The U.S. Securities and Exchange Commission (SEC) has warned Nigerian crypto investors that holding crypto assets only in custodial wallets could pose a risk.
On May 15, 2022, the Nigerian SEC released new rules to regulate the activities of digital asset market participants, which de facto legalize this asset class in the country.
A few days later, during a speech at the FINRA (Financial Industry Regulatory Authority) conference, US SEC Chairman Gary Gensler warned investors from Nigeria about the dangers of storing digital assets in custodial wallets.
Gensler pointed out that Nigerian investors may be confused about the ownership and management of their cryptocurrency assets, since the use of custodial cryptocurrency wallets automatically means the full transfer of ownership and operational control of the digital platform:
“If the platform collapses, guess what you have to do next? Only, as a counterparty of the platform, stand in line in the bankruptcy court.”
The conference was hosted by the Financial Institutions Regulatory Agency (FINRA), an American non-profit organization that regulates, mediates, and enforces the laws of exchanges and brokers and dealers. FINRA regulates trading in stocks, corporate bonds, futures and options.
“When crypto platforms take custody of your assets, they can use them for trading. And this is not at all like trading in the stock markets. In fact, the platforms are working against you, ”Gensler is sure.
The head of the SEC called cryptocurrencies a “highly speculative asset class” and confirmed the lack of guaranteed investor protection. Gensler called on Nigeria and other FINRA members to create fundamental investor safety rules such as insider trading, market manipulation and fraud.
The South Korean Financial Services Commission (TSC), amid the tense situation around the stablecoin market, has proposed registering crypto companies depending on their level of risk and adopting regulations to protect local investors.
Source: Bits
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