The US Securities and Exchange Commission (SEC) has issued a warning to investors regarding the potential risks associated with investing in crypto assets.
The agency has specifically cautioned against relying solely on proof of reserves (PoRs) published by cryptocurrency exchanges, stating that such assurances do not provide complete protection against loss of funds.
In its statement, the SEC highlighted that unregistered securities offerings from cryptocurrency companies may not disclose all relevant information, which can prevent investors from making informed decisions.
The agency emphasized that any broker-dealers, investment advisors, alternative trading systems (ATS), or exchanges dealing with cryptocurrencies must be registered with the SEC and subject to federal securities laws.
The SEC also noted that many cryptocurrency companies have failed and fallen into bankruptcy over the past year, while scammers continue to exploit the growing popularity of crypto assets.
In light of these issues, the agency has increased its scrutiny of crypto platforms and recently fined the Kraken exchange $30 million and threatened legal action against Coinbase over suspected violations of securities laws.
In conclusion, investors are advised to exercise caution when investing in crypto assets, as these instruments are often unstable and speculative.
While PoRs published by exchanges may offer some assurance, investors should not rely solely on these statements and should instead seek out comprehensive audits of financial statements to protect their investments.