SEC Warns Against Interest-Bearing Crypto Accounts — Says They’re Riskier Than Bank Deposits – Regulation Bitcoin News

The U.S. Securities and Exchange Commission (SEC) has warned investors about the “risks with accounts that pay interest on crypto-asset deposits.” The warning coincides with the first enforcement action the agency took against crypto lending platforms.

SEC warns about the risks associated with interest-bearing crypto accounts

The U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force announced Monday that they have jointly issued an investor bulletin “to educate investors about risks with accounts that pay interest on crypto-asset deposits.”

The SEC also announced on the same day that Blockfi, a cryptocurrency lending platform, was being charged with failing to register its product. Blockfi will pay $100 million to the SEC as well 32 state regulators in settlement of the charges.

The SEC explained that “an interest-bearing account for crypto asset holdings … are not as safe as bank or credit union deposits.”

According to the securities regulator, banks and credit unions can be regulated both by federal and state banking regulators. Deposits made at banks and federal credit unions can be insured by both the Federal Deposit Insurance Corporation, FDIC, or National Credit Union Administration (NCUA). Securities accounts with U.S-registered broker may be also insured by Securities Investor Protection Corporation.

SEC:

Investors aren’t provided with the same protections by companies offering interest bearing accounts for crypto assets. Crypto assets that have been sent to these companies are not insured.

Crypto assets held in an interest-bearing account may be used to invest in various crypto products or activities, including lending programs in which the crypto assets are loaned to borrowers, the SEC described, adding that “The interest being paid to you is based on these investment activities.”

Following this, the agency outlined some of the potential risks associated with these activities, such as volatility in crypto markets liquidity, bankruptcies for companies holding crypto assets, changes to regulation, fraud and technical problems.

Let us know your thoughts on the SEC’s warning about interest-bearing cryptocurrency accounts. Please comment below.

Kevin Helms

Kevin, a student of Austrian Economics and evangelist since 2011, discovered Bitcoin. His main interests are in Bitcoin security, open source systems, network effects, cryptography, and intersections between economics, cryptography, and Cryptography.