The US Securities and Exchange Commission (SEC) agenda for this year includes a crackdown on digital assets. SEC head Gery Gensler in January stated that if the crypto exchanges do not enter the regulated arena, the public will be susceptible for another year. Since then, the SEC has relied solely on its agencies to gather information and conduct investigations into cryptocurrency exchanges. It made another step toward its aim on April 1. It required crypto trading platforms to treat all assets held for their customers as their own capital and to include them on their balance sheets. Aside from fiat money, the type and quantity of crypto assets stored for consumers should be reported in detail.
The new rule will go into effect in June and will apply to all publicly traded crypto trading exchanges. Currently, crypto trading firms independently record and report the digital assets held in custody on behalf of their consumers. Brokerages also take advantage of this technology.
As of June, the new rule will separate crypto exchanges from brokerages and dramatically grow the balance sheets of the exchanges. In last year’s balance report, Coinbase listed $21.3 billion in assets and liabilities, but it also stated that it had $278 billion in cryptocurrencies and currency in client custody. According to the notice, the SEC is concerned about the harmful impact of cryptocurrencies’ technological, legal, and regulatory hazards on their operations.
According to the announcement:
“The obligations associated with these arrangements involve unique risks and uncertainties not present in arrangements to safeguard assets that are not crypto-assets, including technological, legal, and regulatory risks and uncertainties.”
The protection of assets and third parties who may be harmed by the high volatility of cryptocurrencies are examples of technological hazards. Legal hazards allude to the absence of history on how crypto custody would be handled within court. On the other side, regulatory concerns are associated with having a few regulatory restrictions for owning crypto. At the same time, exchange operators may fail to comply with new laws, increasing the dangers for investors.
With the new regulation, the SEC intends to provide more data on cryptocurrency exchanges to assist investors in making allocation decisions. The ruling stated that the staff thinks that the guidance in this statement on risk recognition, measurement, and disclosure will improve the information obtained by investors and other users of financial statements concerning these risks, therefore supporting them in making investment and other capital allocation choices.
Read more:
- SEC designates cryptocurrency as a priority for examination
- Crypto experts discuss National security and innovation on a webinar
