It’s hard to imagine that even the most ardent bitcoin or digital currency enthusiast isn’t doing a bit of reassessment in light of events in recent days. Prices have been on a roller coaster that doesn’t appear to have an end … at least a good one. There’s still hope, however, that digital currency’s future can be bright if bitcoin’s big blind spot is addressed.

As a financial regulator for years, I was tough on enforcement and always a consumer/investor advocate. There’s no questions—zero—that had digital currencies been regulated, I would have sought an investigation into the precipitous price changes we’ve witnessed.

Just two years ago, bitcoin was trading in the low $200s. Since then, it has risen over 2,200 percent reaching a high of just over $5,000 earlier this month. Commentators questioned if there was a bitcoin bubble (ya think?). Two days later, Chinese regulators—the Securities Regulatory Commission and the Banking Regulatory Commission, among others—curtailed initial coin offering (ICOs).

That action, rightly, made many investors jittery and jumpy. Some chose to jump off the bitcoin bandwagon at the big prices. The result: prices plummeted for days to roughly $3,500 last week when JP Morgan Chase CEO Jamie Dimon famously called bitcoin a “fraud” that would not end well. Prices went even lower. Then, on Friday, Chinese regulators banned digital currency exchange trading altogether. Prices dropped again to below $3,000. But then something happened that makes sense only from a manipulative mindset: Prices soared to over $3,800. There’s no rational reason for such moves other than some are efforting (successfully, to date) to buoy prices and calm otherwise edgy and excitable bitcoin investors. In the past few days, bitcoin has been around $4,000.

We’ve seen, time and again, where problems related to bitcoin have manifested. In 2013, the FBI shuttered the online digital currency exchange, Silk Road. This digital-currency trading platform provided an online black market for money laundering of illegal drugs, weapons and human trafficking and other nefarious offerings. In 2014, the then-largest digital currency exchange, Mt. Gox (in Japan) went bust—initially losing roughly $475 million of investors’ money. Poof! It was gone.

All of this has occurred, in large part, for two primary reasons.

1—Digital currencies like bitcoin aren’t like stocks. There’s no value of a company building, employees, products or patents or intellectual ingenuity. And, digital currencies aren’t (at least at this time) like a commodity which has underlying value of a physical asset. Unlike oil, gold or corn, with digital currencies, there’s no “there” there—no physical stuff, or even made-up stuff backed by anyone or anything. The only thing that alters the prices of digital currencies is the extent to which others are willing to pay for such currencies. That’s why the value can be gone in a heartbeat.

2—Digital currencies are largely unregulated by governments. There are no anti-money laundering (AML) and know your customer (KYC) requirements like banks have worldwide. There are no segregated customer accounts or clearing which back up customers if there’s an exchange failure. There’s no sure-footed surveillance to ensure trading is taking place in an orderly and appropriate fashion. And, importantly, there’s no investigative force to ferret out bad actors and no digital currency-specific fines or penalties. This all makes digital currencies exceedingly susceptible to fraud and manipulation. It’s an open range for abuse. Buyer beware? You betcha.

The Chinese actions should send a clarion call to digital enthusiast that they need to have some basic regulatory oversight. Rather than waiting for governments to take actions that thwart the development of digital currencies, they should lead efforts to put in place appropriate regulatory oversight for these new and innovative financial technologies.

Recording and transfer of data to digital has been taking place for decades—from music to movies, cameras to computers. Money is no different. It will be digitized. The pace at which that occurs will be determined by how quickly those involved in digital currencies accept and adapt to a real regulation and adjust such currencies to better protect consumers and investors. Visionary leadership is needed. Without it, there’s a mounting risk that more and more governments will simply ban—or over-regulate—bitcoin and other digital currencies.

Commentary by former US Trading Commissioner Bart Chilton. He is also the author of “Ponzimonium: How Scam Artists Are Ripping Off America.”

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