It was perhaps inevitable that people would be gunning for cryptocurrencies in 2018. The success of 2017 – with Bitcoin shooting up from US$1,000 to almost US$20,000 at its peak - earned headlines far beyond the world of traders. Prices were volatile – beyond even the sort of volatility seen by those on forex trading platforms – and the sector shook politicians, investors and banks alike. It was a classic case of digital disruption, but the disruption was not to be without consequences.
While banks were clearly never going to be happy at something that chipped away at their influence – cryptocurrency offers a way to conduct transactions away from their glare, after all – some of the downsides of digital currencies have forced politicians to act.
The fast moving nature of the market has presented opportunities for scammers – with people using fake social media profiles to try to engineer extra price volatility. Meanwhile, the attraction of a secure and private payment platform away from the eyes of central banks has, perhaps inevitably, attracted people wanting to make illegal transactions.
The combination of damaged pride, alleged criminality and the fact that the 'financial establishment' is catching up with cryptocurrency, points clearly to a crack down in 2018. So far, this has come in two forms: legal regulation and advertising restrictions.
The arrival of serious regulation for the cryptocurrency market, in truth, began late last year. Here in Australia, a financial scandal involving the Commonwealth Bank of Australia sparked reforms to strengthen the anti-money laundering laws to include the likes of Bitcoin. This brought cryptocurrencies under the remit of Austrac – and mirrored similar developments in Japan.
In 2018, the pace and scale of reform has picked up – most notably in South Korea where tougher regulations were brought in at the end of January. This restricted trading to 'real-name bank accounts' in a bid to stop both criminals and children from engaging in this activity and bringing this into line with the obligations placed upon banks known as KYC AML (know your customer, anti-money laundering).
That stopped short of an outright ban – as discussed on fevered gossip columns across the growing crypto community – but has set the tone for others to follow.
Advertising clamp down
On top of that, Google has recently revealed that, from June, it intends to ban all cryptocurrency and binary options adverts.
Business Insider notes that the ban includes initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice.
Scott Spencer, Google's Director of Sustainable Ads, said in a blog post that this will help to prevent online scams – and the move brings the company in to line with Facebook.
Don't write it off just yet
If it's harder to trade them and harder to market the sector, does that mean problems lie ahead for cryptocurrencies? Some experts certainly think that such crack downs will help to burst the bubble and spell trouble for the future of the market.
However, it shouldn't be forgotten that the price of Bitcoin is still high – probably much higher than many would have thought possible at the start of 2017 – and new rival cryptocurrencies have also shown strong growth. While a series of regulations might keep price growth in check, there's an argument to be made that both of these measures will help cryptocurrencies in the long run. If new rules can convince investors that the asset is safe – and scams can be eradicated (or at least reduced) – then that improves the image and long-term prospects of the market as a whole.
Indeed, Twitter CEO Jack Dorsey went as far as to predict that – over the next decade or so – Bitcoin might come to be the only currency used for internet transactions. That prognosis is certainly brighter than some – but it goes to show that it'd be wrong to ignore cryptocurrencies, especially on the back of news that doesn't necessarily need to be negative in the long term.
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