The US Securities and Exchange Commission (SEC) issued a notice on March 23 alerting investors on the risks of investing in crypto assets securities. The regulator highlighted several reasons for investors to be wary of investing in these assets, stating that they can be “exceptionally volatile and speculative,” and the platforms where investors buy, sell, borrow, or lend these securities may lack important protections for investors.
The SEC warned that firms offering crypto investments services might violate several applicable laws, including the federal securities laws. The regulator added that the law requires anyone offering securities to register with the Commission to enable proper regulation and oversight of the industry.
The bulletin also mentioned that proof of reserves on crypto exchanges is not a standard audited financial statement, and investors should exercise extreme caution when relying on such statements to make decisions. The SEC further warned that crypto assets could be exceptionally risky and often volatile.
The regulator also noted that scammers use crypto assets’ popularity to defraud retail investors, and it mentioned Ponzi, pyramid schemes, and rug pulls as some of the ways these bad actors perpetrate fraudulent acts.
The SEC gave some investment tips, which can help ensure investing success. It advised investors to do research before investing, consider the underlying technology and potential risks, and only invest what they can afford to lose.
The timing of the publication raised eyebrows as the regulator has increased its scrutiny of the industry. On March 22, the SEC filed charges against crypto entrepreneur Justin Sun and issued a wells notice to U.S.-based exchange Coinbase.
Besides that, the bulletin is coming a few days after the White House Council of Economic Advisers published a report that heavily criticized cryptocurrencies, saying that most don’t have a fundamental value. “They continue to cause risks for financial markets, investors and consumers,” the report added.
Investors are advised to exercise caution when investing in crypto assets and to carefully consider the potential risks before making any investments.