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SEC Cautions Investors On Crypto Asset Securities Market

Crypto Market News: Amid heavy enforcement activity on crypto businesses, the U.S. Securities and Exchange Commission (SEC) issued a warning to investors in the digital assets industry. The agency urged investors to be cautious if they considered an investment in ‘crypto asset securities’. Stating that these investments could be “exceptionally volatile and speculative”, it said they could lack important protections for investors. This comes after fresh SEC enforcement action on crypto exchange Coinbase and Tron founder Justin Sun.

The latest caution came from the SEC’s Office of Investor Education and Advocacy, despite the widespread opinion among the crypto community that there is no clarity on regulation. Although the SEC maintains that existing laws governing the securities market does fully apply to the crypto assets, most industry players argue that those laws are incompatible for these assets. However, many would agree with the SEC’s views that the risk of loss for individual investors in the crypto market is significant, as was seen after the recent FTX collapse and the Terra network failure in 2022.

Crypto’s Non-Compliance

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The SEC warned that entities offering crypto investments or services may not be complying with relevant law, including federal securities laws. This, however, begs the very question from the crypto players around the lack of regulatory clarity. The agency also warned investors about the ‘Proof of Reserves‘ concept. Adding that the disclosure may only provide a part of the story, it said the proof of reserves “does not tell customers the whole story about the entity’s liabilities.”

The SEC warning also mentioned the role of fraudsters in exploiting the popularity of crypto market, while also mentioning the role of celebrity endorsements for crypto products and services. Meanwhile, the Bitcoin price rallied over the past few weeks amid rising concerns about the larger impact of the ongoing banking crisis.

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