Bitcoin hit a year low on Sunday, dropping to $5,900 before bouncing back to $6,180 as regulators prepare to pounce.
The bears were given renewed vigour by global financial regulators, with the Japanese Financial Services Agency ordering six exchanges, including bitFlyer, the country’s largest, to revamp their business processes to comply with anti-money laundering regulations.
A succession of exchange hacks, whose frequency seems to be increasing, has also worried market participants that fear overbearing regulations may be introduced by the authorities. Industry players are concerned that regulators may not get the balance right between protecting investors and fostering innovation in the crypto sector.
The Bank for International Settlements (BIS) has also added to the worries following a report last week that questioned the viability of crypto and a recent statement urging the financial authorities to regulate crypto as they would mainstream financial assets such as equities and bonds.
Hacks of South Korea’s Coinrail exchange two weeks ago and of the much larger Bithumb last week are seen as likely to further encourage regulators to act sooner rather than later.
Positves for the sector such as payments startup Square receiving a bitlicense from Nrw York State and the Japanese bankruptcy court in the Mt.Gox case ordering funds to be returned to creditors, which removes the threat of the bankruptcy trustee dumping bitcoin on the market, have for now been discounted.
Elsewhere, fifth-placed coin EOS is up 10% today as it joins the bounce seen across the sector but its governance problems continue.
The EOS networks arbitration and wider governance regime are being called into question.
First, the EOS’s 21 block producers froze seven accounts and then the EOS Core Arbitration Forum froze another 27. The freezing we to protrctbtoken holders from phishing attacks but the manner in which the intervention have happened and the fact that they happen at all has led some to question the decentralisation of the blockchain.
The EOS constitution, which is currently designated as interim, has also come in for criticism because of its Article XV that allows for the effective seizure of tokens that have not been used for three years. The Article exists to guard against resources being drained from the network due to dormancy but the draconian nature of the solution appears to fly in the face of the lofty aims of the network to protect “life, liberty and property” inpertuity.
The EOS experiment in governance shows the problems with implementing a proof of stake system that enables enterprise level scale but which has to make trade offs in terms of censorship resistance and decentralisation.
Nevertheless, those EOS tokenholders who had fallen victim to scammers will be thankful that the arbitration mechanisms exist to freeze accounts before criminals could move the tokens to an exchange.
Gary has been writing about cryptocurrencies since 2013 and currently works as the cryptocurrency analyst at interactive investor, the UK’s second-largest online investment platform. Gary contributes for Coin Intelligence News in a personal capacity and none of his commentary should be considered investment advice. Gary is the winner of the ADVFN International Financial Awards 2018 Cryptocurrency Writer of the Year. Contact Gary on twitter at: @gary_mcfarlane