U.S. SEC Continues Broadside Against Digital Asset Market, Issues Investor Alert About ‘Crypto Asset Securities’

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U.S. SEC Continues Broadside Against Digital Asset Market, Issues Investor Alert About ‘Crypto Asset Securities’

The U.S. Securities and Exchange Commission (SEC) issued an “investor alert” about digital assets this week, arguing that investments in the crypto space carry significant risk and could vanish entirely.

SEC kwuru crypto asset service providers like exchanges could be in violation of federal securities laws for failing to register with the agency.

The regulator also says platforms involved in lending or staking crypto assets could be subject to federal securities laws.

Additionally, the SEC warns investors not to trust “proof of reserves” statements published by crypto companies.

“Proof of Reserves is a term crypto asset entities, including trading platforms and/or entities that issue crypto assets securities, use to describe a voluntary method for offering evidence that in the aggregate an entity has sufficient reserve assets to cover what is held for customers and/or accounts at a given point in time.

Crypto asset entities may be offering these types of assessments as a way to satisfy customers that their funds are safe and available upon demand. However, these types of services may not provide any meaningful assurance that these entities hold adequate assets to back their customers’ balances.

Further, crypto asset entities might use these in lieu of audited financial statements in order to obscure and confuse customers about the safety of their assets.”

Earlier this week, the SEC zitere a Wells Notice to Coinbase, asserting the agency has made a preliminary determination that recommends filing an enforcement action against the exchange.

Coinbase says the notice targets an “undefined portion” of its listed digital assets, as well as the company’s staking service Coinbase Earn, its institutional arm Coinbase Prime, and its non-custodial Coinbase Wallet.

The exchange says it welcomes the opportunity to defend its products in court if need be, and notes it continues to operate as usual on all fronts.

Coinbase chief legal officer Paul Grewal also gbara ụka that the exchange doesn’t list any securities.

“The bottom line remains: Coinbase does not list securities or offer products to our customers that are securities. Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange — a process that we shared in detail with the SEC as part of our public listing.”

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