US SEC Urges Crypto Companies to Highlight Investor Risks
According to the U.S. Securities and Exchange Commission (SEC) local crypto services companies should disclose the associated investment risks to clients. SEC has warned investors on crypto investments.
The US watchdog recently issued guidance to various entities, including cryptocurrency-related companies, to disclose to their clients in detail how their operations run and explain the potential risks related.
The SEC reminded that there is no standard for safeguarding digital assets, and therefore they should be considered a liability on firms’ balance sheets. Organizations should also disclose the “nature and amount” of cryptocurrencies they hold.
The regulator highlighted for inexperienced investors about the risks related to crypto, and insisted that companies should explain to clients that they might lose their funds:
“The technological mechanisms supporting how crypto assets are issued, held, or transferred, as wells as legal uncertainties regarding holding crypto assets for others, create significant increased risks… including an increased risk of financial loss.”
Security breaches in crypto is nothing new. In January, hackers attacked the leading crypto exchange CryptoCom and drained crypto assets worth $34 million from it.
Earlier this week, Axie Infinity’s blockchain bridge – Ronin Network – was also hacked and $624 million in crypto was stolen.
It’s worth noting that in both cases the victims were fully reimbursed.
SEC To Target Regulating Crypto Exchanges
The U.S. Securities and Exchange Commission is an avid proponent of applying comprehensive regulations to the crypto industry.
The SEC Chair, Gary Gensler, earlier this year made remarks that Washington’s financial watchdogs should directly supervise crypto exchanges. Such initiative should happen in 2022 to grant investors enhanced protection when dealing with digital assets, he said.
“I’ve asked staff to look at every way to get these platforms inside the investor protection remit. If the trading platforms don’t come into the regulated space, it’d be another year of the public being vulnerable.”
