US regulators step up warnings about dangers of crypto assets

The US Securities and Exchange Commission (SEC) on March 23 issued an investor alert urging investors to be cautious if considering an invest involving crypto asset securities. “Investments in crypto asset securities can be exceptionally volatile and speculative, and the platforms where investors buy, sell, borrow, or lend these securities may lack important protections for investors.  The risk of loss for individual investors who participate in transactions involving crypto assets, including crypto asset securities, remains significant,” the SEC warned on its website.

 “Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws… Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses” the regulator added. 

The White House on its side issued its annual Economic Report of the President in which it slashes at crypto assets. “It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient... So far, crypto assets have brought none of these benefits,” according to the report released on March.

This raises the question of the role of regulation in protecting consumers, investors, and the rest of the financial system from panics, crashes, and fraud related to crypto assets, according to the report.

Much of the activity in the crypto asset space is already covered by regulations. Regulators are also expanding their capabilities to bring a large number of new entities under compliance. The year alone, the SEC filed 11 lawsuits against crypto firms or individuals such as the former basketball player Paul Pierce, and other cyber enforcement actions loom (See article on Coinbase vs SEC[DE1] ). Other parts of the crypto universe require coordination by various agencies and deliberations about how to address the risks they pose, the US Treasury concluded in its report “Crypto-Assets: Implications for Consumers, Investors, and Businesses” in September.