SEC Investigations Push Investors Toward Crypto: Study

The thorough analysis and several investigations that the US Securities and Exchange Commission (SEC) has launched on notorious crypto-related entities seem to be working out for the industry so far.

60% of the respondents in a recent survey said they are more likely to enter the digital asset ecosystem after seeing how the regulator interacted with several troubled firms, including Celsius Network, Three Arrows Capital (3AC), and Yuga Labs.

Investors Fond of the SEC’s Approach

According to the latest MLIV Pulse study, 60% of the 564 participants favor the SEC’s stringent interventions toward problematic cryptocurrency firms. Despite the market’s decline, the watchdog’s actions have sparked an increased interest in the digital asset sector.

Chris Gaffney – President of World Markets at TIAA Bank – described himself as a professional investor and a supporter of the crypto industry. In his view, additional regulations could make the asset class even more attractive to average consumers:

“The more they can get crypto out of the Wild West and into traditional investing, the better off it’s going to be.”

The poll participants also commented on bitcoin’s close correlation to risk-on assets and the stock market index S&P 500. 42% think the trend will remain for the next 12 months, while 43% believe this will change and plan to increase their exposure to digital currencies over the same period.

In September, Ethereum shifted from the Proof-of-Work (PoW) consensus algorithm to the Proof-of-Stake (PoS). The process, known as “the Merge,” is estimated to be a stepping stone for the protocol’s future development. As such, some argued that the market valuation of the native token – ether – could surpass bitcoin’s. Around 33% of the survey respondents think this could happen in the following two years.

Crypto remains a highly divisive topic. Asked to choose one word that characterizes the asset class, most participants said either “Ponzi” or “future.”

Victoria Greene – a member of G Squared Private Wealth – is in the proponents’ club. According to her, crypto is “almost like a religion – if you believe, you will always believe no matter the price or the headwinds.”

Nonetheless, she outlined that the sector is still in its early days, and many people are unaware of its use cases. She concluded that individuals with conservative views might stick to the Ponzi team for a while.

The SEC’s Scrutiny

In September, the SEC detected two companies allegedly running a Ponzi scheme. Per the accusations, Creative Advancement LLC and Edelman Blockchain Advisors LLC “fraudulently offered and sold securities, using false, misleading statements” from February 2017 to May 2021.

The owner of the firms – Gabriel Edelman – supposedly raised nearly $4.4 million during that period and promised to invest that sum in cryptocurrencies. The Commission, though, maintained that he distributed a small portion as intended and used the rest to pay off credit cards and send money to family members.

The SEC struck again a few weeks ago, accusing two entities and their executives of managing a pump-and-dump scheme involving a cryptocurrency called Dignity (DIG). The companies, called Arbitrade and Cryptobontix, assured the token was backed by gold and that it was “trading exclusively” on the Russian platform – Livecoin.

The SEC’s investigation found out that none of those was true and that the executives pocketed over $36 million from the users’ funds.