registered with the SEC before the ICO, placing them in violation of the law. While the immediate aftermath impacted DAO, the ramifications of this decision were widespread; the SEC showed that many ICOs could also be in trouble, too. Although the SEC did not press any charges at the time of the decision, it effectively changed the ICO game, which had been allowed to run freely an without regulation for many months up to that point.
Interestingly, while the cryptocurrency world did react to the news in a negative way, the overall impact was minimal. According to Coin Telegraph, the top five coins fell in price on the day of the announcement but relatively quickly recovered their value.
Winklevoss ETF Application Denied
Earlier this summer, in July of 2018, the SEC denied the second attempt by the Winklevoss brothers to launch a bitcoin ETF. On July 26, the SEC determined it was not convinced by the brothers’ claim that bitcoin markets are “inherently resistant to manipulation,” deciding to reject their efforts to launch an ETF for that and other reasons. The cryptocurrency markets reacted swiftly and negatively; BTC lost more than $400 in value in just 3 hours. Many other coins declined as well. However, the leading digital currency by market cap regained its value within 24 hours.
Winklevoss Brothers (Wikipedia)
VanEck SolidX ETF Denied
Most recently, when the SEC pushed back its announcement on the VanEck and SolidX ETF plans, the market panicked. BTC lost about $500 in six hours and continued to decline in the days following the announcement. Ripple lost more than 20% of its value. Interestingly, this news was decidedly neutral; the SEC did not indicate that it was rejecting the ETF, as it had in the case of the Winklevoss product. Instead, it simply announced it would delay the announcement of its decision. Still, the markets reacted strongly.
SEC and CFTC Jointly Recognize Cryptocurrencies
Lest it seem that the SEC is only capable of pummeling crypto prices, it’s useful to look at an earlier example as well. In February of 2018, the SEC and the Commodities and Future Trading Commission (CFTC) held a joint hearing regarding cryptocurrencies, ICOs, and blockchain. Regulators recognized the importance of the new industry, stressing that fair regulatory frameworks were key to its long-term success. Representatives also indicated that “if there was no bitcoin, there would be no blockchain.”
The markets reacted with a strong bullish trend. This came about at a key moment, as China and India were moving to crack down on cryptocurrency and the markets had been slumping. BTC and ETH both gained about 20% in the days following the hearing.