Bitcoin took a hit last night after the US Securities and Exchange Commission (SEC) announced it will require digital asset exchanges to register with the federal agency.
Prices plunged by more than $1,000 in the space of an hour, falling from $10,673.03 at 4.40pm GMT to $9,481.45 by 5.22pm GMT on Wednesday, according to CoinDesk.
So far on Thursday the token has attempted to claw back its losses, kickstarting trading at $9,906.80 and peaking at $10,030.63 after 1am.
As of 8.33am Bitcoin is exchanging hands for $9,865.37 – down 0.42 percent.
The SEC announcement last night sparked fears of tighter cryptocurrency regulation, forcing traders to pull back.
According to the agency, digital assets moving through exchanges need to abide by federal laws, to protect investors’ best interests.
The SEC said in a statement: “If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.
“The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.
“Many platforms refer to themselves as ‘exchanges’, which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.”
The decision came in the wake of news hackers have caused “irregular trades” on Binance, one of the word’s biggest and most popular cryptocurrency exchanges.
Though Binance said no traders had their tokens stolen, the hack highlighted security issues that are present in the crypto sphere.
Some have now welcomed the SEC’s move in the wake of recent events, seeing it as a step in the right direction towards protecting customers.
Joseph Weinberg, OECD Think Tank special advisor and chairman of Shyft, said: “The SEC is doing their jobs in protecting consumers from market risks.”
According to Mr Weinberg, ‘cryptocurrency exchanges’ is a misnomer term which has lulled many customers into a false sense of security.
He explained: “Exchanges are regulated by the SEC and under IOSCO policy to be regulated by securities regulators.
“Our ecosystem has never been good at branding – Bitcoin isn’t actually a coin, ICOs aren’t actually coin offerings and exchanges aren’t actually exchanges.
“‘Crypto exchanges’ are actually marketplaces where buyers and sellers come to transaction between two or more parties.
“The majority of technology professionals building these exchanges aren’t familiar with securities law where terminology is very important. To use the terminology of an exchange implies securities dealings and securities markets.”
The crypto expert said more work needs to be done between governmental agencies and organisations to “focus on policy for the industry”.