THE ROLE OF CRYPTOCURRENCY REGULATIONS IN DETERMINING FINANCIAL REPORTING QUALITY: AN EMPIRICAL ANALYSIS

The fast growth of cryptocurrencies and blockchain-based financial systems creates major difficulties for accounting systems because of their problems with asset classification, asset valuation, and asset disclosure. Companies must use managerial judgment for accounting because specific accounting standards do not exist, which creates problems for international financial reporting standards. The study examines the impact of cryptocurrency regulations on financial reporting quality in businesses that deal with digital assets. The data of 200 firms from financial statements, regulatory reports, and financial databases have been collected for empirical analysis. The results demonstrated that both regulatory strength and regulatory clarity enhance financial reporting quality because enforcement mechanisms that are stronger and regulatory guidance that is clearer lead to better reporting practices. The findings show that well-established regulatory systems create clear rules that decrease financial reporting risks that companies might exploit. The outcomes show that audit quality does not impact financial reporting quality because institutional and regulatory factors have a greater influence over cryptocurrency reporting practices than audit quality. The results suggest that policymakers should emphasize the need for improved regulatory systems and the development of specific digital asset accounting standards. The results show that regulatory design determines the financial reporting requirements that developing digital financial systems need for their digital financial systems.