Key takeaways:
- The SEC omitted “digital assets” from the glossary in a final decision that was made official by the agency’s Form PF and released on Wednesday.
- In a petition for changes submitted in August 2022, the American regulator put out a concept of digital assets.
The concept of “digital assets” under the regulations governing the compilation of declarations for hedge and private equity funds had not yet been approved by the U.S. Securities and Exchange Commission (SEC). It was originally put forth nine months ago.
The regulator refers to these as “assets that are issued and transferred utilising distributed ledger or blockchain technology, including so-called “virtual currencies,”coins,” and tokens ” in the initial version of the document.
The Securities and Exchange Commission issued updates to Form PF on May 3. SEC-registered funds use this form to provide the regulator with basic information about their fund so it may evaluate any possible “systemic risks.”
Gary Gensler, chairman of the SEC, stated at the time, “Make no mistake: many crypto trading platforms already come under the present umbrella of an exchange and thus have a legal obligation to adhere with the securities laws.”
“Yet these platforms behave as if they had a choice over whether to abide by our laws. No, they don’t.”
However, the approved rules do not contain this clause. The regulator is still working on a definition, according to the footnote, and has previously suggested including it in the Form PF Glossary of Common Terms.
According to Lee Scheider, general counsel at Ava Labs, the characterization that the SEC originally put forward was so broad that anything on a blockchain constituted a digital asset. “That doesn’t make sense; the SEC has no authority over that.“
The SEC’s most recent revision to its Form PF regulations, on the other hand, mandates that SEC-registered funds now record significant occurrences, such as fee and expense details, that could signal systemic risk or harm to investors. The SEC wants to shed more light on the enormously profitable sector.
The SEC further stated in its proposal from August that the current “other” category in which information about a fund’s digital assets is reported results in “less reliable Form PF data for analysis.”
It proposed the word with the aforementioned goal in mind in order to achieve differentiated and, as a result, more precise reporting on such assets.
Under Gensler’s direction, the SEC has been aggressively pursuing legal action against cryptocurrency businesses. Cryptography-related definitions haven’t always been avoided by the SEC. In mid-April, the regulator announced that it would review the definition of “exchange” to possibly include decentralised finance (DeFi).
