The US Securities and Exchange Commission (SEC) has warned investors about the “risks of interest-paying accounts on crypto-asset deposits”. This warning coincides with the first enforcement action taken by the agency against crypto lending platforms.
SEC warns about risks in interest-bearing crypto accounts
The Retail Strategy Task Force of the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Division of Enforcement announced Monday that they jointly issued an investor bulletin “to educate investors about the risks of those accounts. For those who pay interest on crypto-asset deposits.”
On the same day, the SEC announced that it had charged cryptocurrency lending platform BlockFi for failing to register its crypto loan offering. BlockFi has agreed to pay $100 million in penalties to settle the allegations with the SEC and 32 state regulators.
The SEC explained that “an interest-bearing account for cryptocurrency asset holdings … is not as secure as a bank or credit union deposit.”
Securities Watchdog notes that banks and credit unions are regulated by both federal and state banking regulators. In addition, deposits at banks or federal credit unions are insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). Similarly, securities accounts held with US-registered brokers may also be insured by the Securities Investor Protection Corporation (SIPC).
The SEC warned:
Companies that offer interest-bearing accounts for crypto assets do not offer investors the same protection as banks or credit unions, and crypto assets sent to those companies are not currently insured.
Crypto assets held in an interest-bearing account can be used to invest in various crypto products or activities, including lending programs in which crypto assets are lent to borrowers, the SEC described as “paying you The interest being done is based on these investment activities.”
The agency then outlined the risks that crypto markets are subject to, including volatility and liquidity, the company holding your crypto assets could go bankrupt, regulation changes, potential fraud, technical glitches, security breaches and malware. .
What do you think about the SEC warning against interest-bearing crypto accounts? Let us know in the comments section below.
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