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FameEX Hot Topics | Potential Security Risks of Crypto Assets Highlighted by US SEC to Investors

2023-03-24 11:13:45

The US Securities and Exchange Commission (SEC) has issued a fresh warning to investors regarding the high-risk nature of investments in cryptocurrency assets. The regulator noted that while the cryptocurrency market has experienced significant growth, it has also been characterised by considerable volatility and a number of instances of insolvency and asset value loss.Investors are urged by the SEC to only risk funds that they can afford to lose entirely. The commission also highlighted that the platforms where investors buy, sell, borrow or lend cryptocurrency assets may lack critical investor protections. Moreover, it cautioned that investments in these assets are "exceptionally volatile and speculative".

The cryptocurrency market faced a challenging year in 2022, with several high-profile companies collapsing and cybercrime activity rising. One of the most significant incidents was the downfall of FTX, which was once valued at $32 billion and filed for bankruptcy in November. The exchange's founder, Sam Bankman-Fried, is also facing criminal charges in the US.The collapse of FTX followed on from the failure of Celsius Network and Three Arrows Capital, which suffered significant losses. Additionally, the industry was hit by the collapse of the Luna cryptocurrency and its associated Terra stablecoin, which resulted in considerable job losses.

These events have contributed to a decline in investor interest in the sector, with many market participants calling for increased regulation to protect investors from the risks associated with cryptocurrency investments.In summary, the SEC's warning reminds investors that investing in cryptocurrency assets carries significant risks, and they should only invest funds they can afford to lose entirely. It is also vital for investors to recognise that the platforms where they transact in these assets may lack important investor protections. Lastly, the recent challenges experienced by the industry suggest that regulators and market participants must remain vigilant to ensure that investors are appropriately protected.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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