It has been a turbulent few months for cryptocurrency investors. Elon Musk’s hot and cold relationship with Bitcoin has caused massive fluctuations in its value, as he highlights environmental concerns regarding the energy usage of cryptocurrency mining. China has gone one step further, banning cryptocurrency mining as well as clamping down on trading as it seeks to pave the way for its own central bank backed Chinese digital currency. In the latest blow, Barclays bank has intervened to stop UK investors using their credit or debit cards to deposit funds into the world’s largest cryptocurrency exchange, Binance.

Their decision comes hot on the heels of the UK’s Financial Conduct Authority’s (FCA) ruling that Binance is not permitted to conduct any regulated activities within the UK, as the Cayman Islands headquartered company has not registered with them. The FCA went further on its website stating: “Be wary of adverts online and on social media promising high returns on investments in cryptoasset or cryptoasset-related products. Most firms advertising and selling investments in cryptoassets are not authorised by the FCA.”

This is certainly not the first case of legal trouble for cryptocurrencies – last year the US Securities and Exchanges Commission (SEC) launched a surprise lawsuit against Ripple Labs and two of its executives Chris Larsen and CEO Brad Garlinghouse who were managing cryptoasset XRP. The SEC claims that the centralised nature of XRP meant that it was not a commodity as advertised, but in fact an unregistered security, which the executives had profited from to the tune of over $1 billion dollars.  The legal action caused the second largest crypto-exchange Coinbase to suspend trading of the asset, but this has not stopped customers filing lawsuits against the exchange claiming it was profiting from an illegal asset.

These high-profile controversies are perhaps the teething problems of a nascent industry which has exploded over the past twelve months in a goldrush style mania of speculation, reaching its zenith in April of this year as Bitcoin hit over $60,000 a coin in price. As the wheels of politics and law-making are famously slow to turn, there was naturally a period of lag between this feverish consumer investment rush and the legal framework catching up. Bitcoin’s price has continued to fall since its peak in April as a myriad of concerns mount up: its environmental impact, its use in money laundering and organised crime such as the cyberattack on the Colonial Pipeline, and the fears that regulation will be the final nail in the coffin.

Some of the cooling in the cryptocurrency market may be unrelated to these issues – opportunistic investors often move onto the next big thing, having made their money when times were good. It is being posited by some analysts that timber and commodities generally may be the next hot investment opportunity. For cryptocurrencies this is a make-or-break moment which will determine whether they were just a passing fad, or whether they will embed themselves permanently in the financial landscape. Defenders of cryptocurrency will be quick to point out the giddy highs in valuations this year were in part driven by institutional adoption from some big players, not merely transient consumer interest. Furthermore, some have argued that regulation may not necessarily be a bad thing, as governmental intervention will safeguard consumers and map out a more stable foundation for the industry.

Yet cryptocurrency is not only a financial instrument, but also a utopian project that aimed to transcend the problems of the old economic system. Its decentralised nature was meant to curtail the power of central banks and governmental spending that drives inflationary cycles. In short, cryptocurrencies were an expression of a libertarian ideal and Bitcoin evangelists did not merely want to make a quick buck, but instead to revolutionise the entire global economic system. To their diehard supporters, cryptocurrencies have been targeted unfairly by a reactionary economic system which is hellbent on derailing the free cryptocurrency market and supplanting it with governmental and corporation backed digital currencies. Whether that is true or not is up for debate, but cryptocurrency advocates may be right about one thing – regulation is likely to make cryptoassets less appealing to many of the core userbase who value privacy and freedom.

Markets live and die on perceptions – and at this stage the mere spectre of regulation is a bogeyman that is driving investors away. The Armageddon scenario that governments around the world will adopt China’s approach and de facto ban cryptocurrencies may or may not come to pass. Some are even predicting that there may yet be a revival in cryptocurrencies’ fortunes in the short term, as inflation fears remind investors again of the problems with fiat currency. But this is not the first David and Goliath battle between those seeking more economic freedom and those who want to maintain the old economic order. The Pirate Parties of the early 2000s sought to disrupt established economic norms by decentralising and undermining the concept of copyright. Nearly 20 years on, with copyright enforced by algorithm on platforms across the internet, it is hard to make the case that they ultimately won.

The trajectory for cryptocurrencies may ultimately be similar: co-opted by larger forces in some cases, slowly regulated out of existence in other cases. It is true that the technological foundations of cryptocurrency make it hard to for them to be policed entirely, but the field could well end up returning to the preserve of a few technologically minded enthusiasts. This prediction may be too gloomy for some who point out that it is unlikely that an industry with a market cap of over a trillion dollars is simply going to vanish overnight and is instead merely suffering from some short-term setbacks. The true outcome remains to be seen, but this is undoubtedly a pivotal moment in the story of cryptocurrencies which will determine their place for decades to come.