SEC Chairman Jay Clayton Sounds Warning Bell For Cryptocurrency Investors
If we had a time machine, we go back to the early days of Bitcoin and invest heavily. On this day seven years ago, Bitcoin was worth around $0.24. That means a $100 investment would have gotten you around 417 Bitcoins worth nearly $7.1 million today. The numbers turn really obscene when you crunch the numbers for when Bitcoin was worth a fraction of a cent. But while hindsight is 20/20, Bitcoin continues to rise in value, drawing in investors from all corners. It's such a big deal that US Securities and Exchange (SEC) chairman Jay Clayton felt compelled to offer some words of warning.
"A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation," Clayton says. "Investors should understand that to date no initial coin offerings have been registered with the SEC."
Clayton's comments come on the heels of Bitcoin surging past $10,000 for the first time just weeks ago. At the time of this writing, Bitcoin is trading for around $17,000, and some believe it has a much higher ceiling. Bitcoin's performance has generated significant buzz, both in Bitcoin itself and in digital coins generally.
His statement also comes just hours after the SEC put a halt to an ICO (initial coin offering) from a restaurant review app, after the company failed to register it as a security. The implication with that move is that the SEC is ready and willing to step in to address registration gaffs related to ICOs, even when fraud is not involved.
The concerns do not end there, as Clayton also warned investors about the heightened risk of having money funneled overseas.
"Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds," Clayton added.
Despite the risks, Clayton isn't sour on cryptocurrencies. He points out that the SEC is "committed to promoting capital formation," and that the underlying technology "may prove to be disruptive, transformative, and efficiency enhancing." He is referring to blockchain.
"I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so," Clayton says.
The bottom line? There is potential in cryptocurrency, but do your researcher. Also, buyer beware.
"A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation," Clayton says. "Investors should understand that to date no initial coin offerings have been registered with the SEC."
Clayton's comments come on the heels of Bitcoin surging past $10,000 for the first time just weeks ago. At the time of this writing, Bitcoin is trading for around $17,000, and some believe it has a much higher ceiling. Bitcoin's performance has generated significant buzz, both in Bitcoin itself and in digital coins generally.
His statement also comes just hours after the SEC put a halt to an ICO (initial coin offering) from a restaurant review app, after the company failed to register it as a security. The implication with that move is that the SEC is ready and willing to step in to address registration gaffs related to ICOs, even when fraud is not involved.
The concerns do not end there, as Clayton also warned investors about the heightened risk of having money funneled overseas.
"Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds," Clayton added.
Despite the risks, Clayton isn't sour on cryptocurrencies. He points out that the SEC is "committed to promoting capital formation," and that the underlying technology "may prove to be disruptive, transformative, and efficiency enhancing." He is referring to blockchain.
"I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so," Clayton says.
The bottom line? There is potential in cryptocurrency, but do your researcher. Also, buyer beware.
