According To The U.S Sec, Crypto Safeguarding Contracts Are A Liability.

    On Thursday, the Securities and Exchange Commission ruled that publicly traded U.S. corporations that hold cryptographic tokens for their customers or users must account for those assets as liabilities on their balance sheets and explain to investors the risks associated with those assets.

    According to SEC advice, a wide variety of publicly-traded organisations, including crypto exchanges and traditional financial institutions such as retail brokerages and banks, would be subject to the new rules and regulations.

    While there is a well-established norm under accounting regulations for securing traditional assets on behalf of customers, there is no specific standard for safeguarding crypto assets, and firms differ in how they manage these types of relationships.

    According to the SEC’s recommendations, there are “substantial” technological, legal, and regulatory risks connected with the preservation of crypto-assets, and as a consequence, they should be shown as a liability on corporations’ balance sheets, rather than as an asset.

    As the SEC said, “the technological systems that underpin how crypto-assets are produced, kept, and transferred, as well as legal issues surrounding holding crypto-assets for others, generate significantly heightened risks…including an increased risk of financial loss.”

    The “type and amount” of crypto assets that companies are accountable for holding, with separate disclosures for each key crypto-asset, as well as any vulnerabilities emerging from concentration in such activities, should be disclosed as well.

    According to the SEC, the underlying crypto-assets should be valued at their fair market value.

    Cybercriminals continue to target cryptocurrency platforms and wallets, with hackers taking $615 million worth of bitcoin from blockchain project Ronin just last week, to name a recent example.

    Aside from that, regulators in the United States are still unsure about how to manage cryptocurrencies, with officials now debating new guidelines for how banks should handle digital assets.

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