The Securities and Exchange Commission (SEC) has frequently expressed concerns about the perceived risks of crypto-assets and emphasized the need for strict regulation of the industry. However, it was not until the FTX incident that the regulator escalated its level of aggression.
In its latest move to stigmatize cryptocurrencies, the SEC has issued an ‘investor alert’ urging caution when dealing with these assets.
The agency’s Office of Investor Education and Advocacy warned investors of the highly volatile and speculative nature of crypto asset securities and the lack of important protections for investors on some crypto exchanges.
The SEC also explained that federal securities laws may apply to platforms offering lending or staking services in crypto assets.
The SEC highlighted that unregistered platforms offering crypto asset securities may not provide relevant details required by investors to make informed decisions. Additionally, the agency expressed doubts about the effectiveness of proof-of-reserves reports in verifying whether entities hold adequate assets to back their users’ balances.
The SEC emphasized that no crypto asset entity is currently registered with it as a national securities exchange, and investors engaging with crypto asset securities may not benefit from rules that protect against fraud, manipulation, front-running, wash sales, and other misconduct.
The SEC’s actions mark a critical turning point for the crypto industry, as the agency and the industry engage in a debate over whether crypto-assets should be considered securities or commodities.
Meanwhile, the SEC is currently in a dispute with Coinbase, one of the most prominent crypto exchanges. The agency issued a Wells Notice to the San Francisco-based platform, setting the stage for a potential lawsuit, following numerous investigations.
In response, Coinbase’s CEO, Brian Armstrong, said the SEC had previously reviewed its business and approved the platform to go public, maintaining that they were right on the law and confident in the facts.
Crypto Crackdown
In summary the SEC has issued an investor alert to the public over certain crypto investments that may be deemed secruities. Just in the past week Coinbase, Bybit, and Binance have been attacked by the SEC in what many crypto commentators are calling “Operation chokepoint.