Why Cryptocurrencies Are in for a Very Bad Day **VERY BAD**

in bitcoin •  9 months ago

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Judge Jack B. Weinstein , who has served in New York's Eastern District since 1967 , filed a 79-page preliminary injunction against a cryptocurrency trading advice firm that stands accused of fraud. The company in question was hardly a major player , but the ramifications of the order have the potential to impact the entire virtual currency market.

In mid-January , the Commodity Futures Trading Commission - one of several agencies struggling to regulate the booming cryptocurrency market - announced it was charging a small virtual currency trading advice firm called CabbageTech with fraud. In itself , this is not unusual: The CFTC and SEC have been nipping away at the ugliest edges of this space , increasingly bringing charges against small but egregious players. CabbageTech , which fleeced investors after promising absurd weekly returns , falls within the normal bounds of CFTC's quarry. From the injunction:

Instead of achieving enormous gains on behalf of CDM Customers , once Defendants had solicited and obtained CDM Customer funds for trading by Defendants on behalf of customers , Defendants ceased communicating with the customers and misappropriated the customers funds

Wider-reaching enforcement , however , has been stalled. Agencies unwilling to stifle innovation have avoided a heavy hand , but cryptocurrencies have also been difficult to define from a regulatory standpoint. The CFTC's own chairman , Christopher Giancarlo , sat before Congress last month and explained that bitcoin can function as a currency , means of account , and an asset during a hearing that made clear no single agency currently has enforcement power over this sector.

But Judge Weinstein's injunction may change that , by upholding that cryptocurrencies fall under the Commodity Exchange Act , a 1936 law governing the trading of commodities and futures. Not only does this give precedent for CFTC to more aggressively pursue fraud , the CEA has broad implications on the regulation of exchanges , meaning the various coin swapping platforms virtual currencies are traded on now , like Coinbase , may become a target for CFTC in the near future.

Panic is already beginning to spread across the cryptocurrency investment space as a result of Judge Weinstein's order , an SEC statement saying crypto-trading platforms should register as security exchanges , and rumors of a hack on the Binance exchange.

There's new urgency for organized , sanctioned exchanges as regulators begin to prune away fraudsters from the virtual currency space. Perhaps reading the tea leaves , Paypal filed a patent earlier this week for its own " expedited virtual currency transaction system. "

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