Authorities to place crypto under increased scrutiny

Authorities in the U.S. are planning to put the cryptocurrency industry under intensified scrutiny as the popularity and adoption rate of blockchain and cryptocurrency grow.

Following the collapse of FTX, one of the country's biggest crypto exchanges, U.S. lawmakers are now considering the various regulations that should be implemented to protect the industry.

The Wall Street Journal also reported that lawmakers are under increasing pressure to create a new framework for regulating cryptocurrencies.

After holding a public consultation on Dec. 14, the Financial Accounting Standards Board discussed the proposed regulations for the financial statements of companies that are holding crypto assets. The regulations are expected to be enacted in the first six months of 2023.

The SEC recently sent out a sample letter to companies regarding the various developments in the cryptocurrency market, asking them to consider the need to update their filings with regard to the changes in the market.

According to legal experts, the changing regulations are expected to have a significant impact on the operations of the financial and crypto sectors. Mark Kornfeld, a shareholder at Buchanan Ingersol and Rooney, noted that the changes are expected to have a multi-pronged effect on the markets.

The SEC is also expected to carry out full-scale examinations of the cryptocurrency market in the coming months. This will be similar to the actions it took after the Bernard L. Madoff fraud was revealed to the world.

Kornfeld reiterated that all market participants should expect a significant increase in the number of regulatory actions that the agency will take.

"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," Kornfeld said.

Crypto regulations' changing landscape

The IRS is also becoming more focused on the cryptocurrency market. In addition to its criminal division, the agency is hiring hundreds of new employees to investigate cybercrime and digital assets.

After all, the IRS said it hoped to establish a cooperative relationship with the crypto industry in order to combat financial crime.

During a House hearing in December, Republican Congressman Jake Auchincloss criticized the lack of transparency and regulation in the cryptocurrency industry.

He also noted that the lack of progress in establishing a more transparent and efficient ecosystem has led to the loss of credibility of the industry.

Senator Roger Marshall was also pushing for stricter regulations in the country. He noted that there needed to be convincing proof that cryptocurrencies weren't just a type of investment scheme.

Despite the various concerns about the cryptocurrency industry, Congressman Patrick McHenry still convinced his colleagues to support his proposal to establish a comprehensive review of the industry. He noted that it was essential to separate the good from the bad in the industry.

As the scrutiny surrounding crypto regulation intensifies, experts suggest that the actions taken by the IRS and the SEC are expected to positively impact the long-term development of the cryptocurrency market.

According to Kornfeld, the changes will lead to a more transparent and regulated environment.

"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," Kornfeld said.