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Regulations may halt the cryptocurrency craze

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The thought of virtual money is obscure, but not entirely unfathomable. Like stocks and similar investments, you can purchase and sell cryptocurrencies such as Bitcoin or Ethereum that have slightly unusual properties. Many older investors are curious about whether to enter the market. However, economists and market observers have a few new concerns.

On this blog, we previously discussed how people sold fake cryptocurrency investments to Baby boomers. Governments around the world have begun to notice that this kind of behavior is placing investors at risk. These virtual coins, given their newfangled status, have not faced regulation like established currencies, but that may soon change.

China, Japan and South Korea plan to regulate cryptocurrencies in the near future, if not forbid them altogether. American officials may also seek to create laws to protect investors and detect illegal activity, such as money laundering. The SEC already warns investors to tread this virtual market carefully.

Because digital currencies cross international markets, regulations in any country impact all investors. This could have a profound effect on the value of existing crypto investments. Cryptocurrencies can fluctuate between hundreds of dollars over a few hours, but the threat of regulation could cause a steady – perhaps sharp – decline. Investors might start to exit the market in an attempt to sell their coins at maximum value before regulatory requirements make trading more difficult.

While new legislation threatens the value of digital coin for current participants, investors could also benefit from additional government protection. Regulations could facilitate justice in securities litigation cases. They could potentially decrease the amount of fake investments from both domestic and overseas fraud.