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  6.  | Will the SEC increase digital currency accounting standards in 2022?

Will the SEC increase digital currency accounting standards in 2022?

On Behalf of | Apr 13, 2022 | Securities Litigation

One of the key benefits of cryptocurrency is its accessibility. Anyone with a computer or smartphone and internet access can put together a cryptocurrency wallet and access financial services. There is no centralized authority, no bank or financial institution, to process an application.

No hoops to jump through.

Unfortunately, there is also risk that comes with this relatively new form of currency. The United States Securities and Exchange Commission (SEC) noted two key areas of concern when it comes to keeping investors who use cryptocurrency safe from fraud. These concerns include rapid change of ownership and lack of regulatory requirements. The feds note these two issues are the key reasons this form of currency remains a risky bet for investors.

In an effort to address these concerns, the SEC recommends new crypto currency rules that would include the following:

  • Know who has crypto key info. The SEC explains that it is important for the investor to know of any exchange or company that has the cryptographic key information for the asset. Although a failure to have this information can result in loss of the asset, investors should also account for the risk that comes with sharing this information.
  • Report to SEC. New accounting standards will also likely require public companies report these holdings.

If successful, these new rules would go into effect after June 15.

Why the push for new rules?

In a recent interview, investor advocates claim the push is in response to hacking incidents. A former SEC commissioner states that the recent hacking of Axie Infinity, a blockchain game, led to the loss of an estimated $615 million in cryptocurrency. Investor advocates state increased regulations that focus on custody of digital currency will reduce the risk of these hacking events in the future.

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