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SEC Issues Warning to Investors Regarding the Risks of Crypto Securities

SEC Urges Investors to Consider Risks Before Investing in Crypto Securities

The U.S. Securities and Exchange Commission (SEC) is urging investors to exercise caution when investing in cryptoasset securities. The agency’s Office of Investors Education and Advocacy has warned that platforms offering crypto trading may not be complying with federal securities statutes.

In a bulletin issued on Thursday, the SEC emphasized that the law requires securities broker-dealers, investment advisers, and exchanges to register with the SEC, a state regulator, or a self-regulatory organization. Entities and platforms involved in lending or staking crypto assets may also be subject to federal securities laws.

This warning follows the SEC’s previous attempts to demonstrate that many crypto exchanges are operating as unregistered securities exchanges in the U.S. SEC Chair Gary Gensler has frequently voiced this view, and the regulator’s warning comes just a day after Coinbase (COIN) disclosed the SEC issued it a Wells notice, indicating a possible imminent enforcement action tied to its listing of potentially unregistered securities.

Coinbase’s Nasdaq-listed shares were hit hard by this news, slumping as much as 20% in early trading on Thursday. At the time of writing, they have recovered around half of their losses, down 10% at $69.32.

Investors need to be aware of the risks involved when investing in crypto securities. The SEC’s warning serves as a reminder that many platforms offering crypto trading may not be complying with federal securities laws, leaving investors vulnerable to potential fraud and scams.

Investors should exercise caution and do their due diligence before investing in any crypto securities. This includes researching the platform offering the investment, understanding the risks involved, and verifying that the platform is registered with the appropriate regulatory authorities.


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