The Internal Revenue Service, the Financial Accounting Standards Board, and the Securities and Exchange Commission are all working to tighten crypto regulations and broaden industry oversight.
Fourteen years after Bitcoin’s genesis block launched a profound disruption in financial services and other industries through the rise of blockchain technology, United States authorities are finally becoming more interested in cryptocurrencies’ future and economic impact.
On Dec. 14, the Financial Accounting Standards Board discussed new accounting and disclosure requirements for entities holding crypto assets in financial statements, following an agenda consultation with investors — the first in five years. The proposed rules are expected to be issued in the first half of 2023.
A sample letter was sent by the Securities and Exchange Commission a few days earlier, asking businesses to consider the recent developments in the crypto markets in their disclosures. “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.”
Legal experts predict that many crypto and financial services players will be affected by the changes. “It should have a multi-pronged and ultimately profound macro and micro impact on financial markets generally and the crypto industry specifically,” said Buchanan Ingersol and Rooney shareholder Mark Kornfeld, who specializes in financial and securities fraud. In a cointelegraph article they published, he said:
“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’s (IRS) Criminal Investigation division has reportedly hired hundreds of new agents to work on digital assets and cybercrime, making cryptocurrency an additional area of focus. The IRS wants to work with crypto companies and its own data scientists to form a “symbiotic relationship” to fight financial crime.
After the dramatic collapse of the cryptocurrency exchange FTX in November, lawmakers in the United States are also under pressure to establish a new regulatory framework for cryptocurrencies. This will set the stage for future scrutiny of the cryptocurrency market in 2023.
However, there are those who anticipate favorable long-term outcomes.“The net result should prove to be a more regulated and transparent climate, increased market stability, and much-improved investor and consumer protection in a space that has until recently operated in an environment fairly characterized as relatively secretive and opaque,” Kornfeld says.