The U.S. Securities and Exchange Commission (SEC) issued an investor alert on Thursday, urging caution around crypto assets.
The US regulatory body stated that firms offering crypto investments might not be complying with U.S. laws.
According to the SEC, entities and platforms involved in lending or staking crypto assets may not be adhering to the federal securities laws while investors should understand the risks such as high volatility and fraud associated with cryptocurrency before investing in it.
SEC said, “investments in crypto asset securities can be exceptionally risky, and are often volatile, with a number of major platforms and crypto assets becoming insolvent and/or losing value in the past year.”
The regulatory body added that fraudsters also often exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses.
“It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment. A celebrity endorsement does not mean that an investment is appropriate for all investors, or even that it is legitimate,” the SEC added.
The agency, therefore, urged crypto investors to have an investing plan, as well as to understand their risk tolerance and time horizon.
Investors King understands that this alert is coming a day after the U.S. Securities and Exchange Commission served Coinbase a ‘Wells Notice” indicating a possible imminent enforcement action against the company. The “Well Notice” came hard on Coinbase as its stocks slumped as much as 20% in early trading on Thursday.
The SEC’s position on cryptocurrency however isn’t new. The agency has been in a lengthy legal battle with Ripple Lab, the parent company of XRP.
Some crypto enthusiasts believe that the SEC is trying to use XRP to establish a case against many crypto exchanges, claiming that they are offering unregistered securities to the public.