US SEC warns of crypto days after Nigeria nods to digital assets

The United States Securities and Exchange Commission has warned the investing public against cryptocurrencies, saying the digital asset class is not that decentralized.

The latest warning comes days after Nigeria’s SEC moved to regulate digital assets.

U.S. Securities and Exchange Commission Chairman Gary Gensler revealed this during an appearance at a FINRA conference.

He said investors should not believe they own their cryptocurrency tokens, noting that using a digital wallet on a platform signifies a transfer of ownership to the platform.

He said, “If the platform falls, guess what? You just have a quid pro quo relationship with the platform,” Gensler said. “Line up in bankruptcy court.”

According to the SEC Chairman, the digital asset class is not decentralized enough, citing a small handful of major trading and lending venues that handle the majority of crypto-asset traffic.

Gensler advocated for fundamental safeguards for investors such as market integrity, banning high-profile clients, and combating manipulation and fraud.

He also said that crypto platforms frequently trade and create markets against investors.

He said, “When [the platforms] be careful when they take these tokens, they can use them, they can trade them. It’s not like when you trade the stock markets,” Gensler said. “They make deals against you.”

Recall that the Nigerian SEC has issued new rules for digital assets as part of its efforts to regulate digital/virtual assets such as Bitcoins and NFTs.

The SEC action effectively legalizes digital assets such as cryptocurrencies and NFTs in Nigeria, where the central bank had imposed an indefinite ban.

Sylvia B. Polson