The U.S. Securities and Exchange Commission (SEC), in its latest statement, again emphasizes that investments in cryptocurrency assets are associated with “exceptionally high risk.” The SEC, as a regulatory body of the financial market, highlights that the cryptocurrency market is still rife with fraud, including fake coin offerings, Ponzi and pyramid schemes, as well as direct theft of investor funds.
In a statement published on social media, the SEC’s Office of Investor Education warns that investments in crypto assets are often unstable and risky. The SEC warns that many entities offering investments or services related to crypto assets may not comply with existing regulations, including federal securities laws. This means that investors may not enjoy the protection provided for traditional stock markets such as the NYSE or Nasdaq.
The rest of the SEC alert emphasizes that scammers are exploiting the growing popularity of cryptocurrency assets to attract retail investors to scams, often leading to huge losses. The SEC warns that investments related to crypto assets continue to be full of fraud, including fake coin offerings, Ponzi schemes, pyramids, and direct thefts.
The SEC statement is not the first warning for potential investors. In March, the commission released a report advising on how to “Exercise Caution When Investing in Crypto Assets” (link: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/crypto-asset-securities).
It is worth noting that the debate over whether crypto tokens are securities or commodities still casts a shadow over the cryptocurrency industry in the USA. Although SEC Chairman Gary Gensler claims that all crypto tokens, except Bitcoin, are securities, a recent court ruling regarding XRP suggests otherwise. The SEC’s silence on Ethereum (ETH), the second-largest cryptocurrency, adds to the confusion, provoking accusations of intentional misleading by lawmakers, including Congressman Tom Emmer.
Currently, the SEC is assessing 13 applications for approval of Bitcoin-based ETFs. Many analyses predict that the securities regulatory body will approve several Bitcoin-based ETFs at the beginning of next year. This highlights the importance of closely following changes in regulations and exercising caution when investing in this dynamically changing sector.
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