Despite the "digital asset" term proposal nine months ago, SEC chose not to include it in new hedge fund regulations.
The US Securities and Exchange Commission (SEC), an independent agency of the United States federal government tasked with enforcing the law against market manipulation, is holding off on finalizing the term "digital assets" in new reporting guidelines for hedge and private equity funds.
Despite proposing a definition nine months ago, the SEC did not include "digital assets" in recently announced amendments to a form completed by SEC-registered funds to provide essential information about their fund, Form PF.
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Initially, the SEC's August 2022 proposal included a definition for "digital assets," which would have been the first official definition by the securities regulator.
However, the regulator has now decided against adding the definition for the time being. In a statement, the SEC said:
We proposed adding 'digital assets' as a new term to the Form PF Glossary of Terms. The Commission and staff are continuing to consider this term and are not adopting 'digital assets' as part of this rule at this time.
The suggested definition for digital assets described it as an asset "that is issued and/or transferred using distributed ledger or blockchain technology," encompassing commonly used terms such as "virtual currencies," "coins," and "tokens."
Currently, funds report information about digital assets in an "other" category, resulting in "less robust Form PF data for analysis."
The SEC initially proposed the definition to collect more accurate reporting on digital assets, stating:
We believe it is important to collect information on funds' exposures to digital assets in order to understand better their overall market exposures.
Nonetheless, the latest updates to the SEC's Form PF rules now require SEC-registered funds to report pivotal events indicating systemic risk or harm to investors, launched in response to the US banking crisis.
However, including the term "digital assets" is not the only thing SEC seems to be avoiding. Recently, crypto exchange Coinbase took legal action against SEC to push the nation's securities regulator to address a petition that has been lingering since July 2022.
