SEC wants firms to disclose if they have crypto exposure

Quick Take

  • The Securities and Exchange Commission is pressing firms to disclose if they have financial exposure to crypto assets or companies whose business and financial status could be affected by reverberations in digital asset markets. 

The U.S. Securities and Exchange Commission wants companies to publicly disclose if they have exposure to crypto assets, including whether they do business with any crypto-related companies. 

The regulatory agency, which oversees disclosures for public companies in the U.S., said the guidance is due to, "Recent bankruptcies and financial distress among crypto asset market participants," that occurred this year, most recently the high-profile implosion of FTX and its corporate family. "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," the agency guidance continues. 

Firms must disclose if they have direct or indirect relations with companies that have filed for bankruptcy, experienced excessive redemptions or withdrawals of crypto assets, maintain unaccounted crypto assets of customers and experienced corporate compliance failures.

In addition, companies must describe how the bankruptcies of certain firms affected their businesses and that the company must take safeguards to protect its customers' crypto assets. 

The news comes after FTX's collapse led to fears of financial contagion in crypto markets, as well as increased scrutiny of the SEC. The guidance will be posted to an SEC website, "and is intended to be illustrative of the types of comments we might send to public company issuers if/when applicable," an agency spokesperson told The Block. 

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

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