The price of bitcoin and most other major cryptocurrencies dropped sharply on Friday after financial regulators in Japan ordered several crypto exchanges to improve their anti-money laundering practices, adding to long-standing fears that government crackdowns could hurt the market.
In response to the mandate from Japan’s Financial Services Agency, bitFlyer—the largest cryptocurrency exchange in the country—suspended the creation of new accounts while it improves its practices.
“Our management and all employees are united in our understanding of how serious these issues are, as well as how serious we are in responding to them going forward,” bitFlyer said in a statement.
Japanese regulators gave the same order to five other exchanges after reportedly noticing weaknesses in how they combatted money laundering.
To some, the move might seem like a minor setback that should be expected as users and governments continue to adapt to new technologies. But Friday’s selling stems from a few legitimate concerns about what Japan’s regulatory move could mean in the near- and long-term future.
For starters, bitFlyer’s response interrupts the flow of new capital to one of the largest cryptocurrency exchanges in the world. The Japanese yen accounts for a majority of bitcoin’s daily volume, so it is obvious that any interruption in this market will cause headwinds.
Moreover, the regulatory order speaks to a greater concern for crypto enthusiasts—one which threatens the potential long-term impact of digital currencies. Widespread government crackdowns and new laws could very well diminish the overarching point of cryptocurrencies, which—for many users—is to circumvent traditional financial sector barriers.
Japan has led the way in terms of regulation so far, although other countries have joined in the effort recently. Just a few weeks back, The Wall Street Journal reported that U.S. regulators are investigating potential price manipulation at four major exchanges occurring after CME Group (NASDAQ:CME) launched bitcoin futures.
According to CoinMarketCap.com, bitcoin prices have dropped more than 7.7% over the past 24 hours. In that time, Ethereum—the world’s second largest cryptocurrency by way of market cap—has slumped about 9.9%, Ripple has tumbled 6.5%, and Bitcoin Cash has lost more than 11.8%. Litecoin, a popular coin among traders and retail investors, has also dropped about 11.5%.
Overall, only two of the top 100 cryptocurrencies have remained in the green in the past day, based on CoinMarketCap’s data. The total capitalization of the global crypto market has shed nearly 9.5%.
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