New York City: The U.S. Securities and Exchange Commission on Wednesday signaled it will be paying close attention to how public companies report their exposure to crypto currencies, following a period of tumult in digital assets markets.
In letters addressed to dozens of companies and funds, the SEC’s division of corporation finance pointed out that investors need clear information about businesses’ “possible exposure to financial damage” from the volatile prices of digital tokens.
The regulator also asked companies to describe their policies for valuing cryptocurrency holdings, as well as risks related to investors’ ability to redeem their tokens for cash.
The letters were sent to companies ranging from biotech firms with a modest exposure to cryptocurrencies to funds dedicated to investing in digital assets.
The SEC has released a statement
warning companies about crypto-related damages. They are asking companies to disclose their policies for valuing crypto currency holdings, as well as risks related to investors’ ability to redeem their tokens for cash.
The SEC is looking out for Crypto investors and wants to help them avoid losses
Crypto currencies have been on a roller coaster ride over the past year, with prices falling sharply from their highs in December 2017. The SEC’s letters come as a number of companies have been drawn into the cryptocurrency space, either by investing in digital assets or by experimenting with blockchain technology. The SEC’s move to scrutinize public companies’ disclosures around cryptocurrencies is a reminder that the regulator is watching the space closely. The letters also underscore the risks that come with investing in digital assets, which are often highly volatile and can be difficult to value. Investors need clear information about businesses’ “possible exposure to financial damage” from the volatile prices of digital tokens, the SEC said. The regulator also asked companies to describe their policies for valuing cryptocurrency holdings, as well as risks related to investors’ ability to redeem their tokens for cash.
The letters were sent to companies ranging from biotech firms with a modest exposure to cryptocurrencies to funds dedicated to investing in digital assets. The SEC’s focus on disclosure around cryptocurrency holdings comes as a number of companies have been drawn into the space. In December, the SEC charged a businessman and two companies with defrauding investors in a $30 million initial coin offering. The SEC alleged that the defendants raised the money by falsely promising to use it to build a digital platform for trading a variety of assets, including volatile cryptocurrencies. Similarly, in November, the SEC charged a man with running a fraudulent cryptocurrency scheme.
The SEC alleged that the defendant lured investors by promising to invest their money in a new cryptocurrency he was developing, which he claimed was backed by assets including real estate and diamonds. These cases highlight the risks that come with investing in digital assets, which are often highly volatile and can be difficult to value. The SEC’s focus on disclosure around cryptocurrency holdings will help ensure that investors have the information they need to make informed decisions about whether to invest in these products.
