SEC Warns Companies to Reveal Exposure to Crypto Businesses

SEC

The U.S. Securities and Exchange Commission is still on the crypto warpath. Its latest edict is targeted at publicly listed companies with any exposure to the asset class or industry.

The SEC’s Division of Corporation Finance released a statement On Dec. 8 “regarding recent developments in crypto-asset markets.”

The guidance has targeted companies that have disclosure obligations under federal securities laws. Citing “widespread disruption” in crypto markets, the regulator said that companies should evaluate their disclosures and update them if crypto is involved.

Furthermore, auditing firms have already upgraded crypto firms to high risk.

It has been widely predicted that regulators would use the FTX fiasco to crack down on the industry, and the SEC is doing exactly that, portraying the entire industry as overtly risky and dangerous.

The agency harked back to the 1933 securities act, which requires firms to make disclosures in the interests of their investors. With crypto being deemed as the new axis of evil now, it has been added too.

Companies now need to disclose if they have direct or indirect relations with crypto firms that attain the following criteria:

  1. They must have filed for bankruptcy or been decreed insolvent or bankrupt.
  2. They must have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets.
  3. They must have the crypto assets of their customers unaccounted for.
  4. They must have experienced material and corporate compliance failures.
  5. Additionally, companies are required to describe any material risks to the business from regulatory developments relating to crypto assets.

The SEC even provided them with a sample letter to use as a template when filing or updating disclosures.

The move may be intended to discourage companies from having any dealings with the crypto industry.

The SEC is clearly gearing up to come down hard on crypto. It does not yet have the authority to fully regulate the sector but is making moves in that direction.

If a regulatory framework in the U.S. grants the SEC full authority over the industry, crypto companies will need to comply with the same laws as stock exchanges and banks. On Dec. 8, the CEO of the Intercontinental Exchange (ICE), Jeffrey Sprecher, agreed that crypto assets should be regulated as securities.

This will effectively make it much harder for retail traders to participate in the markets. It could also result in a mass exodus of fintech firms and innovation from the United States.

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