Impending SEC Regulatory Decision
Updated: Mar 31, 2019
The SEC has been watching, researching, and carefully crafting their response to the sudden onslaught of cryptocurrency tokens over the past year or so. Their decision is looming, but the writing seems to be on the wall that it is coming soon and could possibly include a statement that all tokens are securities and only allowed for trading on regulated exchanges. This has been a common rumor that has been floating throughout the crypto community for some time and seems to be gaining some traction as we grow closer to a possible decision. Unfortunately, for those of us in the United States this could have a major impact in the volume of coins available for us to legally trade as well as the ICOs we can participate in.
As we look to try to forecast what and when the SEC decide on anything, here are some possible short-term market reactions if these rumors do come to fruition:
1. Altcoin Consolidation into Bitcoin and Ethereum
The SEC has already stated that BTC and ETH were not securities, so they would not be subject to the security designation and regulation requirements. This would allow those blue chips to be freely traded through current methods. We could envision a potential outflow from altcoins back into those “safe” vehicles.
Coins to consider: BTC & ETH (Could also potentially include LTC and BCH but BTC & ETH should be the largest benefactors)
2. Larger Adoption of Decentralized Exchanges (DEX)
Since there currently are no viable regulated exchanges available, there should be an increase in volume on DEX platforms like IDEX, ShapeShift, Radar Relay, Waves, etc. A shift to DEX could have a major impact on other projects like 0x (protocol for DEX platforms) and Binance (recently announced decentralized exchange) who are entering the decentralized exchange space and could be seen as an alternative within an overly regulated environment.
Coins to consider: ZRX & BNB
3. A Move Towards Privacy Coins
A regulatory crackdown of this magnitude could trigger a move toward privacy coins that provide a more anonymous and “shielded” trading experience.
Coins to consider: XMR, ZCASH, ZCOIN & PIVX
4. Faster Implementation of Regulated Exchange Projects
As we stated before, SEC regulated exchanges do not currently exist. That doesn’t mean that there aren’t companies and projects working with the SEC on this front. Circle and its newly acquired exchange, Poloniex, as well as other major exchanges such as Coinbase and Bittrex have been actively working with the SEC on regulatory compliance through exemptions as alternative trading systems (ATS) which will allow them to list security tokens. Other projects such as Polymath and tZero which are both security token platforms have been working with the SEC on compliance for future security token offerings. A move from the SEC of this nature is either predicated on having a solution in place shortly after their announcement or most certainly would increase the efforts of all parties to be the first to provide the United States with a legal solution towards security token trading.
Coins to consider: POLY
No one can predict the future. A decision such as the one outlined above could be extremely beneficial for the mainstream adoption of cryptocurrencies. What we do know is that the crypto markets are extremely volatile, especially with regards to regulatory news. If these rumors do come to fruition, we can most definitely expect a reaction from the markets one way or another. We just want to make you aware of the situation and prepare you for some of the potential outcomes.