SEC Warns Against Crypto Investment Risks

One of the forces not to be ignored as a crypto investor is the Security and Exchange Commission, SEC. The body does everything it can to either regulate crypto or scrap the industry if possible Time to time SEC warns investors for inherent risk.

• Ripple has been battling it out with SEC since 2020
• Binance have faced SEC scrutiny this 2022 as the commission commenced investigations on BNB
• The chairman is unhappy with the continuing bear market in the sector. As such, he warns investors to be careful of crypto investment.
• SEC plans to work with many crypto exchanges, lending platforms, and other operators to ensure that investors are protected.

Now, the chairman of Wall Street’s top regulator has said the Securities and Exchange Commission (SEC) will consider exempting crypto firms from some regulatory requirements in an attempt to tame the crypto “Wild West.”

“There’s a potential path forward,” SEC chair Gary Gensler said during an interview with Yahoo Finance in comments that point to how the SEC could work with the crypto industry going forward and adding the agency has the authority to give exemptions to certain regulatory and disclosure requirements. “I’ve said to the industry, to the lending platforms, to the trading platforms: ‘Come in, talk to us.'”

XRP And BNB SEC Controversy

Unfortunately, many digital operators, including network founders, exchange firms, and even top management in the space, have had issues with the commission.

For instance, Ripple has been battling it out with SEC since 2020. Whether XRP is in fact a security is subject to one of the most intense ongoing court battles in crypto. The SEC sued Ripple in December 2020, accusing the company of failing to register roughly $1.4 billion worth of XRP as securities. Ripple, however, maintains XRP is a utility token for payments, not a speculative asset, and that it was issued prior to Ripple’s founding.

In addition, other operators such as Binance have faced SEC scrutiny this 2022 as the commission commenced investigations on BNB. According to the commission, the aim is to determine if the token is unregistered

Apart from these two, many others face one issue from the commission in their bid to protect investors against losses. So, no one is surprised at the SEC chairman’s recent speech that crypto investors should be careful of the risks in the sector.

Continuing Bear Market is a Big Concern

Gary Gensler is responsible for creating regulations aiming to protect investors’ interests. The chairman is unhappy with the continuing bear market in the sector. As such, he warns investors to be careful of crypto investment.

 In Gary Gensler’s speech, the SEC has issued 23 regulations for the digital asset industry and is awaiting approvals.

Early in February 2022, Gensler disclosed that both SEC and CFTC (Commodity Futures Trading Commission) are working together to achieve crypto regulation. He also stated that

SEC plans to work with many crypto exchanges, lending platforms, and other operators to ensure that investors are protected.

Investor Should be more Educated

According to Gensler, investors operating in the crypto industry should be made to understand the risks in their investments. He reiterated that they should understand the difference between equity offerings and asset-backed securities. By disclosing the differences clearly, investors can decide whether to invest or not.

Regarding the general public, they should be protected whether they’re buying digital coins as asset-backed security or security. He also disclosed that the US SEC allows investors in America to take risks. But operators should disclose all information, whether selling financial assets or raising money from the public.

Given the recent losses and bankruptcy in the crypto market, these statements couldn’t have been more appropriate and timely. The crypto community has experienced a lot since the market crashed till now. Many exchanges even stopped investors from withdrawing their funds to prevent insolvency.

Regarding all these issues, Gary Gensler opines that the lack of compliance in the sector contributed to the losses.

He also stated that

Bitcoin is not a security since no entity issued it. Therefore, the position of the SEC chairman about the losses is understandable.

From all indications, many cryptos that crashed were not compliant with regulations. Also, there was no adequate disclosure by their operators. As such, people invested money in such firms without proper funds insurance.

Bitcoin and crypto market a “Wild West”

Gensler, who has previously branded the bitcoin and crypto market a “Wild West” and this week repeated a warning that many crypto companies are “non-compliant,” said the SEC has “robust authorities from Congress to use our exemptive authorities that we can tailor investor protection.”

Earlier this year, the SEC found crypto lender BlockFi to be an unregistered investment company, reaching a settlement of $100 million.

In May, the SEC announced it had doubled the number of staff in its Crypto Assets and Cyber Unit as it tries to get a handle on the red-hot crypto market that last year ballooned to an eye-watering $3 trillion value before deflating over the last few months due to the Federal Reserve’s increasingly hawkish stance and the collapse of the terraUSD stablecoin along with its support cryptocurrency luna.

Gensler said…

“The public is largely unprotected due to non-compliance in this space The public benefits by knowing full and fair disclosure and that somebody is not lying to them. You know, basic protections.”