SEC steps back from defining digital assets in new hedge fund rules

The United States securities regulator is holding disconnected from ratifying the explanation of the word “digital assets” successful rules that govern reporting disclosures for hedge and backstage equity funds, contempt proposing to bash truthful immoderate 9 months ago.

On May 3 the Securities and Exchange Commission (SEC) published amendments to Form PF — a signifier that SEC-registered funds implicit to disclose basal accusation astir their money truthful the regulator tin measure imaginable “systemic risks.”

The SEC primitively included a integer assets explanation successful an August 2022 proposal for the changes. If it went into effect, it would person been the archetypal clip the SEC defined “digital assets.”

Fast guardant to contiguous and the regulator says it's not going up with adding the definition, astatine slightest for now.

“We projected adding ‘digital assets’ arsenic a caller word to the Form PF Glossary of Terms. The Commission and unit are continuing to see this word and are not adopting ‘digital assets’ arsenic portion of this regularisation astatine this time.”

The explanation the SEC enactment guardant for integer assets was an plus “that is issued and/or transferred utilizing distributed ledger oregon blockchain technology” and included different commonly utilized presumption specified arsenic “virtual currencies,” “coins” and “tokens.”

Today the SEC finalized their caller Form PF rules. The connection included the 1st explanation of “digital assets” successful a rule. It is absorbing that the SEC take to NOT follow the explanation successful their last rule. https://t.co/5y1UXbJqBd

— Anne Kelley (@amk_dc) May 3, 2023

The SEC said successful its August connection that currently, accusation regarding a fund's integer assets are reported successful an “other” class and results successful “less robust Form PF information for analysis.”

It projected the explanation successful bid to get separate, and by extension, much close reporting connected specified assets.

“We judge it is important to cod accusation connected funds’ exposures to integer assets successful bid to recognize amended their wide marketplace exposures.”

However, the latest updates to the SEC’s Form PF rules present necessitate — among different caller requirements — that SEC-registered funds study the occurrence of cardinal events that could bespeak systemic hazard oregon harm to investors successful a apt effect to the U.S. banking crisis.

Related: SEC’s warfare connected crypto: How acold volition it go?

Firms indispensable besides disclose details of their fees and expenses arsenic the SEC tries to formed a airy connected the multi-trillion dollar sector.

The SEC hasn’t ever shied distant from crypto-related definitions, announcing successful mid-April that it would revisit its definition of an “exchange” to perchance see decentralized concern (DeFi).

SEC seat Gary Gensler has besides agelong been vocal connected his assertion that cryptocurrencies are securities nether his Commissions remit and the U.S. crypto assemblage is acting afoul of securities laws.

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