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SEC Chairman Warns Against Crypto Investment Risks, Here’s Why

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. 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. 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.

Related Reading | Bitcoin Is ‘Here to Stay,’ Ex-BlackRock Investment Adviser Says – Better Than Gold?

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.

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.

Gary Gensler Encourages Crypto Investors About Full Disclosure

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.

SEC Chairman Warns Against Crypto Investment Risks, Here's Why
Cryptocurrency market is surging by 4% on the daily chart | Source: Crypto Total Market Cap on TradingView.com

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.

Related Reading | Dutch Central Bank Fines Binance Over Unauthorised Services

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.

Featured image from One News Page, chart from TradingView.com
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