Across cryptocurrency forums and blogs, the word of the month is “capitulation”. With bitcoin below $5,000 for the first time since October 2017, leading figures in the community have turned on each other in a spiral of finger pointing, while crypto-enthusiasts are at war with detractors who see this as a victory for fiat currencies. While this may not be the end for bitcoin and company, the crash underlines the question of whether it is worth trying to bring cryptocurrencies into the mainstream at all.
There are plenty of reasons to view cryptocurrencies with concern, including immense volatility (bitcoin has lost 30 per cent of its value over the week), fraud and manipulation, the fact that a number of initial coin offerings have turned out to be scams, and their use by money launderers and terrorists. But, as is endemic in the technology industry, regulation has struggled to keep pace. Proposed “self-regulation” has, unsurprisingly, been lacking: the Winklevoss twins’ Virtual Commodity Association, formed in August to provide “an industry-sponsored, self-regulatory organisation”, has been quiet even as crypto has collapsed.
Authorities have been more proactive. The UK’s Financial Conduct Authority is mooting a ban on cryptocurrency derivatives, while a UK Commons select committee has decried crypto-asset markets as the “ Wild West”, and called for regulation. Hong Kong’s Securities and Futures Commission this month said it was examining plans to regulate cryptocurrency exchanges. In September, a report from the New York attorney-general’s office called out the industry for conflicts of interest and insufficient protection from market manipulation.