(The Center Square) – The Arizona Corporation Commission issued a warning to investors about companies with digital assets that offer interest-bearing cryptocurrency accounts.
AZCC says that with crypto interest accounts, customers lend crypto assets to the company and in return receive paid interest in crypto assets.
As a result of the downturn in the crypto market, some companies are preventing account holders from withdrawing money from their accounts and transferring it between accounts. AZCC says bankruptcy reports from Celsius Network and Voyager Digital highlight this problem.
The Corporation Commission Securities Division warns investors that some crypto-interest account providers are not completely honest with their investors. The division says that account providers may not have adequately disclosed the risks that customers face when depositing cryptocurrencies on these platforms.
“Some companies may significantly overestimate the extent to which their collateral practices protect their ability to pay investors the stated return,” the AZCC said in a press release.
In a recent action against BlockFi Lending, LLC, the commission found that some cryptocurrency accounts were unregistered securities.
The securities registration exists to ensure that investors receive all the information they need to assess whether or not to enter into these cryptocurrency account schemes, including risks taken with deposits.
The commission is investigating “whether other providers of crypto-interest accounts are violating laws under the commission’s jurisdiction,” it reports.
Here are some of the issues that AZCC lists about crypto interest providers:
- They are not governed by the same rules and protections as banks and credit unions, which are required to have deposit insurance.
- They are unpredictable, volatile and sometimes illiquid.
- They may become insolvent or go bankrupt.
- Their cryptocurrencies cannot be traded anywhere.
- There may be changes in the regulation that may limit the use and exchange of the digital resource.
- Their platforms can be vulnerable to theft, technical errors or hackers.
- They may be located outside the United States, so your ability to take legal action may be limited or subject to foreign laws and regulations.
- The Companies Commission encourages investors to be careful before responding to any inquiry that offers a return on digital assets. Investors can find a list of companies and individuals who have been sanctioned or are facing sanctions for cryptocurrency-related investment activity on the securities department’s the enforcement section of its website.
Arizona account investors with cryptocurrencies can file complaints to the Commission’s securities department at www.azcc.gov/azinvestor. The AZCC encourages people to visit www.azcc.gov/azinvestor to learn more about investing in cryptocurrencies.
