The SEC, FASB, and IRS are all trying to tighten crypto rules and keep a closer eye on the industry.
United States authorities are finally showing an increased interest in cryptocurrencies’ future and economic impact, fourteen years after Bitcoin’s Genesis Block sparked a major disruption in financial services and other industries through the advent of blockchain technology.
Following the first agenda consultation with investors in five years, the Financial Accounting Standards Board (FASB) reviewed new accounting and disclosure requirements for firms holding crypto assets in financial statements on Dec. 14. It is anticipated that the proposed guidelines will be released in the first half of 2023.
A few days prior, the Securities and Exchange Commission (SEC) sent a sample letter to companies, asking them to consider including information about recent developments in the cryptocurrency markets in their disclosures. This includes business descriptions, risk factors, and management’s discussion and analysis.
Legal experts predict that many players in the cryptocurrency and financial services industries will be affected by the changes. According to Mark Kornfeld, shareholder for securities and financial fraud at the law firm Buchanan Ingersol and Rooney, “it should have a multi-pronged and ultimately substantial macro- and micro impact on financial markets generally and the crypto business particularly.” According to the attorney:
“First, the Commission, much like it did after the Madoff Ponzi scheme was disclosed to the world at large, will be aggressively monitoring and doing full-blown regulatory examinations of in time thousands (if not more) conducting business in and around this space. All in the market should reasonably anticipate and fully expect a sizable uptick in regulatory enforcement proceedings by the Commission, and, continued legal challenges to, the Commission’s jurisdictional authority.”
According to reports, the Internal Revenue Service (IRS) is also focusing more on cryptocurrency and has hired hundreds of new agents to work on digital assets and cybercrime. The IRS is looking to collaborate with cryptocurrency companies in addition to its own data scientists in an effort to forge a “symbiotic connection” to combat financial fraud.
After the abrupt collapse of the cryptocurrency exchange FTX in November last year, which paved the way for a forthcoming governmental examination of the crypto market in 2023, lawmakers in the United States are also under pressure to establish a new legal framework for cryptocurrencies.
However, other individuals think the long-term results will be favourable.
“The net result should prove to be a more regulated and transparent climate, increased market stability, and much improved investor and consumer protection in a space that has until recently operated in an environment that is fairly characterised as relatively secretive and opaque,” Kornfeld remarked.