Bitcoin Dives After SEC Says Crypto Platforms Must Be Registered

• March 07 2018
• Camila Russo

Bitcoin slumped after the U.S. Securities and Exchange Commission reiterated that many online trading platforms for digital assets should register with the agency as exchanges.

Bitcoin slumped after the U.S. Securities and Exchange Commission reiterated that many online trading platforms for digital assets should register with the agency as exchanges.

The largest cryptocurrency dropped as much as 8.6 percent to $9,864 after the SEC statement boosted concern that tightening regulation may limit trading. Bitcoin is down about 50 percent from its high of almost $20,000 in December in part because regulators worldwide have clamped down on trading, mining and initial coin offerings. Adding to concern is speculation that the exchange Binance has been hacked again.

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the SEC said in the statement Wednesday.

Some of the largest cryptocurrency trading platforms, like Coinbase Inc.’s GDAX, aren’t registered as a national exchange with the SEC, and instead have money transmission licenses with separate states. In the case of Gemini, it’s regulated by the New York State Department of Financial Services as a trust company, according to its website. Templum LLC claims to be the only SEC-registered exchange while Overstock.com Inc.’s tZero also aims to be a fully-compliant trading platform.

Many platforms are referring to themselves as “exchanges,” which can give the “misimpression” to investors that they are regulated or meet the regulatory standards of a national securities exchange, the SEC said in its statement, warning that it doesn’t review the trading protocols used by these platforms and that access to a platform’s trading services may not be the same for all users.

The statement comes a week after reports that regulators sent a number of subpoenas to firms they suspect might be violating securities laws.

Users of Binance, one of the largest crypto trading platforms by volume, complained online that their accounts got hacked. Binance users on social networks Reddit and Twitter said hackers sold their smaller coins and bought a cryptocurrency called Viacoin, which is up 28 percent today, according to CoinMarketCap.

— With assistance by Lily Katz