SEC Chairman Gary Gensler said that cryptocurrencies are a highly speculative and volatile investment vehicle.
The US Securities and Exchange Commission (SEC) Chairman Gary Gensler tweeted a Twitter space session in which he discussed the risks of cryptocurrency investments with SEC Commissioner Caroline Crenshaw on Jan. 27.
Speaking to the US army, Gensler said that cryptocurrencies are a highly speculative and volatile investment instrument. He went on to say that several crypto projects are unregistered securities, as they do not comply with securities law.
The SEC chairman has stated that the commission should register many crypto projects because they qualify as securities. However, the crypto community has accused the regulator of employing “regulation by enforcement” tactics.
Gensler on How to Spot Fraud Projects
Gary Gensler gave advice on how investors can spot crypto scam projects. According to Gensler, a project can be a scam if it doesn’t prove it’s compliant or can’t provide adequate information about how it works or what it does. He added that other signs that a project might be a scam would be its inability to explain what it is about.
Other signs highlighted by the regulatory chief included projects offering very high and unsustainable returns. He advised crypto investors to think before investing, adding that they should not get caught up in fear of missing out (FOMO).
Commissioner Crenshow repeated Gensler’s warning. She said the following:
“The bottom line is that there is increased risk when investing in these novel, speculative and volatile investments that really lack basic protections and regulations. So if you are considering investing in crypto, consider how much of your portfolio you are putting into it, and certainly no more than you can afford to lose.”
SEC Intensifies Crypto Regulation Efforts
Following the FTX collapse in November 2022, the SEC has intensified its efforts to bring the crypto industry into compliance. The financial watchdog accused FTX founder Sam Bankman-Fried of defrauding investors with his trading platform.
The regulator filed charges against bankrupt lender Genesis and cryptocurrency exchange Gemini over their now-defunct Earn program. According to the regulator, the program was not registered with a commission, as required by federal securities laws.
More recently, reports revealed that the SEC has increased scrutiny of crypto companies planning to go public. Stablecoin issuer Circle said its public listing efforts failed because it was unable to get regulatory approval. Grayscale has also seen his plan to turn its Bitcoin Trust into an ETF sunk by the financial regulator. It should be remembered that earlier this month, Grayscale’s chief legal officer, Craig Salm, stated that the firm’s proposal to convert its trust into a spot ETF satisfies the law. He further claimed that the ETF is designed to prevent fraud and manipulation while protecting investors and the public interest.
By Audy Castaneda
