SEC Issues Warning Against Illegal Crypto Exchanges

SEC, the Security and Exchange Commission has published a letter warning “unlawful online platforms that trade digital assets.” Along with the letter, they have also advised digital currency investors to only deal with companies that are registered with SEC as an ATS (Alternative Trading System).

Currently, a number of digital asset exchanges have popped up along with many ICOs. Many of such entities function illegally or are simply scams to entrap investors. With the intention of investor security in mind, SEC issued the mentioned letter to get all unregistered digital asset exchanges to register with the agency, failing which they will be exempted from registration.

SEC explains, “The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices.” This information can help investor see which exchanges are protected by security laws and SEC, and thus will unlikely become scam victims.

According to SEC, many platforms offer features such as bidding, order books, and execution data, through which they claim to be legit and registered exchanges. However, these attributes do not legally stand as a qualification in the eyes of the U.S regulators and federal security laws.

“To get the protections offered by the federal securities laws and SEC oversight when trading digital assets that are securities, investors should use a platform or entity registered with the SEC, such as a national securities exchange, alternative trading system (“ATS”), or broker-dealer.”

Currently, SEC has designed a list of 13 questions they want investors to ask themselves before investing in an online platform. These questions are designed to help judge whether or not the institution functions legally or not.

Now, meanwhile SEC was informing investors and warning digital asset exchanges, the cryptocurrency market dropped significantly in value. Apparently, there has been a loss of around 10-20% in a short period.

Please share it if you enjoy the read!

Leave a Reply

Your email address will not be published. Required fields are marked *