Recent Disclosure Guidance Highlights Growing Concern Surrounding the Risks of User Assets Held by Various Crypto Custodians

6 June 2022
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Recent turmoil in the cryptocurrency market has brought issues related to crypto-asset custody to the forefront of the cryptocurrency discourse; in an enormous $1 trillion crypto-asset crash between approximately May 6, 2022 and May 16, 2022, some coins lost up to 99% of their original value. Many crypto-asset investors are now wondering how their assets may be treated if their crypto-asset exchange of choice were to file for bankruptcy. While this question remains largely unanswered, new guidelines issued on April 11, 2022 by the U.S. Securities Exchange Commission (the “SEC”) regarding platforms that safeguard or hold crypto-assets on behalf of users may require additional disclosures on this topic.