Tuesday, June 6, 2023

The US government recently warned everyone to be careful with investing in cryptocurrencies. This means some companies may not be following the rules and laws about crypto asset securities that should be followed. The Securities and Exchange Commission wants people to understand there might be risks when investing in crypto assets.

SEC Warns Investors to Exercise Caution with Cryptocurrencies, Proves Not Enough with Proof-of-Reserves Method

On March 23, 2023, the U.S. Securities and Exchange Commission (SEC) released a warning for investors about cryptocurrencies like Bitcoin. They said that if you want to invest in them, be careful because they can be very risky and change quickly in value. Also, there may not be the same kind of safeguards that you get when investing in other things like stocks or bonds.

The SEC also talks about how cryptocurrency companies like exchanges can use proof-of-reserves (POR) as a way of being more transparent. But the regulator notes that this method may only show certain things, like money or stuff owned at one moment in time, but it doesn’t always show what the company is doing with the customer’s money. And although the POR shows a snapshot, it can’t actually prevent people from taking the customer’s assets away.

The SEC (Securities and Exchange Commission) says that a proof-of-reserves is not as strong or thorough as getting an audit of your financial statements. This means it might not give you any kind of guarantee.

Recently, the SEC (Securities and Exchange Commission) sent a warning to Terraform Labs CEO Do Kwon, Tron’s Justin Sun, and also to Coinbase. Plus, the SEC charged famous people like Kim Kardashian, Paul Pierce from the NBA Hall of Fame, Lindsay Lohan and Youtuber Jake Paul.

SEC’s Investor Alert

The SEC (Securities and Exchange Commission) said in its investor alert that the crypto exchanges are not regulated like the SEC-registered ones, because they combine some services that would usually be done by different firms which may need to register separately at SEC, a state regulator or even a self-regulatory organization. However, when these services are mixed together it might pose conflicts of interests and risks for investors.

The agency called SEC recently issued an advisory notice saying that over the past year the crypto industry has been very unpredictable and risky. Additionally, it warned about fraudsters taking advantage of people’s interest in cryptocurrencies to trick them out of their money. It also comes after Gary Gensler spoke to New York Magazine’s Intelligencer about this topic.

In an interview, Gensler said why he thinks all crypto assets except bitcoin are securities. Plus, New York Attorney General Letitia James recently declared that ethereum is a security in her case against the Kucoin crypto exchange.

Rostin Behnam, the Chairman of the Commodity Futures Trading Commission, believes that ethereum is a commodity. He was referring to something that Ripple’s chief legal officer recently said about Gensler’s Intelligencer interview. They think Gensler shouldn’t be voting on any future enforcement cases about crypto assets.

What do you think about the SEC’s recent notice on cryptocurrencies? Tell us in the comments below.


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