- The SEC issued a warning to investors over the risk of digital assets and notes that cryptocurrency platforms may be violating some of the country’s laws because they are not formally registered as an investment asset.
- It also criticizes the reserve testing and economic model of firms such as Crypto.com and Binance.
- In addition, the SEC fined celebrities on the U.S. scene for promoting digital currencies without saying they charged for it.
The U.S. Securities and Exchange Commission (SEC) is increasingly increasing the pressure on platforms dedicated to cryptocurrencies. Indeed, the U.S. government agency issued last week a new warning to investors over the risk of digital assets.
Although the Commission is famous for its negative stance on cryptocurrencies, the note seeks to avoid detours, stating that firms that provide this type of investments “may be in violation” (so says the text) of some of the country’s laws, because they are not formally registered as an investment asset.
The regulator warns the company about unregistered offerings, i.e., that these securities do not provide important information that investors should have available to make informed decisions.
The SEC has also taken direct aim at the so-called proof of reserves, the solution that crypto exchange and crypto exchange platforms have in place after the FTX crash.
The major exchanges wanted to increase the confidence of their customers by providing information about the assets they control. But the problem pointed out by the agency is that this approach can be used to hide and mislead users about the security of their cryptoassets.
SEC: pressure on crypto platforms
The argument pointed out by the US Securities and Exchange Commission is that cryptocurrencies are an investment asset.
Gary Gensler, who currently chairs the SEC, has argued a few days ago that securities rules can be triggered because owners of these digital assets show a return the moment they acquire tokens backed by an industry-agreed mechanism, such as reserve testing.
By the end of 2022, Mazars, the audit, tax & advisory firm, had made a decision to stop working for its cryptocurrency clients on mechanism development.
The U.S. agency took another step further by criticizing especially the economic model of firms such as Crypto.com and Binance, which are the most important exchange platforms worldwide.
A separate paragraph for what the head of the US Commodity Futures Trading Commission (CFTC), Rostin Behnam, said this Tuesday, March 28, who assured that Binance has “many years” evading US laws and that it is an increasingly evident practice of that exchange house.
The SEC indicates that they provide various services that are generally provided by independent companies that are registered with the agency or other official entities.
In particular, they believe that the combination of these functions only causes a conflict of interest and increases the risk for clients.
The publication of the US Securities and Exchange Commission came out just a day after a notice was issued stating that Coinbase, a very important exchange platform in the world due to its trading volume over the past year, has violated existing regulations.
SEC against influencers
In parallel, the SEC charged different celebrities of the US scene due to the fact that they violated the existing law by promoting digital currencies.
Actress Lindsay Lohan and youtuber Jake Paul are among those accused, in a list that already included other celebrities such as Kim Kardashian.
The allegations are part of the case that the SEC started against the businessman linked to these assets, Justin Sun, for the unregistered offer and sale of Tronix and BitTorrent cryptos.
The regulatory body has highlighted that it acted by manipulating the activity of the two tokens with the aim of simulating liquidity.
In this week’s release, the SEC again highlights that one should not choose where to make investments solely on a recommendation from a public figure.
Regulations and the price of cryptocurrencies
The Securities and Exchange Commission has long been a source of concern for crypto platforms and exchanges.
It’s because the agency, which is tasked with protecting investors and maintaining fair, orderly and efficient markets, has often been skeptical of digital assets and the companies that facilitate their use (such as Binance, Coinbase, among others).
One of the key areas of focus for the SEC has been the question of whether cryptocurrencies are securities and therefore subject to regulation under securities laws.
This has been a contentious issue, with some arguing that cryptocurrencies are different from traditional securities and others arguing that they should be subject to the same rules and regulations.
In addition to its focus on securities regulation, the SEC has also taken action against cryptocurrency platforms and exchanges that it believes are operating illegally. In particular, the agency has focused on companies that offer services such as cryptocurrency trading, custody and lending without proper licenses and registrations. FTX, for example, is one example.
Also on the list were companies such as BitConnect and Ripple.
In these cases, the SEC has alleged that the companies committed fraud and other illegal activities in connection with their cryptocurrency offerings.
The truth is that the SEC’s pressure on cryptocurrency platforms and exchanges is unlikely to abate anytime soon. And it is, in fact, the biggest drag on the price of many of these coins.
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