SEC Warns Investors To Use Caution On ICOs and Digital Currency

Investing, News, Regulation | January 4, 2018 By:

The US Securities and Exchange Commission has again told investors: if you lose on cryptocurrencies, don’t come crying to us.

In a statement Thursday from SEC Chairman Jay Clayton and Commissioners Kara Stein and Michael Piwowar, the government said investors should “exercise caution” in their digital currency holdings. “The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment,” the officials said.

The SEC has ramped up enforcement of initial coin offerings and cryptocurrency businesses over the last six months. It forced one ICO to return money to investors and has put others on notice that many ICOs could be considered securities offerings, and thus subject to regulations regarding issuance of same.

“Unfortunately, it is clear that many promoters of ICOs and others participating in the cryptocurrency-related investment markets are not following [state and federal securities] laws,” Clayton said.

Clayton’s remarks were a response to the North American Securities Administrators Association urging investors to “go beyond the headlines and hype.”

“Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart,” said NASAA President Joseph Borg.