Cryptocurrency prices tumbled Tuesday as El Salvador became the first country to adopt bitcoin as legal tender.
President Nayib Bukele, who has pushed for adopting the cryptocurrency, said it will help Salvadorans save about $400 million the government calculates is spent annually on commissions for remittances.
Bukele said last month that the country will open 200 ATMs and 50 kiosks Tuesday to let its citizens make Bitcoin exchanges.
The change means businesses could accept payment in bitcoin alongside the U.S. dollar, which has been El Salvador's official currency since 2001 and will remain legal tender.
Supporters of the move say it will lower commission costs for billions of dollars sent from abroad, while critics warned it may fuel money laundering.
Bitcoin tumbled 9.4% to $46,854, after breaking through $52,000 Monday, its highest level since May.
Ethereum was sank 12.7% to $3,436 and DogeCoin dropped nearly 19% to 24 cents.
Bukele said on Twitter early Tuesday that El Salvador temporarily disabled Chivo, its government-run bitcoin wallet, to increase the capacity of the servers, which were hindering new users from installing, CNBC reported.
Meanwhile, JPMorgan Managing Director Nikolaos Panigirtzoglou said retail investors have been propelling altcoins to new highs since early August, according to Forbes.
He pointed out that Bitcoin and Ethereum's share of the market has fallen from 78% on August 4 to about 67% amid waning institutional interest in funds tied to the two top cryptocurrencies.
Panigirtzoglou said bitcoin's share of the market in particular looks "uncomfortably low" by historical standards—a likely reflection of "froth and retail investor mania," as opposed to sustainable gains.
Winston Ma, a former managing director and head of North America at China Investment Corp., said the newly aggressive Securities and Exchange Commission is accelerating its regulatory action after SEC Chairman’s Gary Gensler hawkish speech at the Aspen Security forum.
During his address Gensler warned "we just don't have enough investor protection in crypto" and added that, "frankly, at this time, it's more like the Wild West."
Ma, author of "The Digital War - How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace," said that the SEC's reported investigation of Uniswap, the developer behind the biggest decentralized cryptocurrency exchange, "is a milestone moment."
Regulators are investing how products created by Uniswap Labs, which developed DeFi exchange Uniswap, are used by and marketed to customers, according to the Wall Street Journal.
The company told the New York Post in a statement that it is "committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.”
"The decentralized exchanges are at the center of the creation of crypto products in the same way stablecoins at the center of the transaction of crypto products," Ma said. "With the SEC looking at the exchanges and US Treasury looking at stablecoins, the US crypto industry may soon embrace a completely new regulatory framework."
David Lesperance, managing partner of immigration and tax adviser with Lesperance & Associates, noted that Sam Bankman-Fried, who co-founded the FTX crypto exchange, said if cryptocurrencies do some self-policing "government regulators are going to drop their current (and entirely predictable) push for the imposition of Know-Your-Customer and anti-money laundering measures."
"I wonder if those using his exchange or his investors share his optimism?" Lesperance asked. "If he is wrong, he need look no further than Arthur Hayers for a glimpse of his future. FTX investors and exchange users need to look no further than the experience of their peers from BitMex."
Hayes, former CEO of BitMex, was charged with in April with violating the Bank Secrecy Act. His attorneys at the time said Hayes was "a self-made entrepreneur who has been wrongly accused of crimes that he did not commit."