SEC Issues Guidance on Disclosure of Cryptocurrency Risk

The staff of the SEC’s Division of Corporation Finance released guidance for companies issuing securities in an illustrative letter, entitled “Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets.” The comments focus on providing investors with specific, tailored disclosure regarding a company’s involvement with cryptocurrency and other digital assets, together with associated risk factors. The letter discusses potential disclosure scenarios, and asks companies to detail how such scenarios may affect their operations. Additionally, the Letter provides a list of sample comments focusing on the material impacts of crypto asset market developments, including but not limited to:

• a company’s exposure to counterparties and other market participants;
• risks related to a company’s liquidity and ability to obtain financing; and,
• risks related to legal proceedings, investigations or regulatory impacts on the crypto asset markets.

According to an update from Dechert, “This guidance also likely signals the beginning of an increased emphasis on consumer protection safeguards for cryptocurrency-related risks.”

Click here to read an update from Dechert covering the new guidance.