Gary Gensler (chairman of the U.S. Securities and Exchange Commission) has warned that crypto investments can be too good to be true. The U.S. Treasury Department believes that recent market turmoil highlights the need for regulatory frameworks to mitigate the risks associated with digital assets.
Last week, Gary Gensler, Chairman of the SEC, warned investors about crypto lending platforms that offer products that are too good to be true.
Following the withdrawal freeze by crypto lender Celsius Network, the securities regulator’s warning came last week.
“We have seen that lending platforms operate a lot like banks,” said one of the participants. They are telling investors to give them their crypto. Gensler was quoted saying, “We’ll give you big returns 7% or 4.5%,” “How can someone offer such a large percentage of returns in today’s market without giving a lot of information?”
The SEC chair stressed that:
I warn the public. It may be impossible to believe if it sounds too good to true.
The SEC and various state securities regulators are currently looking into Celsius Network’s decision to stop withdrawals. According to reports, the company hired Citigroup as an advisor, and then sought out Akin Gump Strauss Hauer & Feld for legal assistance in financial restructuring.
Babel Finance, a Hong Kong-based company that deals in crypto products, temporarily stopped withdrawals and redemptions following Celsius.
Treasury Official Underlines the Urgent Need For Crypto Regulatory Frameworks
The crypto market has been shaken by the collapse of cryptoterra (LUNA), stablecoin terrausd(UST) in May, and problems at crypto lending platforms.
Bitcoin dropped below $20K this weekend, as the total crypto market lost over a trillion dollars since mid-April.
A U.S. Treasury Department official highlighted the urgency of cryptocurrency regulation following the sell-off in the crypto market last week. According to Reuters, nothing is being done by the Treasury Department “monitoring activity on the crypto market.”
The recent turmoil is a reminder of the need to establish regulatory frameworks to mitigate the risk digital assets present.
The official stated that they continue to work closely together with their regulatory partners as they take actions under their existing authority and offer guidance as Congress considers legislation to further address the risks.