What's happening?

Shares of Bitcoin Investment Trust (GBTC -0.08%) are down by roughly 11% as of 1:00 p.m. EST, following the 9% plunge in bitcoin (BTC-USD) since the close of the stock markets on Friday. Cryptocurrencies large and small are diving in value as investors try to make sense of recent regulatory action.

So what

On Friday, the Securities and Exchange Commission (SEC) settled charges against two companies for their illegal initial coin offerings (ICOs). The SEC contends that CarrierEq Inc. (AirFox) and Paragon Coin Inc. should have registered their ICOs, which raised $15 million and $12 million, respectively, as securities.

Put simply, the SEC believes that companies that raise money by issuing "coins" or "tokens" should register with the SEC just as companies who raise money by selling stock to the public do.

Artist's rendering of what a physical bitcoin token might look like.

Image source: Getty Images.

In a press release, Stephanie Avakian, co-director of the SEC's Enforcement Division, said, "these cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets." It's being interpreted as a warning that a regulatory "open season" may soon begin on unregistered sales of tokens to investors.

Earlier this month, the SEC took aim at an online exchange for helping investors transact in digital currencies. The SEC charged Zachary Coburn, founder of trading platform EtherDelta, for operating an unregistered exchange. The settlement included $300,000 disgorgement of earnings, $13,000 of interest, and a $75,000 penalty.

Now what

The SEC's crackdown on ICOs and exchanges doesn't directly relate to bitcoin or Bitcoin Investment Trust, but it's a sign that regulators may take aim at companies that issue cryptocurrencies, as well as at those that make markets in them. Shares of Bitcoin Investment Trust are backed by roughly 0.001 bitcoin each, thus making it the only quasi-bitcoin ETF easily available to American traders.

The market seems to be taking the view that anything that makes cryptocurrencies harder to purchase is bad for bitcoin, the biggest cryptocurrency of them all.