These are turbulent days for crypto. The price of Bitcoin on Coinbase dipped to $3300 in early December, its lowest point since August 2017. The amount of capital raised through ICOs has declined in the second half of 2018, and the flow of U.S. money into new ICOs dried up well before that.
The specter of enforcement looms over the entire space, the U.S. increasingly becoming one of the loudest contingents, following China’s and South Korea’s more Draconian approach to the space. The regulators have mobilized, and the public can hear the pounding of the drum.
Indeed, the action in the U.S. has already started. Two ICOs that did not register their token sale, Airfox and Paragon, recently settled with the SEC and paid hefty fines for selling unregistered securities to investors. Similarly, on November 8th, EtherDelta made headlines when it became the first to be charged with operating an unregistered exchange because the majority of tokens trading today are securities. In September, the New York Attorney General posted a report on these virtual markets. EtherDelta will not be the last crypto exchange to face legal ramifications for the way they conducted business.
Both entrepreneurs and investors are now wary of how enforcement will play out, though they may not have been a year ago. As a result, the market slowed.
An Inevitable Collision
The reality is that there would inevitably have been friction between blockchain and government regulators. First, you have decentralization. The ability to transfer assets peer-to-peer, no middlemen, no controls. The mentality of “why shouldn’t I be able to sell something I own to whomever I want if I deem the price fair?” After all, this is how economies have historically functioned, and in many places,