Bitcoin prices collapsed by more than 9% this morning after Japanese cryptocurrency exchanges stopped creation of new accounts in response to a demand from regulatory authorities to tighten internal controls for fighting money laundering. Bitcoin’s price fell from $6668.03 to $6122.84 after the order was issued. At 15:18 UTC, the price of a single bitcoin was $6,165.17, down 8.22% from 24 hours ago.
No More New Accounts
In its order, Japan's Financial Services Authority (FSA) targeted bitFlyer and five other leading exchanges in Japan. bitFlyer suspended new account creation to “maximize” its efforts for “building a suitable service." The exchange stated that it was re-implementing the confirmation process for accounts.
According to Brian Kelly, founder and CEO of BKCM, a cryptocurrency-focused investment firm, FSA’s order had the effect of hindering capital flow to new exchanges. Still, he was sanguine about the long-term effects of the move and told CNBC that it would help legitimize bitcoin as an asset class by building a better ecosystem.
Japan's Role in Bitcoin
Japan is the largest market for bitcoin trading. According to some reports last year, bitcoin’s phenomenal price rise last year was propelled by Japanese housewives looking for high returns in a deflationary economy marked by low investment returns. However, that upward trajectory was cut short this year after the biggest cryptocurrency theft ever was carried out at Coincheck, a prominent Japanese exchange. (See also: Coincheck May Have Suffered The Worst Hack In Cryptocurrency History) The FSA has stepped up its efforts to monitor cryptocurrency exchanges after the incident. For example, it conducted onsite inspections of exchanges in February and rapped exchanges that did not have adequate security measures to protect customer funds.
Bitcoin’s price has been on a downward slide since the start of this year. Several factors, from government crackdown to hacks and scandals to regulatory stalemates, have contributed to the decline. As of this writing, the cryptocurrency is down by 54% from the start of 2018. (See also: Cryptocurrency Markets Gain $13 Billion In 1 Hour).
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin and litecoin.