The United States Securities and Exchange Commission (SEC) has called on companies to fully disclose their crypto asset risks and exposure to fallen crypto firms, citing “financial distress” and joining efforts to regulate the space in order to prevent a repeat of the FTX fiasco.
SEC Calls for Disclosure of Crypto Risks
The FTX implosion sent a shockwave through the crypto industry, with many crypto companies forced to file for bankruptcy. The SEC has now sent a letter to public companies asking them to evaluate their crypto exposure.
The regulator said under federal security laws, companies have obligations to report direct and indirect exposure to bankrupt crypto firms and the broader financial distress across the digital asset market.
Public companies are also to report their relationships with crypto companies deemed insolvent, suffered excessive redemptions, or failed to account for their customers’ crypto assets. They will also report ways of safeguarding their customers’ crypto assets.
SEC Prepares for Stricter Crypto Regulations
The FTX collapse, which has left millions of investors disgruntled, has renewed the push for crypto regulation. The SEC has increased its push for stricter crypto market regulation because of the FTX incident.
In the last couple of months, the SEC has opened two new offices – an Office of Crypto Assets and an Office of Industrial Applications and Services – specifically for the regulation of the crypto sector.
On the Flipside
- United States Federal Lawmakers have criticized the SEC for lagging behind the rapid growth of crypto markets in its regulations.
Why You Should Care
The SEC wants public companies to disclose how they may have been affected by the FTX collapse to avoid misleading investors about their financial status.
What will be the impact of regulation? Read:
Can Regulations Save Cryptocurrency Against Future Market Dips?
Read more on the SEC guidance in:
SEC Wants US Companies to Disclose Their Crypto Involvements Citing Disruption in the Markets