In the crypto industry, daily, there are several scams related to cryptocurrencies and stablecoins occur, due to which several people lose their invested money. It is very difficult to find that the crypto project you’re investing in is a legit way or a kind of crypto scam. But according to Gary Gensler, the chairman of the SEC, also known as the US Securities and Exchange Commission, it’s not much hard to spot a crypto scam.
Earlier this month, on the 11th of January, speaking to the US Army during a Twitter Space, SEC chair Gary, and Caroline Crenshaw, the Commissioner of the SEC, discussed what they consider the dangers of investing in crypto. Moreover, they also discussed how to tell if a project is a scam, which is a very hot question in the crypto industry. Gensler said that if something looks too good to be true, sometimes they are, but there are some red flags that you can look for beyond it being too good to be right.
For the answer to this question, Gensler introduced three ways to find out whether a crypto project is a scam. The first way is that the crypto project can’t provide clear documentation about how it works or it plans to deliver its purposes. The second way is that the crypto project can’t also demonstrate that it’s in regulatory compliance. The final way is that the crypto project can’t easily describe what it is at all. According to the SEC chair, offers of high returns are a red flag. Gensler also warned against projects that are overly complicated or rush the investor to make a decision.
Moreover, Gensler said that most cryptocurrencies are not complying with the securities laws, which they should do. Regarding the future of cryptocurrencies and the crypto industry, Gensler indicated that the majority of cryptocurrencies and tokens currently in the market would fail. And SEC Commissioner said that it’s important for us to understand that crypto is novel and it’s speculative. Pointing to the scams in the crypto industry, Caroline said that there needs to be more transparency.