The United States SEC suggests that crypto companies should clarify the mission of their activities and disclose all risks to their users.
The US Securities and Exchange Commission (SEC) has advised local enterprises that provide crypto services to explain to their clients the dangers connected with such operations. The agency cautioned investors to exercise extreme caution when investing in the asset class since they could suffer a financial loss.
Crypto Firms Should be Held Accountable
The US Securities and Exchange Commission (SEC) offered recommendations to a wide range of firms, including cryptocurrency-related companies, to explain the substance of their activities and expose potential dangers to customers.
The watchdog emphasized that there is no formal norm for protecting digital assets, and as such, they should be seen as a liability on enterprises’ balance sheets. Organizations should also disclose the “type and amount” of cryptocurrencies in their possession.
The SEC has once again warned inexperienced investors about the industry’s risks. It insisted that businesses inform clients that their funds may be lost:
“The technological mechanisms supporting how crypto assets are issued, held, or transferred, as wells as legal uncertainties regarding holding crypto assets for others create significantly increased risks… including an increased risk of financial loss.”
Several businesses’ security has already been hacked in the last few months, resulting in losses for users. In January, hackers broke into the biggest exchange CryptoCom and stole $34 million in digital assets.
It could be recalled that the Ethereum-linked sidechain — Ronin Network – was also used by criminals to steal a record $625 million in cryptocurrency. However, in both cases, victims were completely compensated.
Despite stating that it does not intend to prohibit digital asset ventures in the United States, the SEC is a strong supporter of imposing thorough restrictions on the industry.
Gary Gensler, the current Chair of the SEC, stated earlier this year that Washington’s financial watchdogs should directly monitor exchanges. According to him, such an endeavor should take place in 2022 to provide investors with improved protection while 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 mentioned cryptocurrency once again when President Joe Biden signed the first-ever executive order on digital assets. The former stated that he is looking forward to working with “colleagues across the government” to improve the sector’s environment. Similar to the White House, he emphasized the importance of protecting clients and preventing illegal activity.
