The US SEC issued an investor announcement: beware of the risks of interest-bearing accounts of encrypted assets

The U.S. SEC’s Office of Investor Education and Advocacy and the Enforcement Division’s Retail Strategy Working Group are issuing an investor bulletin to educate investors about the risks of accounts that pay interest on deposits with crypto assets.

Cryptoassets, including cryptocurrencies, stablecoins, tokens and other digital assets, have seen increased interest from retail investors over the past few years, the SEC said. This investor announcement highlights the risks that may be involved in a recent financial product related to crypto-assets used in interest-bearing accounts for holding crypto-assets.

1. Unlike bank deposits, these products may sound similar to interest-bearing accounts at banks or credit unions, but investors need to be aware that these cryptoasset-related accounts are not as secure as bank or credit union deposits .

2. Risks of crypto asset investment, crypto assets held in interest-bearing accounts may be used to invest in various crypto asset-related products, plans or other activities, including lending projects that lend crypto assets to borrowers. The interest paid to you is based on these investment activities.

These include: volatility and illiquidity in cryptoasset markets; the risk that the company holding your cryptoassets may fail or go bankrupt; unpredictability, including that the market for a particular cryptoasset may disappear entirely, or the cryptoasset may no longer be available Transactions anywhere; regulatory changes by federal, state, or foreign governments that may restrict the use and exchange of cryptoassets; inability to rectify in the event of fraud, default, or error; and potential fraud, technical glitches, hacking, or malware.