As part of this year's World Investor Week, the U.S. Securities and Exchange Commission (SEC) and numerous other prominent financial agencies have published a number of cautionary statements on investing in crypto assets. "The risk of loss for individual investors who participate in transactions involving crypto assets, including crypto asset securities, remains significant," the regulators emphasized.
World Investor Week Highlights Crypto Warns
On September 29, as part of this year's World Investor Week, the SEC's Office of Investor Education and Advocacy (OIEA) released an investor bulletin. The International Organization of Securities Commissions (IOSCO) is spearheading a worldwide push to improve investor safety and education.
The SEC, FINRA, CFTC, NFA, SIPC, and NASAA worked together to create the bulletin, as did the Financial Industry Regulatory Authority (FINRA), the Commodity Futures Trading Commission (CFTC), the National Futures Association (NFA), and the Securities Investor Protection Corporation (SIPC).
The three focuses of World Investor Week 2023 are Sustainable Finance, Investor Resilience, and Crypto Assets. The alert lists many hazards associated with investing in cryptocurrencies with regard to crypto assets. The bulletin issues a warning that "investments in crypto assets can be exceptionally volatile and speculative, and the marketplaces where investors buy, sell, borrow, or lend these investments may lack significant safeguards."
The regulators stated: "Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws," and further stated:
Investors who deposit money or cryptocurrency assets with a crypto asset business run the risk of losing legal ownership of such assets and being unable to retrieve them at a later date.
The alert also explains that there are a variety of hazards for investors in crypto assets, including fraud, unregistered offerings, and a lack of Securities Investor Protection Corporation (SIPC) protection. The regulators stated that fraudsters "continue to exploit the growing popularity of crypto assets to lure retail investors into scams, frequently resulting in devastating losses."
The regulators added that you must conduct active research and seek information to see whether your portfolio, including retirement plans and investment accounts, contains any investments related to crypto assets. "Investors should understand if they are being exposed to risky investments involving crypto assets," they emphasized.
The bulletin's final cautionary statement reads:
Individual investors who take part in transactions involving crypto assets, including crypto asset securities, are still at a high risk of losing money. Any speculative investment should only be made with money you can afford to lose completely.
A further piece of advice from the regulators was to "take the time to understand how the investment works and look for warning signs that it may be a crypto asset investment scam" if you were thinking about investing in something related to cryptocurrencies. They advised reading everything carefully, getting clarification, and keeping an eye out for "the signs of a fraudulent trading website."
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