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What Would It Mean If Cryptocurrencies Are Termed As Securities Like Stocks?

There is a growing whisper about federal regulation’s possible means to treat cryptocurrencies as securities. That meant it would be treated much like the stocks. As a result, prices of some of the digital currencies faced downside pressure on Tuesday. However, the market has recovered on Wednesday in the Asian region where the bitcoin managed a gain of 0.65 percent and Ethereum 1.07 percent. Regulators around the world are engaged in either tightening or launching fresh rules to govern the emerging virtual coin sector.

Joint Discussion

There are already fears gripping the crypto community on the possibility of federal laws being changed to treat digital currencies as securities. That was quite evident when the market reacted to the Wall Street Journal news on Tuesday. The report indicated about the increasing thought among regulators on the treatment of digital tokens. Some of the big virtual currencies prices fell sharply anywhere between 4 percent and 9 percent during the mid-morning session on Tuesday. That is because investors feared that the rules applicable to the stock market would become applicable to the cryptocurrencies too.

The Securities and Exchange Commission (SEC) is not convinced with the term the Commodity Futures Trading Commission (CFTC) provided. The SEC believes that the creation of cryptos in 2014 was an illegal act of securities sale. The regulator sees the new age instrument more as securities only whereas CFTC has termed it as commodities. As a result, cryptocurrencies were exempted from the purview of the SEC regulation. However, a joint discussion will be held next week to consider the status of the digital currencies, Fortune reported.

There are already investigations going in respect of the creators of virtual currencies. They are also looking into the aspect of any creator having control over the value of the tokens or coins. If the investigators come across any such thing, then the sector would be inviting problems. That would also mean the increased chances of regulation and bring under the purview of the SEC.

As a result, cryptocurrencies would be treated on par with those of stock performances. Generally, the performance of the stock is getting impacted either favorably or unfavorably due to decisions are taken by the management of the companies. This included earnings number or the forecast provided by it any other management changes that will come into effect.

Weak Opening

The first quarter is completely hampered by different unfavorable news in the digital coin sector. However, that came after most of the virtual currencies prices have hit the rooftop towards the end of the year 2017. Some of the cryptocurrencies delivered more than 1000 percent returns last year thus attracting more and more people. However, the month of May witnessed a weak opening for the virtual coin sector after significant gains in April.

The gains in April were attributed to different reasons. This included expanded acceptance of bitcoin though there is an element of continued uncertainty. Also, some of the European nations are showing increased interest in the digital coins. However, no central bank is ready to accept that cryptocurrency would replace traditional currencies.