• The SEC has issued a bulletin to investors warning them against investing in crypto asset securities due to their volatile and speculative nature.
• It also pointed out that the crypto exchanges may lack important protections for investors, as they are required to register with the SEC, a state regulator or SRO such as FINRA.
• The post also mentioned that platforms offering lending or staking services in crypto assets may be subject to federal securities laws.
SEC Issues Warning Against Investing in Crypto Asset Securities
The United States Securities and Exchange Commission (SEC) has released an “Investor Alert” cautioning investors against investing in crypto asset securities due to their „exceptionally volatile and speculative“ nature. The alert further highlighted that the crypto exchanges „may lack important protections for investors“.
Protection Measures Required by Law
In order to provide investor protection, the law requires parties involved with providing investments involving cryptocurrencies, including securities broker-dealers, investment advisers, alternative trading systems (ATS), and exchanges, to register with the SEC, a state regulator and/or a self-regulatory organization (SRO), such as FINRA.
Platforms Offering Crypto Asset Securities
The alert further noted that platforms offering lending or staking services in crypto assets may be subject to federal securities laws. It warned that unregistered platforms offering crypto asset securities may not provide relevant details required by investors to make informed decisions before investing.
Audit Requirements for Crypto Exchanges
The SEC believes Proof of Reserve (PoR) „is not as rigorous, or as comprehensive, as a financial statement audit“, and „may not provide any level of assurance“. They have thus urged potential investors to exercise caution when dealing with cryptocurrency investments on these exchanges which may lack appropriate audit requirements.
In conclusion, the SEC has urged potential investors to use extreme caution when considering an investment involving cryptocurrency assets due its highly speculative nature and lack of proper regulation across many exchanges.