The Securities and Exchange Commission advised public companies to consider disclosing their exposure to and potential impacts from the cryptocurrency market following recent turbulence in the industry.
"In meeting their disclosure obligations, companies should 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," the SEC's division of corporation finance said in guidance released Thursday.
The guidance comes after the crash of major crypto firms FTX and BlockFi, which have prompted increased calls for regulation of the crypto industry. Last week, Commodity Futures Trading Commission Chairman Rostin Behnam called on Congress to pass crypto regulation giving more authority to the CFTC. SEC Chairman Gary Gensler previously said he's in favor of doing so, though he believes the majority of crypto tokens are securities and should register with the SEC.
The guidance recommends that companies disclose "the material impacts of crypto asset market developments," which could include exposure to counterparties that have filed for bankruptcy or faced insolvency, risks related to liquidity, and risks related to investigations or regulatory developments in the market.
Public companies are already required by law to disclose financially material information to investors, however, the SEC's corporate finance division issued the guidance in light of recent developments.
"Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business," the division said.
The guidance urged companies to examine the recommendations "as they prepare disclosure documents that may not typically be subject to review by the Division before their use."
