SEC Demands Companies To Reveal Their Exposure To Crypto
- The United States Securities and Exchange Commission (SEC) released a statement asking companies to disclose their exposure to cryptocurrencies.
- SEC said that companies will have to modify disclosures if crypto is involved due to the “widespread disruption” in the crypto markets.
- Regulators around the world have become increasingly concerned about operations in the crypto world following FTX collapse.
- The regulator even provided a sample letter as a template for filing or updating disclosures.
The United States Securities and Exchange Commission (SEC) has recently released a statement in regards to the latest developments in cryptocurrency markets.
According to the December 8 guidance, the SEC targets companies that have disclosure obligations under the federal securities laws.
The agency said that companies should review their disclosures and modify them if crypto is involved due to the “widespread disruption” in the cryptocurrency markets. It reads:
“In meeting their disclosure obligations, companies should consider the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis.”
After the unfortunate demise of the once-leading crypto exchange platform FTX, regulators around the world have become increasingly concerned about the operations in the crypto world.
Interestingly, the SEC is doing exactly the same thing, painting the entire sector as blatantly risky and dangerous.
The regulator referred to the 1933 Securities Act, which mandates that companies disclose information in the best interests of their investors. Crypto has also been included because it is being seen as the new existential threat.
It is important to note that the auditing firms have already marked the crypto firms as high risk.
As per the new guidelines by the SEC, the companies are now required to disclose if they have direct or indirect relations with crypto companies that have filed for bankruptcy or been decreed insolvent or bankrupt, have experienced excessive redemptions or suspended withdrawals, have unaccounted crypto assets of their customers, or have experienced material and corporate compliance failures.
Moreover, companies must also outline any significant risks to their operations resulting from regulatory changes pertaining to crypto assets. The regulator even provided a sample letter as a template for filing or updating disclosures.
While the SEC has not explicitly come out against the crypto firms, the move might intend to discourage companies from having any relationships with the crypto firms.
Though the regulator does not have the power to completely control the crypto industry, it seems that it is working in the same direction by gearing up to come down hard on the sector.
Crypto companies will have to abide by the same regulations as stock exchanges and banks if a regulatory framework in the U.S. gives the SEC complete control over the sector.
On December 8, Intercontinental Exchange (ICE) CEO Jeffrey Sprecher concurred that cryptocurrencies should be handled like securities and subject to regulation.
“What does that mean? It means more transparency, it means segregated client funds, the role of the broker as a broker-dealer will be overseeing, and the exchanges will be separated from the brokers. The settlement and clearing will be separated from the exchanges.”