The head of the US Securities and Exchange Commission (SEC) has advised bitcoin and cryptocurrency investors to be careful of criminal activity and scams.

SEC’s head, Jay Clayton, said to The Guardian: “If a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.”

Clayton warned investors to ask questions before investing in cryptocurrencies, such as “are there substantial risks of theft or loss, including from hacking?” and “is the offering legal?”

‘Less protection than traditional markets’

Clayton continued to The Guardian: “A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.

“I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects.

“However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.”

The Guardian also noted Clayton’s main concern is cryptocurrencies change the manner of financial trading, but not the legal basis for regulation.

Written by Leah Alger