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Crypto Market on Edge as South Korea Enacts New Regulations

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The blockchain community was on edge Thursday after South Korea announced a new mix of regulations aimed at taming the speculative surge in cryptocurrency accounts.

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South Korea Steps Up Oversight Efforts

The South Korean government announced Thursday it would implement a series of measures to limit speculation in cryptocurrency trading. This includes swift bans on new trading accounts as well as anonymous trading accounts. Brokers that fail to comply with these conditions face the risk of getting shut down.

According to the South Korean Financial Services Commission (FSC), the new rules will come into effect in January. This was confirmed by the Commission’s English Facebook account. The social media post also confirmed that banks will play a more central role in regulating the market by serving as ‘gatekeepers’ in the flow of capital to and from crypto exchanges.

“The FSC will continue to make efforts to prevent side effects and risks from speculative trading of crytocurrencies from spilling over into the financial sector,” the Commission said in its post.

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The government also issued the following statement, according to The Guardian:

“Officials share the view that virtual currency trading is overheating irrationally … and we can no longer overlook this abnormal speculative situation.”

Earlier this month, the government had restricted minors and non-residents from opening cryptocurrency accounts.

Until recently, South Korea had been one of the more laissez-faire jurisdictions for cryptocurrency trading, with major exchanges Bithumb and Coinone accounting for a growing share of market activity. It is estimated that roughly 20% of all bitcoin trades take place in South Korea.

Broad Market Selloff

South Korea’s new regulatory push triggered a brisk decline in the cryptocurrency market, with the total value of all coins in circulation falling by nearly $40 billion. The selloff hit bitcoin as well as the major altcoins, a sign that investors remain concerned over the regulatory landscape.

At the time of writing, the cryptocurrency market was worth $559 million, according to CoinMarketCap. The market cap reached a low of $539 billion shortly after 11:00 UTC.

Just a few weeks ago, the market nearly reached $650 billion following the launch of bitcoin futures trading on the major U.S. exchanges. The futures contracts have been credited with bringing cryptocurrency to mainstream circles, a feat that could lead to higher prices in the long term.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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After SEC Feedback, Several Firms Withdraw Bids to List Bitcoin ETFs

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Several fund managers have shelved bids to launch bitcoin exchange-traded funds (ETFs), citing push back from the Securities and Exchange Commission (SEC). The regulator, which has taken a hard stance on bitcoin in the past, expressed concerns over liquidity and valuation of futures contracts backed by the cryptocurrency.

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Bids Withdrawn

In a recent letter published online, Direxion and Exchange Listed Funds announced that they had cancelled their bids to launch ETFs that track bitcoin futures. ProShares Trust also issued a latter one day later informing the public that it will not pursue the matter further.

Unlike the cryptocurrency itself, bitcoin ETFs can be traded by retail investors as easily as stocks and other financial products. It would also allow them to gain exposure to the digital asset without the volatility of trading it directly.

Proponents of the ETFs had high hopes the filings would be approved following the launch of bitcoin futures contracts on the CBOE and CME exchanges last month. The coin’s 1,500% surge last year created a sense of urgency for fund managers to get in on the action.

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Interestingly, the SEC does not regulate futures, as that is the domain of the Commodity Futures Trading Commission (CFTC). The CFTC is being pressured to reassess the bitcoin futures contracts for underlying risks.

Last year, the SEC failed to approve a high-profile bitcoin ETF backed by billionaire investors Cameron and Tyler Winklevoss. At the time, the securities regulator cited “concerns about the potential for fraudulent or manipulative acts and practices” related to bitcoin. Although that line of reasoning likely still persists, regulators now appear to be more concerned with volatility.

While volatility has been part and parcel of digital currency trading, the general trajectory of the market has been overwhelmingly higher. A flood of exchanges has rushed to get in on the action, although many have been unable to scale fast enough to meet demand. As a result, several major exchanges, including Bitstamp and Bitfinex, have instituted temporary blocks on new accounts.

Bitcoin has started the year in rocky waters, as investors seem to favor the more diverse altcoin universe. The original blockchain has seen its overall market share decline to roughly one third, with the likes of Ripple and Ethereum witnessing an upsurge in demand.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Shares of Hong Kong-Based UBI Blockchain Suspended by SEC

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The Securities and Exchange Commission (SEC) has halted trading in UBI Blockchain Internet Ltd. (UBIA) over “unexplained market activity,” a sign that regulators were continuing to clamp down on assets tied to cryptocurrency.

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Trading Halted

The U.S. securities regulator announced Monday that it was suspending UBI Blockchain shares from being traded until the company answers questions about the accuracy of its financial statements.

UBI Blockchain surged more than 900% last year, bringing its total market value north of $800 million. All this, and the company has yet post any revenue. It also failed to give regulators a working phone number during public filing.

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Company chief Tony Liu said the SEC’s decision is “understandable  due to the recent frenzy of buying stock related to the bitcoin phenomena.” However, Liu reminded that his company was not involved in cryptocurrency.

“We believe the general public is confusing our blockchain technology with bitcoin companies,” Liu said in a statement that was quoted by Bloomberg. UBI was “involved in blockchain technology for well over two years before the bitcoin buying frenzy took place and we plan to be in business for years after the bitcoin buying anomaly ends.”

Blockchain is the pioneering technology that underlies bitcoin and other cryptocurrencies, but can exist independently of those systems. Its vast use case has attracted attention from banks, governments and businesses in pursuit of more transparent audit trails.

The Rise of Crypto Stocks

So-called ‘crypto stocks’ have benefited from the euphoria surrounding digital currencies. Their popularity has grown in lockstep with bitcoin among investors who want to capitalize on the crypto revolution without the added volatility of owning the underlying assets.

There’s a long list of companies that can offer indirect exposure to cryptocurrency. Some of the more popular include AMD (AMD) and Nvidia (NVDA), whose chips are used for mining virtual currency.

Digital Power (DPW) is a manufacturer of power-supply products that is venturing into cryptocurrency-specific equipment. Meanwhile, Overstock.com is an online retailer that not only accepts bitcoin, but is launching a mega ICO through its subsidiary tZero.

In addition to stocks, traditional investors can choose from Grayscale’s Bitcoin Investment Trust (GBTC), which holds BTC tokens in a fund that is similar to an ETF, as well as futures contracts offered by CME and CBOE. Efforts to bring bitcoin to the ETF market are also ongoing.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Regulation

CFTC Plans to Address Growing Concerns Over Cryptocurrency Trading

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The Commodity Futures Trading Committee (CFTC) is moving to address industry-wide concerns over its oversight responsibilities for cryptocurrencies, the burgeoning asset class that has quickly moved into institutional investment circles.

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According to The Wall Street Journal, two CFTC advisory committees will meet later this month to discuss oversight of cryptocurrency exchanges, the processing of bitcoin futures and whether the digital asset class falls under the same rules governing securities manipulation. The advisory groups consist of regulators as well as market participants.

“Ignoring virtual-currency trading will not make it go away.  Nor is it a responsible regulatory strategy,” said Chairman J. Christopher Giancarlo in a statement.

The U.S. derivatives regulator has faced criticism over its handling of cryptocurrency regulation, with some investors and industry groups arguing that more needs to be done to protect consumers. These groups have been especially vocal about the CFTC’s handling of bitcoin futures, which began trading on the CBOE and CME futures exchanges last month. The growth of bitcoin futures has also led CBOE to pursue the listing of half a dozen exchange-traded funds (ETFs) tied to the digital asset.

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Earlier this week, the Securities and Exchange Commission (SEC) invited the public to comment on two of the CBOE’s proposed funds. A week prior, it issued a similar call on two other ETFs put forward by the Chicago-based exchange.

Critics of bitcoin-based futures contracts argue that the new products could introduce unwanted risks into the clearing process. The Futures Industry Association (FIA) has questioned whether the CFTC could have done more to solicit public input or delay the release of the futures contracts.

In response, the CFTC has argued that “neither statute nor rule” would have prevented the likes of CME from launching their new futures products in advance of public hearings. “Even if the CFTC could have held public hearings or requested public input, it is unlikely that the outcome would have changed,” the CFTC added.

Cryptocurrencies have taken the global market by storm over the last 12 months. Currently, there are roughly 1,400 cryptocurrencies collectively valued at more than $760 billion. Analysts say the only thing stopping the market from expanding further is the regulatory uncertainty facing digital assets. South Korea recently became the latest jurisdiction to clamp down on cryptocurrency exchanges. In the United States, the SEC has already warned that it is policing the ICO market to ensure securities tokens are meeting federal securities requirements.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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