Reading 3 min Views 4 Published Updated
The US Securities Regulatory Authority has refrained from ratifying the definition of “digital assets” in the rules governing disclosure for hedge funds and private equity funds, despite proposing to do so about nine months ago.
On May 3, the Securities and Exchange Commission (SEC) released amendments to Form PF, a form that SEC-registered funds complete to disclose basic information about their fund so that the regulator can assess potential “systemic risks.”
The SEC originally included the definition of digital assets in its August 2022 amendment proposal. Had it gone into effect, the SEC would have defined “digital assets” for the first time.
Fast forward to today and the regulator says it’s not going to add a definition, at least not yet.
“We have proposed adding “digital assets” as a new term to the Form PF glossary of terms. The Commission and staff continue to review the term and do not currently accept “digital assets” as part of this rule.”
The definition proposed by the SEC for digital assets was an asset “that is issued and/or transferred using distributed ledger or blockchain technology” and included other commonly used terms such as “virtual currencies”, “coins” and “tokens”.
Today the SEC finalized their new Form PF rules. The proposal included the 1st definition of “digital assets” in a rule. It is interesting that the SEC choose to NOT adopt the definition in their final rule. https://t.co/5y1UXbJqBd
— Anne Kelley (@amk_dc) May 3, 2023
The SEC said in its August proposal that information about the fund’s digital assets is currently reported under the “other” category and results in “less reliable PF form data for analysis.”
This definition has been proposed in order to obtain separate and therefore more accurate reporting of such assets.
“We believe it is important to collect information on the exposure of funds to digital assets in order to better understand their overall market exposure.”
However, recent updates to the Securities and Exchange Commission’s Form PF rules now require, among other new requirements, that funds registered with the U.S. Securities and Exchange Commission report key events that may indicate systemic risk or harm to investors as a result of possible response to the US banking crisis.
Related: SEC War on Crypto: How Far Will It Go?
Firms must also disclose their fees and expenses as the SEC attempts to shed light on the multi-trillion dollar sector.
The SEC hasn’t always shied away from crypto-related definitions, announcing in mid-April that it would revise its definition of “exchange” to possibly include decentralized finance (DeFi).
SEC Chairman Gary Gensler has also long argued that cryptocurrencies are securities under his purview, and the U.S. cryptocurrency sector violates securities laws.
Hall of Flame: Cryptocurrency Wendy on SEC Debacle, Sexism, and How Underdogs Can Win