SEC Risks Associated With Crypto Investments By Gary Gensler

Key Points:

• Gary Gensler, the head of the U.S. Securities and Exchange Commission (SEC), tweeted a conversation he had with Caroline Crenshaw, an SEC commissioner, on January 27 about the dangers of investing in cryptocurrencies.
• SEC chairman has argued repeatedly that since many cryptocurrency projects meet the criteria for securities, the commission should register them. The cryptocurrency community has, however, accused the agency of using “regulation by enforcement” strategies.
• Gary Gensler provided advice on how to identify cryptocurrency scam enterprises for investors.

Gary Gensler, the head of the U.S. Securities and Exchange Commission (SEC), tweeted a conversation he had with Caroline Crenshaw, an SEC commissioner, on January 27 about the dangers of investing in cryptocurrencies.

Gensler claimed that cryptocurrency is a highly speculative and volatile financial instrument when addressing the U.S. army. Several cryptocurrency initiatives, he continued, are unregistered securities since they do not adhere to securities law.

The SEC chairman has argued repeatedly that since many cryptocurrency projects meet the criteria for securities, the commission should register them. The cryptocurrency community has, however, accused the agency of using “regulation by enforcement” strategies.

Gensler on recognizing fraudulent projects

Gary Gensler provided advice on how to identify cryptocurrency scam enterprises for investors. Gensler claims that a project may be fraudulent if it cannot adequately explain how it operates or what it does, or if it cannot demonstrate that it complies with regulatory requirements. The incapacity of a project to articulate its purpose is another red flag, he continued.

The regulatory chief also called attention to ventures that promised extremely high and unsustainable profits as further warning indicators. He cautioned cryptocurrency investors to exercise caution before investing and to avoid succumbing to the fear of missing out (FOMO).

Commissioner Crenshow rehashed Genslers warning. She said:

“The bottom line is there’s increased risk when you invest in these novel, speculative, volatile investments that really lack basic protections and regulations. So if you’re considering investing in crypto, consider how much of your portfolio you devote to it, and certainly no more than you can afford to lose.”

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