(Reuters) – US listed companies holding cryptocurrencies on behalf of users and customers should report these assets as a liability in their balance sheet and disclose related risks to investors, the US Securities and Exchange Commission said on Thursday.
The SEC guidance would apply to a range of listed entities, including crypto exchanges and traditional companies such as retail brokers and banks that are increasingly providing cryptocurrency services and holding digital assets on behalf of a range of clients.
Although there is a well-established standard under accounting rules to protect traditional assets on behalf of customers, there is no explicit standard for protecting cryptocurrencies and companies differ in their treatment of these arrangements.
In its guidance, the SEC stated that there are “significant”; technical, legal and regulatory risks associated with protecting cryptocurrencies and, as a result, they should be reflected as a liability on companies’ balance sheets.
“The technical mechanisms that support the issuance, holding or transfer of cryptocurrencies, as well as the legal uncertainties regarding the holdings of cryptocurrencies for others, create significant increased risks … including an increased risk of financial loss,” the SEC wrote.
Companies should also disclose the “nature and quantity” of cryptocurrencies they are responsible for holding, with separate disclosures for each significant cryptocurrency, and any vulnerabilities that result from concentrating on such activities.
The underlying cryptocurrencies should be reported at fair value, the SEC said.
Cryptocurrency platforms and wallets continue to sustain major intrusions, with hackers stealing $ 615 million worth of cryptocurrency from the Ronin blockchain project just this week.
In addition, US regulators are still uncertain about how to deal with cryptocurrencies, and regulators are still discussing new rules for how banks should handle digital assets.