Laith Khalaf, head of investment analysis at AJ Bell, comments on the SEC filing charges against the crypto exchange platform Binance:
“The US financial watchdog is now targeting yet another large crypto provider accused of mishandling customers’ assets, which will be another worrying development for anyone who holds money on crypto platforms. This time it’s Binance, the world’s largest crypto trading platform, which sits in the dock facing a string of charges from the SEC.
“This of course comes hot on the heels of the FTX scandal, which did untold damage to confidence in the cryptoverse. The robust language used by the SEC, along with the lengthy list of charges, suggests this latest fiasco to engulf the crypto market is going to rumble on for some time. The price of Bitcoin took a tumble on the back of the news, and at the moment it feels like the crypto bubble is suffering death by a thousand punctures.
“Crypto is a highly volatile asset in a market which is lightly regulated, so investors must be willing to swallow a whole load of risk before diving in. Crypto poses multiple risks to consumers. Fraud and scams are rife, but even if you buy legitimate crypto, the most obvious risk is the potential for large losses.
“While the vast majority of people who have bought crypto will have done so with a small amount of money that won’t make a huge difference to their life if they sustain heavy losses, there is inevitably a minority who have over-exposed themselves, potentially borrowing money to do so. The FCA suggests it’s seeing increasing evidence of addictive behaviour from some crypto traders, and there may be some lessons that can be learned from the gambling industry in terms of how to manage this, for instance identifying such behaviour and potentially putting transactional limits on some accounts. But the golden rule for crypto buyers remains not to invest any money you aren’t willing to lose in its entirety.”
