SEC Warns Investors of Risks in Crypto Securities Trading
Investors who are considering investing in cryptocurrency securities have been warned to proceed with caution by the United States Securities and Exchange Commission (SEC). The agency’s Office of Investor Education & Advocacy has issued a warning that trading platforms for cryptocurrencies may lack critical investor safeguards and may not comply with federal securities legislation.
Investments in crypto asset securities can be exceptionally volatile & speculative, & the platforms where investors buy, sell, borrow/lend these securities may lack important protections for investors.
@SEC_Investor_Ed to investors: exercise caution w/ crypto asset securities.— U.S. Securities and Exchange Commission (@SECGov) March 23, 2023
SEC Urges Investors to Remain Vigilant and Report Suspicious Behavior in Crypto Trading
The SEC has reminded investors that speculative investments in cryptocurrency securities can be extremely volatile and risky and that marketplaces, where investors purchase, sell, borrow, and lend these securities, may lack critical investor safeguards. According to the SEC bulletin, securities broker-dealers, investment advisors, and exchanges must register with both the SEC and a state agency. They must also register with a self-regulatory body. Businesses and platforms that are active in lending or staking digital currencies may also be liable to securities laws, as lending and staking are considered to be investment activities.
The SEC has tried in the past to show that many cryptocurrency exchanges in the US are operating illegally because they are not registered as securities exchanges. SEC Chair Gary Gensler has expressed this opinion on several occasions. This warning comes just one day after Coinbase (COIN) disclosed that it had received a Wells Notice from the SEC. It indicates that a possible imminent enforcement action related to the exchange listing of possibly unregistered securities was on the horizon.
Coinbase Shares Drop 20% Following SEC’s Disclosure of Wells Notice
The announcement had a significant negative impact on the Nasdaq-listed shares of Coinbase. It dropped as much as 20 percentage points when trading opened on Thursday. But, since then, they have recovered almost half of the losses that they incurred. They are presently trading at $69.32, which is a 10% decrease from their prior high price.
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The Securities and Exchange Commission (SEC) has issued a warning to investors. It serves as a reminder that investing in cryptocurrency securities can be fraught with high levels of risk. Investors should take all safeguards necessary before investing in cryptocurrency securities. Before investing in any cryptocurrency or security related to cryptocurrency, it is critical to conduct extensive research and get the assistance of a qualified financial advisor. Investors have been cautioned by the Securities and Exchange Commission (SEC) to remain vigilant and to report any behaviour that seems fishy to the agency’s enforcement division.
