Fighting fraud in virtual currencies has almost become a game of Whac-A-Mole for regulators and federal prosecutors, who find each new iteration seemingly a few steps ahead them, according to a New York Times commentary. The challenge the authorities face is that cryptocurrencies are so new that they do not fit neatly into laws that were passed decades ago prohibiting misconduct in the securities and commodities markets. It will take time for those regulations to catch up, according to the commentary. Unlike fraudulent schemes or theft from individual investors, this type of conduct cuts to the heart of the market for virtual currencies. It means that prices may not reflect any true value but instead are being driven up or down artificially by those seeking to profit, according to the commentary. The SEC’s jurisdiction only covers investments used to help fund companies, and Bitcoin hardly fits that model. Instead, the agency has focused on companies using initial coin offerings to raise money, arguing that doing so is the same as selling stocks or bonds to investors, and therefore the complex securities registration rules must be followed.
