Crypto exchanges are growing by the multitudes with each passing day as crypto continues to enter deeply into the mainstream. With crypto gaining prominence, it is safe to say that some entities have considered using it as their primary source of investment. To achieve that, they must work with crypto exchanges.

With this, crypto exchanges need to know that they should be liable for their customers and the type of investment they subject them to on their respective platforms. A new statement released by the Securities and Exchange Commission’s examinations division emphasized the list of things that the SEC is looking out for when it comes to regulating digital assets.

The commission issued a “risk alert” statement

In the statement, the division mentioned that it had grown increasingly worried that crypto exchanges are refusing to comply with all the necessary laws and regulations. The division noted that even though most of them are complying with rules such as AML, others have failed to enforce this rule on their clients. The division also mentioned that other crypto exchanges have already rolled out operations with bases in different parts of the country without registration.

Even though risk alert is not something that spells growing danger, the division is just trying to let crypto exchanges know that they should mention some things to their clients so that they won’t overlook them. The division also mentioned that it was interested in knowing key things such as how investment risk experts assess risks and help their clients overcome issues like these. It also mentioned that it was interested in knowing how they keep their records efficiently and the kind of custody practice they keep.

The SEC mentioned decentralized exchanges as such exchanges

When reviewing crypto exchanges, the division also mentioned that they would base it on certain things such as anti-money laundering laws and others. It also mentioned that it would base each broker or exchange on specific laws which are entirely different from the others. Its statement mentioned that it had faced several issues from the pseudonymous point of view of crypto while trying to come up with the laws to regulate the space.

This statement goes to show that many crypto exchanges do not try to verify their customers. So they won’t know if they are providing custodial services to drug traffickers or malicious actors. In the letter that the National Securities Exchange addressed, the statement mentioned that several crypto exchanges have been carrying out services without prompt approval from their part.

With this in mind, the commission talked about individual exchanges operating in the decentralized finance sector where people would be able to carry out several activities just like on various centralized crypto exchanges. The SEC has been targeting crypto exchanges from the onset as they have cracked out on several exchanges and the budding Initial Coin Offering that started in 2017. Crypto exchanges used this to lure investors into investing in a coin with a promise to reap massive rewards when the coin is finally listed.