SEC issues an investment warning on crypto assets

In a recent SEC filing, investors were warned of the dangers associated with crypto assets. The notice was issued only one day after the regulator had served Coinbase with a Wells Notice.

The agency’s Office of investors education and advocacy warned the public that cryptocurrency trading platforms might not comply with federal securities legislation. The regulatory body has cautioned investors to take extreme care when investing in crypto asset securities.

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

In the bulletin published on March 23, the watchdog states that the legislation requires parties such as securities broker-dealers, investment advisors, and exchanges to register with the SEC, a state regulator and a self-regulatory body. In addition, companies and platforms engaged in lending or staking crypto assets may be liable to federal securities regulations.

In the past, the SEC has tried to prove that numerous cryptocurrency exchanges in the United States are operating illegally as unregistered securities exchanges. This opinion is one that SEC Chair Gary Gensler has expressed on several occasions.

This warning comes just one day after the action on Coinbase, which indicated a possible imminent enforcement action related to the exchange listing of potentially unregistered securities, was on the horizon. 

The announcement significantly impacted the Nasdaq-listed shares of Coinbase, which dropped by 14% on March 23.