SEC calls on firms to disclose exposure to crypto bankruptcies and risks

cointelegraph.com:

The United States Securities and Exchange Commission (SEC) has issued new guidance that could see publicly traded companies disclose their exposure to crypto assets.

In a statement released on Dec. 8 by SEC’s Division of Corporation Finance, it said the recent upheaval in the crypto asset market has “caused widespread disruption in those markets” and noted that companies may have disclosure obligations under federal securities laws to disclose whether these events could have an impact on their business.

The SEC has also included an example letter that would be addressed to companies asking for additional disclosures about the company’s exposure to crypto bankruptcies, crypto asset volatility, and any other significant crypto market development.

The first question asks the company to provide disclosure of any “significant crypto asset market developments” that could impact the company’s financial condition, results, or share price, including the impact of the price volatility of crypto assets.”

Other questions ask the company to discuss how certain bankruptcies have impacted or may impact the business, including whether one has experienced “excessive redemptions or withdrawals” or to the extent that crypto assets are being used as collateral for loans.

It also asks the company to describe any material risks to the business from regulatory developments relating to crypto assets, or risks faced by the assertion of jurisdiction by U.S. and foreign regulators or other government entities over crypto assets and crypto asset markets

In the accompanying text, the SEC explained that it “selectively reviews filings […] to monitor and enhance compliance with applicable disclosure requirements.”

It noted that companies are already