On the evening of Friday, March 12 Beijing Time, the CFTC, the U.S. Commodity Futures Trading Commission, is investigating whether the world’s largest cryptocurrency trading platform, Coinan, is illegally allowing Americans to buy related derivatives, a media outlet said, citing anonymous sources familiar with the matter.
Bitcoin fell below the $56,000 round figure mark on the news, dropping about 2 percent in 24 hours and moving nearly $1,000 lower in a matter of minutes. Ether, the second-largest digital currency by market value, also fell below $1,750 at one point.
But two hours after the U.S. stock market opened, bitcoin turned up again during the day, up more than 1% and back above $57,000, and ethereum returned to $1,770, narrowing its intra-day decline to more than 1%.
Analysts say this may be related to the trading pattern exhibited by bitcoin this week, where it typically records intra-day locations in the Asian or European sessions and approaches daily highs in the U.S. session. Some claim this could be due to the mining and selling of bitcoin during the Asian session to buyers who entered during the U.S. session.
Changpeng Zhao, co-founder and CEO of Cryptocurrency, said on Friday on Clubhouse, the recently mega-hit audio social media App, that the company will cooperate with regulators and that their investigation does not necessarily mean the Company will face charges of misconduct.
He declined to comment on whether the CFTC is investigating Cryptocurrency, saying the company is in strict compliance with U.S. regulations and has strict controls in place to prevent customer money laundering: “We will continue to improve compliance and will also actively work with global regulators to improve industry compliance standards.”
Cryptocurrency had said in a statement on Thursday that the company blocks U.S. residents from accessing its website and uses advanced technology to analyze deposits and withdrawals for signs of illegal transactions, and that it takes its compliance obligations “very seriously.” However, regulator CFTC declined to comment on the matter.
Earlier Friday, it was reported that the CFTC, which regulates derivatives trading, was trying to determine whether Cryptocurrency, which is not yet registered as a broker with the regulator, was allowing U.S. residents to buy and sell digital currency derivatives. Cryptocurrency has not yet been accused of misconduct, and the investigation may not lead to enforcement action.
Notably, last October, the CFTF sued BitMEX, based in the Seychelles, an archipelagic nation in the west-central Indian Ocean, in U.S. federal court for allegedly allowing U.S. persons to trade cryptocurrency derivatives and for not registering as a broker with the CFTC. The U.S. Department of Justice also filed a criminal complaint against BitMEX’s founders, accusing them of violating U.S. laws designed to prevent money laundering.
The CFTC considers cryptocurrencies such as bitcoin and ethereum to be commodities and has jurisdiction over their futures and other derivatives. This means that regardless of where the trading platform is based, anyone with U.S. persons trading on it faces strict customer protection and regulatory requirements.
Some analysts say the investigation against Coinbase reflects the fact that U.S. regulators are stepping up scrutiny of the digital currency, potentially preventing it from becoming a mainstream investment asset. Coinbase, the largest U.S. cryptocurrency exchange, also revealed last month that it was responding to a wide-ranging CFTC investigation. The U.S. Treasury Department is also considering new regulations that would require banks to record the identities of holders of invested virtual assets to combat money laundering and other illegal activities.
But Zerohedge, a financial blog known for its venom, says the past five years of examples prove that regulatory intervention ultimately doesn’t count for much, and that only a tightening of monetary policy by the Federal Reserve can burst the bubble of high bitcoin prices. And with more and more institutions embracing digital currencies, it’s almost impossible for regulators to squelch the industry’s growth.
For example, cryptocurrency insiders have recently noted that Grayscale Investments, the firm that fueled bitcoin’s current bull market, has opened at least nine job openings related to cryptocurrency ETFs on Collage.
Industry insiders say the SEC’s release for the first cryptocurrency ETF is just around the corner, and Grayscale is urgently assembling a team and filing another ETF application to catch the boom.
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