SEC Chairman Gary Gensler has warned investors against crypto financing methods that use products that appear to be too good to be true.
Gensler stated digitally at the Robert F. Kennedy Human Rights Compass Investor Conference that the SEC would focus on bitcoin projects and exchanges, cautioning individuals about potentially lucrative investment returns.
Meanwhile, the US Treasury Department believes that the recent volatility in the crypto market emphasizes the important need for regulatory regimes that lessen the vulnerability posed by digital assets.
Bitcoin had earlier hit a fresh 18-month low when major crypto lender Celsius Network stopped withdrawals and the prospect of significant interest rate increases in the United States rocked the volatile asset class.
“We’ve seen lending platforms act little like banks once again.” They’re telling investors, ‘Give us your cryptocurrency.’ We’ll give you a large return (7 percent or 4.5 percent),” According to Gensler. “How does someone offer (such a large percentage of returns) in today’s market without providing a lot of disclosure?”
Gensler went on to say “I warn the general public. If something appears to be too good to be true, it most likely is.”
Celsius, situated in New Jersey, provides interest-bearing products totalling about $11.8 billion in assets to users who deposit cryptocurrencies on its platform. It then lends out cryptocurrency to make money.
Liquidity problems at cryptocurrency lending platform Celsius Network, which has prevented its 1.7 million consumers from redeeming their holdings, will intensify regulatory pressure on the sector, which was already on the defensive due to past crises this year.
According to the Texas State Securities Board’s director of enforcement, who spoke to Reuters on Thursday, securities authorities in Alabama, Kentucky, New Jersey, Texas, and Washington have initiated investigations into the Celsius decision.
The breakdown of cryptocurrency terra (LUNA) and stablecoin TerraUSD (UST) in early May, as well as concerns with crypto lending sites, rattled the crypto industry. This week, the spotlight has returned to cryptocurrency markets, amid rising volatility that has long concerned regulators. Following the crypto market sell-off, a US Treasury Department official stressed the crucial need for cryptocurrency regulation last week.
According to the person, the Treasury Department is “watching behaviour in the bitcoin sector.”
“We believe that the recent turmoil only emphasizes the critical need for regulatory frameworks that mitigate the risks posed by digital assets.” He added.
Typical crypto trading platforms with dozens of tokens, according to Gensler, may well satisfy the definition of “securities” and so should be traded and controlled as such.
“We are now seeing the consequences of regulators failing to provide clarity,” said Perianne Boring, the Chamber of Digital Commerce’s founder and CEO.