By Katanga Johnson
WASHINGTON (Reuters) -U.S. Securities and Exchange Commission (SEC) Gary Gensler said on Tuesday that investors should beware promised returns from crypto lending platforms and products that seem "too good to be true."
The Wall Street watchdog's comments come a day after the world's largest cryptocurrency fell 15% on Monday, its sharpest one-day drop since March 2020.
Bitcoin, which steadied on Tuesday, had earlier hit a new 18-month low as major crypto lender Celsius Network's freezing of withdrawals and the prospect of sharp U.S. interest rate rises shook the volatile asset class.
"We've seen again that lending platforms are operating a little like banks. They're saying to investors 'Give us your crypto. We'll give you a big return 7% or 4.5% return.' How does somebody offer (such large percentage of returns) in the market today and not give a lot of disclosure?" Gensler said during an industry event.
"I caution the public. If it seems too good to be true, it just may well be too good to be true."
New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.
Focus on crypto markets has intensified again this week amid more volatility that has long-alarmed watchdogs.
Companies exposed to cryptocurrencies have previously warned that declines in token prices could have ripple effects, including by triggering margin calls.
Gensler has repeatedly touted that in his view, typical crypto trading platforms, which can have dozens of tokens on it, may well meet the definition of "securities," and should be traded and regulated as such.