Money Management

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What happenedThe Securities and Exchange Commission (SEC) charged crypto exchange Gemini and crypto lender Genesis with selling unregistered securities last week. The Gemini Earn program had allowed users to earn interest by lending out their crypto assets through Genesis. However, last year, Genesis froze withdrawals on its platform, leaving about 340,000 Gemini Earn customers unable to access around $900 million in assets. So whatIt isn’t clear whether the move will help Gemini Earn customers get their money back. But for crypto investors, the dangers of crypto lending platforms have never been more evident. Whatever crypto exchange you use, if you’re earning interest, make sure you understand where that money is coming from.
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The SEC is pursuing cases against several crypto lenders on the basis that these interest-bearing accounts are a type of security. There are strict rules about how securities can be bought and sold, enforced by the SEC. These include fully informing investors about the risks involved, something the SEC says Gemini and Genesis did not do.When you put your money in an interest-bearing savings account, there are rules about what the bank can do with your funds. There are also protections against bank collapse, such as FDIC insurance. For stock brokerages, the Securities Investor Protection Corporation (SIPC) covers investors against company failure. While some crypto platforms have third-party insurance, and some U.S. dollar deposits are covered by FDIC insurance, a lot of assets on crypto platforms are not protected. “The recent collapse of crypto asset lending programs and the suspension of Genesis’ program underscore the critical need for platforms offering securities to retail investors to comply with the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.Tyler Winklevoss, one of Gemini’s founders, hit back at the SEC on Twitter. He said Gemini had been in discussions with the SEC about the Earn program for more than 17 months. “They never raised the prospect of any enforcement action until AFTER Genesis paused withdrawals on November 16th,” he said.Now whatWhen you invest in crypto, there aren’t as many safeguards as you’d get with traditional finance. Know that there are big differences between the following crypto accounts, and each offers different levels of risk:Custodial wallets: If you leave your assets on the platform where you bought them, they’ll usually be held in a custodial wallet. If the platform fails, your account may be frozen and you may not be able to access your money. Indeed, your funds could get tied up in bankruptcy proceedings. Staking accounts: Some cryptocurrencies, known as proof-of-stake cryptos, pay rewards to token holders who agree to tie up their coins to help secure the blockchain. There are different ways to stake crypto, but staking is often a safer way to earn rewards than crypto lending.Lend-earn accounts: The idea behind crypto lending is to take the middleman out of loans. Essentially, you lend your crypto directly and get paid the interest. Unfortunately, it isn’t always clear what risks are being taken with your assets or who they are being lent to.Non-custodial wallets: This is a type of crypto wallet that you control. Unlike a custodial wallet, you’re in charge of your funds and there’s no risk of loss if your exchange collapses. That said, there’s a steep learning curve and if you lose your password or seed phrase, you could also lose access to your crypto.Don’t assume your funds are safe. Instead, consider moving your assets to a crypto wallet that you control, or at least removing them from crypto lending schemes. The volatility of crypto is risky enough without adding in the risk of platform failure.
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What happened

The Securities and Exchange Commission (SEC) charged crypto exchange Gemini and crypto lender Genesis with selling unregistered securities last week. The Gemini Earn program had allowed users to earn interest by lending out their crypto assets through Genesis. However, last year, Genesis froze withdrawals on its platform, leaving about 340,000 Gemini Earn customers unable to access around $900 million in assets.

So what

It isn’t clear whether the move will help Gemini Earn customers get their money back. But for crypto investors, the dangers of crypto lending platforms have never been more evident. Whatever crypto exchange you use, if you’re earning interest, make sure you understand where that money is coming from.

The SEC is pursuing cases against several crypto lenders on the basis that these interest-bearing accounts are a type of security. There are strict rules about how securities can be bought and sold, enforced by the SEC. These include fully informing investors about the risks involved, something the SEC says Gemini and Genesis did not do.

When you put your money in an interest-bearing savings account, there are rules about what the bank can do with your funds. There are also protections against bank collapse, such as FDIC insurance. For stock brokerages, the Securities Investor Protection Corporation (SIPC) covers investors against company failure. While some crypto platforms have third-party insurance, and some U.S. dollar deposits are covered by FDIC insurance, a lot of assets on crypto platforms are not protected.

“The recent collapse of crypto asset lending programs and the suspension of Genesis’ program underscore the critical need for platforms offering securities to retail investors to comply with the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

Tyler Winklevoss, one of Gemini’s founders, hit back at the SEC on Twitter. He said Gemini had been in discussions with the SEC about the Earn program for more than 17 months. “They never raised the prospect of any enforcement action until AFTER Genesis paused withdrawals on November 16th,” he said.

Now what

When you invest in crypto, there aren’t as many safeguards as you’d get with traditional finance. Know that there are big differences between the following crypto accounts, and each offers different levels of risk:

Custodial wallets: If you leave your assets on the platform where you bought them, they’ll usually be held in a custodial wallet. If the platform fails, your account may be frozen and you may not be able to access your money. Indeed, your funds could get tied up in bankruptcy proceedings. Staking accounts: Some cryptocurrencies, known as proof-of-stake cryptos, pay rewards to token holders who agree to tie up their coins to help secure the blockchain. There are different ways to stake crypto, but staking is often a safer way to earn rewards than crypto lending.Lend-earn accounts: The idea behind crypto lending is to take the middleman out of loans. Essentially, you lend your crypto directly and get paid the interest. Unfortunately, it isn’t always clear what risks are being taken with your assets or who they are being lent to.Non-custodial wallets: This is a type of crypto wallet that you control. Unlike a custodial wallet, you’re in charge of your funds and there’s no risk of loss if your exchange collapses. That said, there’s a steep learning curve and if you lose your password or seed phrase, you could also lose access to your crypto.

Don’t assume your funds are safe. Instead, consider moving your assets to a crypto wallet that you control, or at least removing them from crypto lending schemes. The volatility of crypto is risky enough without adding in the risk of platform failure.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The sooner you shed that debt, the better. 

If you’re starting off 2023 with leftover debt from 2022, you can rest assured that you’re in good company. A lot of people were forced to rack up credit card balances just to cover basic expenses last year as inflation surged. And many people routinely end up with debt following the holiday season. So if you were forced to charge things like gifts and travel on your credit cards and deal with the aftermath later, you’re not alone.

But lingering debt can be problematic on several fronts. First of all, the very idea of being in debt could mess with your head and cause you a world of stress. And also, the longer you carry your debt, the more you might end up paying in interest. That’s money you could be using for other purposes, like building your savings or covering everyday bills.

If you’re eager to shed your leftover debt as quickly as possible, here are three essential moves to make.

1. Get on a budget

Following a budget won’t make your debt magically disappear. What it will do, however, is help you limit your non-essential spending and free up money for debt payoff purposes. Also, having a budget will give you a better sense of where your money goes month after month. And having that knowledge could prevent you from racking up debt in the future.

2. Get a side job

It’ll probably take money beyond what your regular paycheck delivers to dig your way out of debt. And while cutting back on spending and spending mindfully will help, an income boost could be your ticket to ridding yourself of leftover debt quickly.

To that end, look at getting yourself a side hustle. The gig economy is loaded with opportunities to pick up extra jobs. And since that money won’t be earmarked for existing bills, like food and utilities, you can dedicate it to paying down debt.

3. Do some consolidating

Consolidating your debt might make it easier to keep track of and less expensive to pay off. And you have a few different options in this regard.

You could take out a loan and use the proceeds to pay off different credit cards. If you own a home, a home equity loan might be a good choice. And if you don’t have home equity to tap, you can look at a personal loan.

Another option is to move all of your credit card balances onto a single card, and then pay off that one card month after month. Many balance transfer offers come with a 0% introductory APR, too, which buys you a reprieve from accruing interest as you work to get out of debt.

Starting off a new year with a pile of debt from the previous year can be a blow to your finances and mental health. And so it’s in your best interest to unload that debt as soon as possible. These tips could be your ticket to doing just that — and getting to move forward with a debt-free slate.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Don’t sweat it if your portfolio doesn’t rebound this year. 

If you’re looking at your IRA balance this month and are unhappy with the number you’re seeing, you’re certainly not alone. Many people lost money — a lot of money — in the stock market last year, at least on paper or on screen. That’s because the market sorely underperformed. That, combined with a major meltdown in the tech sector, has left a lot of investors reeling and feeling very unsettled.

If your IRA lost money in 2022, you may be hoping that your portfolio will recover fully in 2023. But it’s hard to say whether that’s likely to happen.

Sure, the stock market could rebound this year. And you may find that by December 2023, your IRA balance is as high as it was before the market tanked last year.

But it’s also possible that your IRA won’t recover this year. And it could even end up losing additional value.

Those last two scenarios really aren’t something to panic over, though. And the sooner you tell yourself that, the less stress you might have to endure.

It’s important to think long term

If your IRA balance is down now compared to where it sat a year ago, it’s natural you’d want it to recover as quickly as possible. But don’t worry if the next 12 months aren’t kind to your portfolio.

Saving for retirement is something you’re supposed to do over multiple decades. And if you’re many years away from retirement, it means you have plenty of time to recover from the events of 2022 and still wind up with a sizable nest egg.

In fact, let’s say you just turned 35 and your goal is to work until your mid-60s. That means your IRA has a good 30 years to recover. So why put the pressure on for a near-term recovery?

Sure, a quick recovery would be nice. But if it doesn’t happen, know that you still have plenty of time to see your IRA balance pick back up.

Keep saving and investing

Even though the stock market has been volatile over the past 12 months, it’s still a good idea to keep funding your IRA in 2023. First of all, any money you put into a traditional IRA will serve as a tax break and shield some of this year’s income from the IRS. And even if you opt for a Roth IRA and don’t get an immediate tax break on your retirement plan contributions, you can still invest your money and enjoy tax-free gains.

In fact, since the stock market is down right now, it’s actually a pretty good time to invest, since you can scoop up quality stocks at a discount. So even if your portfolio balance is way down, don’t assume you should ditch your IRA and stop investing this year. Instead, keep at it, and keep telling yourself the stock market is apt to recover.

That may not happen anytime soon. But you don’t need it to happen soon. You just need it to happen eventually.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More