Since the fateful collapse of FTX earlier this winter season, the United States government has been coming down on crypto companies and participants in the most robust of manners. In the wake of the FTX implosion, the SEC, or the Securities Exchange Commission, has released a set of new guidelines for publicly traded companies.
In particular, they outline how publicly traded companies will be required to disclose any and all exposure to either crypto coins, tokens, or equity investments.
“We have a robust enforcement history in the crypto space—I think over 100 actions—a couple of dozen while I’ve been here as chair against crypto exchanges, against crypto lending platforms, against, of course, tokens,” Gensler said, citing moves against BlockFi, Poloniex, and Coinbase, the largest U.S. crypto exchange.
The Consequences of the FTX Disaster
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.
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.
SEC Responds By Opening 2 New Offices
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.
And from the looks of it, the SEC isn’t slowing down any time soon. Hopefully, there is still a Wild West, even if there is less of an emphasis on the “wild” aspect of the crypto markets.
Advocates of crypto say that CFOs can use blockchain technology to gain access to fresh pools of capital, serve new groups of customers who transact in cryptocurrencies, and streamline Treasury functions such as money transfers. Some CFOs have adopted crypto-enabled payments or, in the high-profile examples of Tesla and MicroStrategy, brought cryptocurrencies onto their balance sheets.
The Crypto Market Remains a Roller Coaster
Yet cryptocurrencies and related markets have proven extremely volatile this year. Shares in Coinbase, the biggest U.S. cryptocurrency exchange, have plunged more than 82%, while Bitcoin and Ethereum have plummeted more than 63% and 65%, respectively.
Does this indicate it’s time to throw in the towel on crypto? Absolutely not, because these figures are akin to the early days of Microsoft or Amazon. Early volatility is typically a predictor of new technology and innovation rather than a lack of interest or ability to produce real-world utility. If there is anything to be learned from the SEC’s new guidelines is this: learn, approach carefully, and don’t stop believing.