Bitcoin zoomed 24% in value in just 24 hours after a surprisingly positive hearing on cryptocurrency and blockchain held by the Securities and Exchange Commission (SEC), the main U.S. securities market regulator.
The SEC was joined by the Commodity Futures Trading Commission (CFTC) at the event Feb. 5.
“There should be no misunderstanding about the law. When investors are offered and sold securities — which to date ICOs have largely been — they are entitled to the benefits of state and federal securities laws and sellers and other market participants must follow these laws,” the SEC said in a statement released during the hearing.
ICOS are initial coin offerings, the startup phase of a new cryptocurrency.
Nevertheless, the agency explained at the event that regulations would be applied on a case-by-case basis rather than across the entire market and that they are specifically aimed at companies trying to scam clients.
The coin market roared back on the change of tone, with all the top 100 crypto coins in the green with some doubling over 24 hours.
NEO and NEM increased by 55 and 46 percent respectively, while Bitcoin Cash and Ethereum gained up to 33 percent.
Statements by the agencies prior to the hearing seemed to a suggest a coming crackdown on crypto and even demonstrated a fundamental misunderstanding of the difference between Bitcoin, cryptocurrencies, initial coin offerings and the blockchain.
The SEC chair and CFTC chair had previously co-authored an Op-Ed piece in The Wall Street Journal, dated Jan. 24, that many took as a signal of increased scrutiny and regulation.
The bad news did come for crypto companies offering ICOs. They had wanted to define their offerings as currencies but now must register with the SEC, abide by securities regulations, and be liable for violations.
Penalties would range from the freezing of assets raised during token and ICO sales to criminal penalties, including for fraud.
The SEC and US courts have recently establish their “Long Arm of the Law” powers abroad apply to cryptocurrencies. Assets have been frozen as far away as Switzerland, Israel, and Hong Kong.
Then came the clincher that every crypto investor feared: restricting coin investment to the wealthy.
“Prohibiting certain classes of investors from participating in a security or marketplace is nothing new,” the statement read. “For example, certain private offerings are only allowed to accredited individual investors, while others are reserved for the more specific classes of investor.”
In order to be an accredited investor, you must have at income of at least $200,000 or a net worth of at least $1,000,000.