(Kitco News) As bitcoin continues to surprise with new milestones almost daily, are U.S. officials signaling that more regulation is coming, and is that a threat to this year’s massive price rally?
The crypto space has been all the rage so far this year, with bitcoin at its center.
Yet, despite all the good news, there are signs of worry. After surpassing market capitalization of $1 trillion on Friday, bitcoin prices tumbled from new record highs of $58,000 back to $50,000 on Monday. At the time of writing, bitcoin was trading at $54,222.74, down 6.30% on the day.
Weighing on bitcoin were the latest comments from Tesla CEO Elon Musk, stating that prices “seem high” after the digital currency hit the latest new record.
But what about regulation? Could increased scrutiny from the U.S. officials trigger even a bigger selloff?
Recently, Treasury Secretary Janet Yellen has been speaking about the importance of bitcoin regulation while focusing on illicit financing risks. Yellen has also been referring to bitcoin as a very volatile and “highly speculative asset.”
“I think it’s important to make sure that it is not used as a vehicle for illicit transactions and that there’s investor protection. And so regulating institutions that deal in bitcoin, making sure that they adhere to their regulatory responsibilities, I think is certainly important,” Yellen told CNBC last week.
Earlier in February, Yellen told the Treasury’s innovation policy roundtable that the “misuse” of cryptocurrencies like bitcoin is “a growing problem.”
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” she said.
The existing oversight over bitcoin is a “patchwork of regulations” that varies from state to state, analysts told Kitco News.
“The way federal regulation usually works is that an agency will be assigned to be your primarily federal regulator. For instance, banks are regulated by the Federal Reserve, brokerages are regulated by the SEC asset managers, and commodities trading firms are regulated by the CFTC. Each one of those touches on bitcoin but doesn’t have primarily federal regulatory authority over bitcoin itself,” explained Bloomberg Intelligence analyst Ben Elliot.
Here is a quick breakdown:
• Virtual currency spot exchanges are overseen by State Banking regulators via state money transfer laws.
• The U.S. Internal Revenue Service (IRS) treats virtual currencies as property, which is subject to capital gains tax.
• The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) is in charge of monitoring bitcoin’s transfers for anti-money laundering activity.
• The Securities and Exchange Commission (SEC) has taken action against unregistered ICOs (initial coin offerings).
• On the CFTC side, bitcoin has been declared a financial commodity, which means…