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 issued guidance to a wide range of entities, including cryptocurrency-related companies, to explain in detail the essence of their operations and reveal the 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 once again alerted inexperienced investors about the risks related to the industry. It insisted that companies should explain to clients that they might 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 last couple of months, resulting in losses for the users. In January, hackers attacked the 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: Regulating Crypto Exchanges
Despite outlining plans not to ban cryptocurrency endeavors in the States, the SEC is a keen proponent of applying comprehensive regulations 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’ve asked staff to look at every way to get these platforms inside the investor protection remit. If the trading platforms don’t come into the regulated space, it’d be another year of the public being vulnerable.”
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.