Earlier this month, Bloomberg News published the findings of their survey of 60 major crypto companies.
The survey was conducted between January and May 2023 and aimed to investigate the extent to which good corporate governance practices permeated the businesses of crypto companies. Bloomberg identified the (1) supervision of accounts by an independent auditor and (2) existence of an independent board of directors (i.e., one that seats a non-executive director), as the traditional standards of corporate governance of interest for their survey.
The crypto companies selected for the survey were those described as the "upper echelon" of the industry i.e., they had to be publicly listed, valued at over $1 billion in private fundraising or considered to hold significant influence in the sector. This demographic becomes especially relevant when we have a look at the results:
- only 50% of the companies engage an independent auditor to assess their finances;
- only 63% of the companies have an independent board of directors; and
- the Big Four accounting firms have been unwilling or unequipped to work with some digital-asset companies.
The results are not astonishing but indicative of just how loosely-regulated the crypto sector is, with even the most "sophisticated" crypto companies barely meeting the standards set down for other corporates.
While the regulation of companies working with digital assets is a work in progress on the experts' desks, from a disputes' perspective it is worth noting that the gaps are evidentially large. Bespoke regulation would encourage standard practises in the management and governance of crypto companies. The present absence of such regulation has resulted in distressed investors and customers haphazardly finding their way to courts.
The other view is that where there is no regulation, there is no transparency and hence no knowledge of matters that require redressal - we may have no idea of the mountain of potential claims crypto companies may be sitting on.
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