According to the Securities and Exchange Commission (SEC), listed corporations engaging in bitcoin and digital assets must have risk management mechanisms in place to mitigate the effect of market volatility.
The digital currency market has continued to drop in the face of massive sell-offs, with its market value plummeting by about 70% in only seven months.
As per Coingecko.com, the digital currency market cap was $926 billion at 3 p.m. on Wednesday, down 6.8% in 24 hours.
Bitcoin, the most valuable digital currency by market capitalization, was trading at $20,812.91, down 9.2% in 24 hours and 69.9% in seven months from its all-time high in November 2021. Ethereum, the second-largest cryptocurrency by market capitalization, was trading at $1,098.71, down 11.6 percent in 24 hours and 77.5 percent in seven months.
To soften the blow for investors, the SEC issued circular letters on June 14 urging listed companies investing in or doing business with digital assets to create risk management and internal control systems to avoid the threat of cyber theft.
The authority also requested listed companies that want to invest in digital assets to seriously examine to make sure that these investments do not endanger their financial positions or operational results, even though digital asset investments are volatile.
Businesses must guarantee that employees responsible for managing wallets are separate from those responsible for acquiring, selling, exchanging, or keeping digital assets in a fully licensed custodian’s wallet. A monitoring system is also required to guarantee that digital assets exist, that no digital assets are exploited, and that the operation is carried out strictly with the procedures and systems in place.
Furthermore, the SEC requested the internal auditors of the corporations to examine and report on the effectiveness of their internal control systems for digital asset regulation.