A Note by Zack Stutler
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Technology’s growth over the past decade has permeated all aspects of life.[1] Financial markets have not been isolated from this increasing digitization.[2] More specifically, the introduction of digital assets (crypto-currency, non-fungible tokens, etc.) has taken the world by storm.[3] With the introduction of new assets comes the need for new regulations. While consumer regulations are important, so too are regulations on companies and how they report their ownership of digital assets.[4]
Regulations on companies are important because they increase the transparency of companies as well as look out for the interest of investors and the general public.[5] Without government intervention and regulations, corporations would logically operate in profit-maximizing ways that are self-serving.[6] This self-serving nature often lacks an eye for public interest and may promote a lack of disclosure which is not optimal for investors.[7] With this in mind, regulators implement regulations that ensure companies operate in ways that may be in the best interest of the company, but also meet the standards required to ensure investor and general public safety.[8]
[1] See Jared Hecht, How Technology Is Driving Change in Almost Every Major Industry, Forbes (Nov. 30, 2018), https://www.forbes.com/sites/jaredhecht/2018/11/30/how-technology-is-driving-change-in-almost-every-major-industry/.
[2] See id.
[3] See James Royal, Cryptocurrency Statistics 2023: Investing in Crypto, Bankrate (Jan. 5, 2023), https://www.bankrate.com/investing/cryptocurrency-statistics/.
[4] See Fin. Acct. Standards Bd., Proposed Accounting Standards Update, Intangibles-Goodwill and Other-Crypto Assets 17 (2023).
[5] US GAAP: Generally Accepted Accounting Principles, CFA Inst., https://www.cfainstitute.org/en/advocacy/issues/gaap#sort=%40pubbrowsedate%20descending (last visited Mar. 17, 2023).
[6] See Martin Brueckner, Encyclopedia of Corporate Social Responsibility 1921-1927 (Nicholas Capaldi et al. eds., 2013).
[7] See Daniel Taylor, The Lemons Problem: How Less Disclosure Affects Risk Perceptions, Knowledge at Wharton (June 23, 2015), https://knowledge.wharton.upenn.edu/article/the-lemons-problem-how-less-disclosure-affects-perceptions-of-risk-2/.
[8] CFA Inst., supra note 5.