The Securities and Exchange Commission (SEC) of the United States has said that, going ahead, cryptocurrency exchanges must handle the digital assets of their customers as if they were their own liabilities.
Cryptocurrency Exchanges have to Protect Digital Assets
As stated in a recent warning, the SEC warns that cryptocurrency trading platforms that protect digital assets pose risks that are distinct from those faced by conventional financial services.
Crypto is referenced As Entity A
In connection with these services, these entities and/or their agents may safeguard the platform user’s crypto asset(s) and also maintain the cryptographic key information necessary to access the crypto asset.
The obligations associated with these arrangements involve unique risks and uncertainties not present in arrangements to safeguard assets that are not crypto assets, including technological, legal, and regulatory risks and uncertainties.
“The ability of Entity A’s platform users to obtain future benefits from crypto-assets in digital wallets where Entity A holds the cryptographic key information is dependent on the actions of Entity A to safeguard the assets. Those actions include securing the crypto-assets and the associated cryptographic key information and protecting them from loss, theft, or other misuse.
The technological mechanisms supporting how crypto-assets are issued, held, or transferred, as well as legal uncertainties regarding holding crypto-assets for others, create significant increased risks to Entity A, including an increased risk of financial loss.
Accordingly, as long as Entity A is responsible for safeguarding the crypto assets held for its platform users, including maintaining the cryptographic key information necessary to access the crypto assets, the staff believes that Entity A should present a liability on its balance sheet to reflect its obligation to safeguard the crypto assets held for its platform users.
SEC BULLETIN
It is anticipated that crypto platforms will begin revealing the kind and quantity of cryptocurrency assets held by its customers in business accounts by June 15th, according to the SEC.
