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Companies Should Disclose Customers’ Crypto Holdings As Liabilities, US SEC Says


The U.S. SEC said crypto storage arrangements should be considered a liability

U.S.-listed companies that hold cryptocurrencies on behalf of consumers and customers should consider such assets as liabilities on their balance sheets and disclose related risks to investors, securities regulators said on Thursday.

The U.S. Securities and Exchange Commission (SEC) guidelines will apply to a variety of listed entities, including crypto exchanges and traditional firms such as retail brokers and banks that are increasingly providing cryptocurrency services and holding digital assets on behalf of various clients.

While there are robust standards under accounting rules for protecting traditional assets on behalf of customers, there are no clear standards for protecting crypto assets and companies deviate in their treatment of these arrangements.

In its guidance, the SEC said there are “significant” technological, legal and regulatory risks associated with protecting crypto assets and as a result it should be reflected as a liability on a company’s balance sheet.

“The technological mechanisms that support the way crypto assets are issued, held, or transferred, as well as legal uncertainties about holding crypto assets for others, create significant increased risk … including increased risk of financial loss,” the SEC wrote.

Companies should also disclose the “nature and amount” of the crypto assets they are responsible for holding, with separate disclosures for each significant crypto asset, and any vulnerabilities resulting from the concentration in those activities.

Underlying crypto assets should be accounted for at fair value, the SEC said.

Cryptocurrency platforms and wallets continue to suffer major breaches, with hackers just this week stealing $ 615 million worth of cryptocurrency from the Ronin blockchain project.

In addition, U.S. regulators are still undecided on how to treat cryptocurrencies, with regulators still discussing new rules on how banks should handle digital assets.

(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)

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