Why bitcoin and its digital cousins are under increasing scrutiny

said braka 9:31 AM
Cryptocurrencies are under the microscope

as never before. Financial regulators in the US are concerned about the emergence of bitcoin and its digital cousins as speculative investments and have hinted that much tougher regulation is in the pipeline.
Last week, the Securities and Exchange Commission (SEC), which regulates the New York financial markets, issued an alert, saying it was “cautioning market participants that offers and sales of digital assets by ‘virtual’ organisations are subject to the requirements of the federal securities laws”.
The message was that selling coins issued by a digital currency provider and selling shares on the stock exchange amount to pretty much the same level of risk. This sent tremors through the digital currency industry.
The Bank of England, the UK’s main financial regulator, reckons that digital currencies remain very different from standard currencies such as sterling and the dollar because they “act as money only to a limited extent and only for relatively few people”. A spokeswoman for the Bank said it was monitoring developments.
At the same time, the consumer watchdog, the Financial Conduct Authority, is considering the impact of digital currencies, and plans to report on its findings later this year.
The nub of the problems the authorities are considering is that digital currencies are behaving more like an investment than simply a way to pay. Supercharged increases in the value of bitcoin and ethereum, the two largest digital currencies, have recently driven the total value of cryptocurrencies to more than $100bn.
Certainly, they are becoming more acceptable as money: consumers can buy a Dell computer with bitcoin and gift card businesses in the US accept bitcoin, which can then be used at big retailers such as Walmart, Amazon and Nike.
In the UK, Theatre Tickets Direct has recently started accepting bitcoin to buy tickets for London West End shows, along with the online craft beer supermarket Honest Brew.
Peach Aviation, a low-cost Japanese airline, last month became Japan’s first airline to allow customers to pay directly for tickets using bitcoin.
While some people are now being paid in bitcoin, others buy them from exchanges or directly via websites like eBay, from people who have “mined” the coins.
Bitcoin was invented in 2009 when an anonymous software developer issued the first of a limited number of coins based on the novel concept of a digital ledger or blockchain in which transactions made are recorded chronologically and publicly. Buyers and sellers remain anonymous, but the transactions are transparent and transferred at virtually no cost, unlike the transactions processed by stockbrokers and banks, which levy large fees.