Crypto Asset-Related Investments
The SEC’s Office of Investor Education and Assistance has created this webpage to help investors understand different types of crypto asset-related investments. Crypto asset-related investments offer both opportunities and risks. They can be volatile and lose money. Before deciding to invest, it is important to consider how an investment fits your personal investment goals, time horizon, and risk tolerance.
Types of Crypto Asset-Related Investments
There is a broad universe of crypto asset-related investments, and that universe continues to grow. Ways to invest in crypto asset-related investments include:
buying crypto assets;
buying shares of publicly listed companies involved in a crypto asset-related industry; and
buying shares of funds or exchange-traded products (ETPs) with exposure to crypto asset-related investments.
Keep reading to learn more about these crypto asset-related investments and what to consider before investing.
Crypto assets
What they are: A crypto asset is any digital representation of value that is recorded on a cryptographically secured distributed ledger.
Investor considerations: When you buy a crypto asset, you are directly exposed to the price and volatility of the crypto asset. You have full ownership over the crypto asset. Your crypto asset is accessed through a digital wallet using private keys or passcodes. You are also subject to the risks related to how the crypto assets are custodied and can choose to be responsible for the wallet yourself (self-custody where you have sole control over the crypto asset) or ask a third party to handle it for you (third-party custody where you do not have sole control). Read any terms of service or user agreement before you agree to it.
Publicly listed companies involved in a crypto asset-related industry
What they are: Individual publicly listed companies involved in a crypto asset-related industry to varying degrees. One example is companies that provide services to a crypto asset-related industry, such as crypto asset mining and staking companies, crypto asset exchanges, and blockchain technology companies. Another example is digital asset treasury companies (DATCOs or DATs), which focus on acquiring and managing large amounts of crypto assets as part of their corporate treasuries or as their primary business activity.
Investor considerations: When you buy shares of stock in a publicly listed company, you are directly exposed to the performance and stock price of that company. You own a piece of the company and participate in its profits or losses. You do not directly own any crypto assets. The company’s shares may trade higher or lower independent of the price of any crypto asset. Stock ownership in publicly listed companies also comes with well-defined legal rights, which might include the ability to vote on certain company decisions and the right to receive dividends. Review a company’s disclosures to determine how and to what extent it is involved in a crypto asset-related industry. Public company disclosures can be found in the SEC’s EDGAR database. For help using the database, see Using EDGAR to Research Investments.
Funds and ETPs with exposure to crypto asset-related investments
What they are: Investment vehicles that pool money from multiple investors and provide exposure to crypto asset-related investments. These vehicles can be structured as: mutual funds, exchange-traded funds (ETFs) and other funds registered with the SEC as investment companies; private funds, such as hedge funds and private equity funds; and ETPs. These funds and ETPs provide exposure to one or more crypto asset-related investments, in a variety of combinations and amounts depending on investment strategy. For example, these funds and ETPs might provide exposure to one or more of the following investments:
crypto assets;
shares of companies involved in a crypto asset-related industry; and/or
shares of other funds with exposure to crypto asset-related investments.
Investor considerations: These funds and ETPs can provide varying levels of exposure to crypto asset-related investments, depending on investment strategy. Read the fund or ETP’s prospectus to understand its specific mix of assets. The prospectus of a fund or ETP required to file with the SEC can be found in the SEC’s EDGAR database.
When you buy shares of a fund or ETP with exposure to crypto asset-related investments, you are indirectly exposed to the price and volatility of the underlying investments. You do not directly own the underlying investments.
Funds and ETPs are subject to different degrees of regulatory obligations, depending on the structure. Mutual funds, ETFs, and other funds registered with the SEC as investment companies are required to have registered investment advisers. They are also subject to legal requirements intended to protect investors—such as requirements for valuation, custody, and public disclosure. ETPs register their offerings and securities with the SEC and make required public disclosures. But neither ETPs nor private funds are registered with the SEC as investment companies, so they are not subject to the same legal requirements as investment companies. All ETPs, private funds and SEC-registered investment companies are subject to the anti-fraud provisions of the federal securities laws.
Even if an investment vehicle is not an SEC-registered investment company, its adviser might be registered with the SEC. For example, some private fund advisers are SEC-registered investment advisers. Information about SEC-registered advisers is available through the Check Out Your Investment Professional tool on Investor.gov.
Before Investing
Do your own research. It is important to do your own research and understand any potential investment. A crypto asset-related investment itself, or the offer and sale of the investment, may or may not be registered with a regulatory authority, such as the SEC. If a crypto asset-related investment, or the offer and sale of the investment, is registered, look for regulatory disclosure documents that provide key information about the investment and offering, such as fees, risks, and financial health. Many disclosure documents of SEC-registered investments and offerings can be found through the SEC’s EDGAR database. Learn how to use the database by reading Using EDGAR to Research Investments.
Understand custody and security. Custody refers to how and where your investments are stored and accessed. If you purchase a crypto asset directly, be sure to understand its custody arrangements. If the security of your crypto assets is compromised, you could permanently lose access to them. Read the SEC’s Crypto Asset Custody Basics for Retail Investors – Investor Bulletin before deciding how to custody your crypto assets.
Assess your risk tolerance. Crypto asset-related investments can be volatile and lose money, meaning they can experience rapid and significant price swings. This is true whether you invest in crypto assets, companies involved in a crypto asset-related industry, or funds or ETPs with exposure to crypto asset-related investments. Consider whether you have risk tolerance for this type of investment.
Stay informed. Educate yourself about the signs of fraud. Monitor regulatory enforcement and policy developments in this fast-evolving space.
Additional Information
ETPs Providing Exposure to Bitcoin and Ether – Investor Bulletin
Funds Trading in Bitcoin Futures – Investor Bulletin
Crypto Asset Custody Basics for Retail Investors – Investor Bulletin
The content of this webpage represents the views of the staff of the Office of Investor Education and Assistance. This content is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. The content of this webpage, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
