The SEC Wants Public Companies to Disclose Their Crypto Exposure

SEC Chair Gary Gensler

Chip Somodevilla/Getty Images

The Securities and Exchange Commission (SEC) told publicly listed companies to disclose any exposure to cryptocurrency, a month after the collapse of FTX sparked market chaos.

Key Takeaways

  • The Securities and Exchange Commission (SEC) asks public-listed firms to submit their crypto exposure.
  • The guidance comes after FTX, one of the world's largest cryptocurrency exchanges, went bankrupt in November.
  • Earlier this week, the SEC Chair defended the agency against allegations that it failed to protect customers' funds.

 The SEC Takes Action After The FTX Collapse

The regulator said the firms must tell investors whether they face a material impact from the crypto market, including exposure to counterparties, any risk to their ability to get financing and whether they could be endangered by legal proceedings.

"Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business," the SEC said in a statement.

What Companies Need to Answer About Cryptocurrencies

The financial watchdog shared a "sample letter" companies can use as guidance to meet disclosure obligations. In the first question, the companies are asked to disclose any "significant crypto asset market developments" that could affect their financial condition, results, or share price, including the volatility of crypto assets' prices.

The companies are also asked about how certain bankruptcies may have affected their business, including whether excessive redemptions or withdrawals have occurred or to what extent crypto assets are being used as collateral.

The companies need to describe any material risks they face as a result of regulatory developments related to crypto assets or as a result of U.S. and foreign regulators asserting jurisdiction over crypto assets and crypto asset markets.

The Bottom Line

The guidance comes a day after SEC Chair Gary Gensler defended the agency from claims that it failed to prevent crypto firms from misusing customer funds. He emphasized that the regulator does not need further powers to regulate the crypto industry. The sample letter and guidance indicate the government intends to take action in response to FTX's demise.

Article Sources
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  1. SEC. "Sample Letter to Companies".

  2. SEC. "Regarding Recent Developments in Crypto."

  3. SEC. "Regarding Recent Developments in Crypto."

  4. Yahoo Finance. "Gensler Says SEC is Fine Going After Crypto."

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