The Securities and Exchange Commission, the Financial Accounting Standards Board, and the Internal Revenue Service are all working to tighten cryptocurrency regulations and expand industry oversight.
Fourteen years after Bitcoin’s genesis block triggered a profound disruption in financial services and other industries due to the rise of blockchain technology, US authorities are finally becoming more interested in the future and economic impact of cryptocurrencies.
Following the first agenda consultation with investors in five years, the Financial Accounting Standards Board discussed new accounting and disclosure requirements for entities holding crypto assets in financial statements on December 14. The proposed rules will be published in the first half of 2023.
A few days earlier, the Securities and Exchange Commission issued a sample letter regarding recent crypto market developments, urging companies to consider “the need to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis.”
According to legal experts, the changes will be felt by many players in the crypto and financial services industries. “It should have a multifaceted and ultimately profound macro and micro impact on financial markets in general and the crypto industry in particular,” said Mark Kornfeld, a securities and financial fraud shareholder at Buchanan Ingersol and Rooney. He stated to Cointelegraph:
“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.”
The Internal Revenue Service (IRS) is also reportedly focusing on cryptocurrency, with its Criminal Investigation division hiring hundreds of new agents to work on digital assets and cybercrime. Along with its own data scientists, the IRS hopes to collaborate with cryptocurrency firms in order to create a “symbiotic relationship” to combat financial crime.
After the dramatic collapse of crypto exchange FTX last November, lawmakers in the United States are also under pressure to establish a new regulatory framework for cryptocurrencies, setting the stage for upcoming scrutiny in the crypto market in 2023.
Some, however, believe that the long-term outcomes will be positive. “The net result should be a more regulated and transparent climate, increased market stability, and significantly improved investor and consumer protection in a space that has previously operated in a relatively secretive and opaque environment,” said Kornfeld.