The US Securities and Exchange Commission (SEC) – urged local companies that provide crypto services to disclose the associated risks with such operations to clients. The agency warned investors to be utterly cautious when delving into the asset class as they could experience a financial loss.
Crypto Firms Should Be Held Accountable
The US SEC has issued guidance to a wide range of entities, including cryptocurrency-related companies, to explain in detail the essence of their operations and reveal potential risks to customers.
The watchdog reminded that there is no explicit standard for safeguarding digital assets, and as such, they should be considered a liability on firms’ balance sheets. Organizations should also disclose the “nature and amount” of cryptocurrencies they are responsible for holding.
The SEC has again alerted inexperienced investors to the risks associated with the industry. He insisted that companies explain to customers that they could lose their funds:
“The technological mechanisms supporting how crypto assets are issued, held, or transferred, as wells as legal uncertainties regarding holding crypto assets for others, create significant increased risks… including an increased risk of financial loss.”
The security of several entities has already been breached in the past two months, resulting in losses for users. In January, hackers attacked leading crypto exchange CryptoCom and drained $34 million worth of digital assets from it.
Earlier this week, the Ethereum-linked sidechain – Ronin Network – was also exploited by wrongdoers who stole the record $625 million in crypto. In both cases, though, victims were fully reimbursed.
One of the SEC’s Tasks for 2022: Regulate Crypto Exchanges
Although it has announced its intention not to ban cryptocurrency attempts in the United States, the SEC is a strong supporter of applying comprehensive regulation to the industry.
Earlier this year, Gary Gensler – the current Chair of the SEC – opined that Washington’s financial watchdogs should directly supervise crypto exchanges. In his view, such an initiative should happen in 2022 to grant investors enhanced protection when dealing with bitcoin and altcoins:
“I have asked staff to look at all the ways to bring these platforms into the scope of investor protection. If trading platforms do not enter the regulated space, it would be another year of vulnerability for the public.
Gensler touched upon crypto once again after President Joe Biden’s signed the first-ever executive order on digital assets. The former said he looks forward to working with “colleagues across the government” to create a better environment for the sector. Similar to the White House, he pointed out customers’ protection and guarding against illicit activities as priorities.
