SEC Warns Investors of Risks Associated with Interest-Bearing Crypto Accounts

The SEC Office of Investor Education and Advocacy and the Division of Enforcement Retail Strategy Task Force warned investors about the risks associated with accounts that pay interest on crypto-asset deposits.

In an Investor Bulletin, the SEC explained the difference between the protections that are afforded to investors in interest-bearing accounts with bank or credit unions and interest-bearing accounts for crypto assets. The SEC warned to not expect the same level of security, safety and soundness with crypto asset interest-bearing accounts.

The Bulletin identified some of the risks to which investors may be exposed:

  • volatility and illiquidity in the crypto asset markets;

  • potential failure or bankruptcy of the company holding investor crypto assets;

  • unpredictability, including that the market for a particular crypto asset may disappear altogether or that the crypto asset may no longer be tradable anywhere;

  • changes in regulation by federal, state or foreign governments that may restrict the use and exchange of crypto assets;

  • the inability to be made whole should fraud, default or a mistake occur; and

  • potential fraud, technical glitches, hackers or malware.

The SEC urged investors to carefully review all documents and disclosures to ensure they are aware of the risks associated with their investments.