US authorities to intensify scrutiny of crypto industry in 2023

Published at: Jan. 5, 2023

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 (FASB) discussed new accounting and disclosure requirements for entities holding crypto assets in financial statements, following an agenda consultation with investors — the first one in five years. The proposed rules are expected to be issued in the first half of 2023.

A few days earlier, the Securities and Exchange Commission (SEC) delivered a sample letter regarding the recent developments in the crypto markets, asking companies to consider in their disclosures "the need to to address crypto asset market developments in their filings generally, including in their business descriptions, risk factors, and management’s discussion and analysis."

The changes are set to be felt by many players in the crypto and financial services industries, according to legal specialists. "It should have a multi-pronged and ultimately profound macro and micro impact on financial markets generally and the crypto industry specifically," told Cointelegraph Mark Kornfeld, securities and financial fraud shareholder at the law firm Buchanan Ingersol and Rooney. According to the attorney:

"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."

Cryptocurrency is also reportedly becoming a focus of the Internal Revenue Service (IRS), with its Criminal Investigation division hiring hundreds of new agents to work on digital assets and cybercrime. Along with its own data scientists, the IRS is hoping to cooperate with crypto firms, aiming to create a "symbiotic relationship" to fight financial crime.

Legislators in the United States are also under pressure to set a new regulatory framework for cryptocurrencies after last November's dramatic collapse of crypto exchange FTX, setting the stage for upcoming scrutiny in the crypto market in 2023.

There are, however, some who believe the outcomes will be positive in the long term. "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," noted Kornfeld.