Crypto market suffers $2 trillion decline in market value as SEC warns of extreme risks and lack of protections for investors.
Investors have been cautioned by the Securities and Exchange Commission (SEC) regarding the high risks involved in investing in cryptocurrencies. This advisory comes over a year following the cryptocurrency market’s market value decline of $2 trillion, which caused significant losses for those holding bitcoin, ethereum and other cryptocurrency tokens.
Extreme Risks and Lack of Protections
The SEC emphasized in its bulletin that investing in crypto assets can be exceedingly unstable and speculative. The platforms that facilitate the buying, selling, borrowing, or lending of these securities may not offer vital protections for investors. As a result, these inadequate safeguards leave individual investors susceptible to significant losses when engaging in transactions involving crypto asset securities.
Furthermore, numerous platforms that investors employ to purchase cryptocurrencies may be non-compliant with relevant legislation, including federal securities law. This further endangers investors, as evidenced by the FTX platform’s collapse last year, which resulted in billions of dollars in losses for its users.
Wells Notice to Coinbase
The warning comes just one day after the SEC sent a Wells notice to Coinbase, indicating that the largest US cryptocurrency exchange could be sued by the agency for potential securities violations related to its asset listings and staking products. The fact that no crypto exchanges are registered with the SEC means that investors in crypto may not benefit from rules that protect against fraud, manipulation, front-running, wash sales, and other misconduct.
Rampant Fraud in the Crypto Industry
Fraud remains rampant in the crypto industry, as fraudsters exploit the rising popularity of crypto assets to lure retail investors into scams. The SEC warned that investors should only risk money that they can afford to lose entirely.
Government Crackdown on the Crypto Industry
It is likely that the government’s crackdown on the crypto industry will continue following its Wells notice to Coinbase, the recent arrest of Do Kwon, and the charges against Justin Sun and celebrity endorsers like Lindsay Lohan and Jake Paul. Investors should exercise caution and carefully consider the risks involved before investing in cryptocurrencies.
In conclusion, the SEC’s warning to investors is clear: the extreme risks and lack of protections associated with investing in cryptocurrencies make it a highly speculative and risky endeavor. Investors should carefully consider the risks and only risk money that they can afford to lose entirely.
