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Cryptogambling / SEC chair warns of cryptocurrency risks, volatility

SEC chair warns of cryptocurrency risks, volatility

Publish Date: 09/01/2024
Gary Gensler SEC Chair, tags: cryptocurrency - upload.wikimedia.org

Gary Gensler SEC Chair – upload.wikimedia.org

In a social media post on Monday, the U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler, shared his view on cryptocurrency investment, calling it “risky” and “volatile.”

“Investments in crypto assets also can be exceptionally risky & are often volatile. Several major platforms & crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk,” Gensler said.

He highlighted that crypto asset investments and services are not following securities law.

“Those offering crypto asset investments/services may not be complying w/ applicable law, including federal securities laws. Investors in crypto asset securities should understand they may be deprived of key info & other important protections in connection w/ their investment,” he said.

Gensler cautioned that the increasing interest in crypto opens up possibilities for fraud.

“Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams. These investments continue to be replete w/ fraud- bogus coin offerings, Ponzi & pyramid schemes, & outright theft where a project promoter disappears w/ investors’ money.”

Gensler’s statement coincides with the Web3 industry awaiting the SEC’s decision on several Bitcoin ETF applications. It coincided with a series of amended Form S-1 filings, the initial registration forms for new securities.

The SEC is set to finalize the applications — including ones from BlackRock, Ark Invest-21Shares and Fidelity — on Wednesday. This decision could mark a significant approval, potentially bringing the first spot Bitcoin ETF to the U.S.

New phase of digital investment

The anticipated approval by the SEC for a spot Bitcoin ETF might mark a new phase of investment chances for digital assets. This step could offer a regulated way to invest in Bitcoin and open doors for more inclusion of cryptocurrencies into traditional financial systems.

Asset managers’ revised S-1 filings are viewed as the last step before potential approval. Several companies are reducing fees to draw investors to their ETF products. ARK Invest and 21Shares plan to waive the 0.25 percent fee for six months on the initial $1 billion assets, while BlackRock set a competitive ongoing fee of 0.3 percent.

Although the commission can reject the applications, recent legal changes, like a federal judge instructing the SEC to reconsider a spot Bitcoin ETF application previously denied from Grayscale Investments, indicate that the regulator’s reasoning for any decision will be scrutinized.

The potential approval of a spot Bitcoin ETF in the U.S. would follow in the footsteps of Canada, which permitted listing such products on exchanges starting in 2021.

Spot Bitcoin ETF potential rejection’s impact

Bloomberg’s ETF analyst James Seyffar believes there is a 90 percent chance of Bitcoin ETF approval.

He said that ARK-21Invest might withdraw its application but reapply later, or there could be a surprise denial from Gensler. He also brought up the possibility of intervention from the Biden administration as an extreme situation.

“Good question. 1) Ark withdraws with assurances about March (unlikely) 2) Genz goes nuclear & SEC denies using new reasons or ignores the court knowing they’d end up back in court (again–Unlikely) 3) Biden admin comes down and does something to stop this (unlikely),” said Seyffart in a social media post.

Cryptocurrency journalist Laura Shin said if the SEC did not approve the spot Bitcoin ETFs after making applicants “jump through all these hoops,” it would lose credibility. The journalist also stressed that the agency should come up with a very legitimate reason if it ended up rejecting the applications.

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