Guidance From SEC Presses FIs Holding Crypto Assets for Members, Customers to Report Those Assets on Balance Sheets

The U.S. Securities and Exchange Commission is pressing firms to account for crypto assets they’re holding on behalf of customers on their balance sheets. 

A growing number of trading platforms are safeguarding digital assets for their users and maintaining the cryptographic keys necessary to access the tokens, the regulator said in staff guidance Thursday. However, they aren’t always disclosing those activities to investors even though they can lead to financial loss if the assets are stolen or misused, an SEC official said on a call with reporters. 

The guidance -- issued as a Staff Accounting Bulletin -- clarifies how the agency expects companies to apply existing accounting standards to digital assets. The Financial Accounting Standards Board has said it would consider providing specific rules for reporting cryptocurrencies and other types of tokens, but that clarity could be years away. The SEC document offers a quick way to fill that gap, providing investors with more consistent reporting across issuers. 

While such guidance doesn’t carry the legal weight of a rule, it’s closely followed by industry.

Even though crypto firms are currently the ones primarily offering these services, the new guidelines would also apply to any financial institutions that enter into this space, the SEC official told reporters. 

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Read the SEC bulletin

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