Why the price drop?

From an exchange perspective, the classification as a security would mean that exchanges trading Ether, and other cryptocurrencies classified as securities, would need to register with the U.S Securities and Exchange Commission or equivalent or face quite punitive fines. With exchanges looking to elude the grasps of governments and regulators the world over, in the interest of maintaining existing client bases and revenue streams, the easiest solution for an exchange would be to simply remove Ether from their trading platforms.

The price impact on Ethereum and any others that are classified as securities, which could ultimately lead to their exclusion from crypto exchanges, would be significant. Removal from exchanges makes their availability become significantly more limited, leading investors to look elsewhere for more liquid cryptocurrencies and to be able to buy and sell without falling under the scrutiny of governments and the SEC in particular.

From an investor perspective, investing into cryptocurrencies through exchanges that eventually fall under the purview of securities regulators would mean a removal of the very anonymity that has drawn many investors into the market from the beginning.

The introduction of KYC and anti-money laundering policies would require some, but not all investors, to disclose information that could ultimately lead to the seizure of assets and so forth. While the debate can go on over how much dirty money is flowing through the system, there’s undoubtedly enough to make a dent in the event of withdrawal.

Exchanges that do decide to continue to support cryptocurrencies that become classified as securities will also need to material increase costs through the introduction of the very policies and procedures required by regulators such as the SEC. While for some it may be considered an opportunity to draw in clean money and take advantage of the widening investor base, for others it may be an unjustifiable cost burden, another reason to pull the cryptos that get classified as a security.

As far as Ethereum investors and the broader market are concerned, falling under the Commodity Futures Trading Commission would be a far more favourable outcome, the commodity spot market considered to be a far less regulated environment than under the SEC, the CFTC being more focused on incorporating limits on margins, ensuring transparency while looking to manage insider trading in the spot market.

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