Previously, SEC announced that it would scrutinize companies generating hype by pivoting to crypto before diving deeper into initial coin offerings with subpoenas. Today, it appears that the agency turned its attention to people who are buying cryptocurrencies, issuing warnings to consumers against trusting so-called ‘exchanges’ that state or imply that they are protected by federal law. Here’s the thing: They aren’t protected by law because the cryptocurrency world remains unregulated and lawmakers are still trying to figure out how to go about regulating it.
The SEC considers cryptocoins that investors are trafficking to be ‘securities’ under federal law, meaning they satisfy the agency’s definition of ‘national security exchanges’ and should register with the SEC. If they don’t register, they remain outside of government eyes and regulation. This means that the agency is then now able to protect individuals from any manipulative or fraudulent practices, if any take place.
“Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange. Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges,” the SEC stated in a post.
If you, the consumer, continues to use these unregistered ‘exchanges,’ all the SEC is able to do is offer an extensive list of questions individuals should ask to protect themselves. These questions include discovering how the platform selects digital assets for trading, how prices are set, who can trade it and whether the platform is treating all users equally. The SEC is also urging users to evaluate the exchange’s security for data and assets, given that there have been plenty of hacks and robberies taking places for cryptocurrencies.