SEC Chair Warns of ‘Too Good to Be True’ Crypto Products — US Treasury Calls for Urgent Regulation21.06.2022
The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has warned the public about crypto investments that seem “too good to be true.” Meanwhile, the U.S. Treasury Department says that the recent crypto market turmoil underscores the urgent need for regulatory frameworks that mitigate the risks posed by digital assets.
SEC Chair Gensler’s Crypto Warning
SEC Chairman Gary Gensler cautioned investors last week about crypto lending platforms offering products that seem too good to be true, Reuters reported.
The securities regulator’s warning followed crypto lender Celsius Network’s withdrawal freeze early last week.
“We’ve seen again that lending platforms are operating a little like banks. They’re saying to investors ‘Give us your crypto. We’ll give you a big return 7% or 4.5% return,’” Gensler was quoted as saying. “How does somebody offer (such large percentage of returns) in the market today and not give a lot of disclosure?”
The SEC chair stressed:
I caution the public. If it seems too good to be true, it just may well be too good to be true.
The SEC and several state securities regulators are currently investigating Celsius Network’s decision to freeze withdrawals. According to reports, the company subsequently hired Citigroup as an advisor and sought help from Akin Gump Strauss Hauer & Feld, a law firm that specializes in financial restructuring.
Following Celsius, Hong Kong-based Babel Finance temporarily suspended withdrawals and redemptions of its crypto products.
Treasury Official Stresses Urgent Need for Crypto Regulatory Frameworks
The collapse of cryptocurrency terra (LUNA) and stablecoin terrausd (UST) in early May and troubles at crypto lending platforms have shaken the crypto market.
Bitcoin fell below $20K for the first time since 2020 this weekend as the overall crypto market shed over a trillion dollars in market capitalization since mid-April.
Following the crypto market sell-off, an official with the U.S. Treasury Department highlighted the urgent need for cryptocurrency regulation last week. Nothing that the Treasury Department is “monitoring activity in the crypto market,” the official told Reuters:
We believe the recent turmoil only underscores the urgent need for regulatory frameworks that mitigate the risks that digital assets pose.
“We continue to work closely with our regulatory partners, as they take action under their existing authorities, and offer guidance and expertise as Congress considers legislation to further address these risks,” the official detailed.
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