The Securities and Exchange Commission of the United States has issued a warning to investors about the risks associated with accounts that pay clients high interest rates for depositing crypto assets.
Companies that offer interest-bearing accounts for digital assets do not provide the same safeguards as banks and credit unions, and deposits are not insured, according to an investor bulletin issued by the regulator’s Office of Investor Education and Advocacy on Monday. The SEC announced earlier in the day that BlockFi Inc. had agreed to pay $100 million to federal and state securities regulators to settle allegations that it illegally offered a product that paid customers high rates to lend out their digital tokens.
The SEC’s investor advocacy office urged investors to carefully read any disclosures related to interest-bearing accounts, claiming that the products raised a number of concerns, including:
- Companies can use the assets in those accounts for a variety of investment activities, including loans to institutional investors.
- Risks that retail investors face with crypto assets in general, such as price volatility and possible fraud.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.