The SEC Office of Investor Education and Advocacy and the Division of Enforcement Retail Strategy Task Force warned investors about the risks associated with accounts that pay interest on crypto-asset deposits.
In an Investor Bulletin, the SEC explained the difference between the protections that are afforded to investors in interest-bearing accounts with bank or credit unions and interest-bearing accounts for crypto assets. The SEC warned to not expect the same level of security, safety and soundness with crypto asset interest-bearing accounts.
The Bulletin identified some of the risks to which investors may be exposed:
- volatility and illiquidity in the crypto asset markets;
- potential failure or bankruptcy of the company holding investor crypto assets;
- unpredictability, including that the market for a particular crypto asset may disappear altogether or that the crypto asset may no longer be tradable anywhere;
- changes in regulation by federal, state or foreign governments that may restrict the use and exchange of crypto assets;
- the inability to be made whole should fraud, default or a mistake occur; and
- potential fraud, technical glitches, hackers or malware.
The SEC urged investors to carefully review all documents and disclosures to ensure they are aware of the risks associated with their investments.
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