SEC agency says Crypto investment offerings may be subject to the federal securities laws


The US Securities regulatory body warned citizens of investment in crypto staking & lending investment and also suggested not to trust exchanges’ PoR audits.

The United States Securities and Exchange Commission (SEC) is a dominant financial regulatory body in the US. Over a couple of years ago, the SEC agency showed a very strict stance against crypto companies. 

On 23 March 2023, The SEC agency released a warning announcement for US crypto investors and urged the investors to exercise caution before crypto investment.

According to the SEC agency, all the crypto lending, staking & interest offerings may be subject to federal securities law and also claimed that crypto investors may lose all of their investments.

The SEC agency alleged that Proof-of-Reserves (PoR), a common popular method nowadays among crypto companies to give proof of the crypto fund’s reserves behind the company, is nothing because there are no criteria that how they report the information on behalf of PoR.

“In sum, investors should exercise extreme caution when relying on proof of reserves to conclude that a crypto asset entity has sufficient reserve assets to meet customer liabilities,” the SEC agency said.

Further, on celebrity endorsement in the crypto sector, the SEC report stated that people should remain aware of celebrity endorsement in any crypto-related services and don’t trust such people to invest in any crypto offerings.

According to the SEC body, celebrity endorsement doesn’t mean that an investment product or service is better or legitimate to make a profit.

SEC vs Crypto Companies

Within the last two months, the SEC agency took many enforcement actions against the crypto companies. In the latest, the SEC body sent a Wells notice to the Coinbase exchange over the nature of some listed Crypto assets, staking services & lending offerings. 

Before Coinbase, the SEC agency sent a Wells notice to the BUSD stablecoin issuer company Paxos Trust. Paxos responded to that situation and terminated its support for the BUSD stablecoin business. 

Before Paxos Trust, the SEC body took Enforcement action against the Kraken crypto exchange over crypto staking services. Later Kraken settled the case with the SEC and paid a $30 million fine & also suspended crypto staking services for US crypto investors.

Read also: Whales start accumulating Litecoin (LTC) ahead of halving