Sec Removes Proposed Definition Of Digital Assets In Hedge Fund Rules

By Author: Crypto Business World
Total Articles: 7
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The US Securities and Exchange Commission (SEC) has recently announced that it would remove the definition of “digital asset”. Excluding it from hedge fund regulations marks a positive outcome for crypto enthusiasts as SEC relaxes regulation.

The amendment to Form PF, which SEC-registered funds complete to disclose basic information about their fund, was published on May 3. The SEC had originally included the digital asset definition in an August 2022 proposal, which would have marked the first time the SEC defined "digital assets."

The agency declared that it is "continuing to consider this term and is not adopting ‘digital assets’ as part of this rule at this time." The SEC is still considering crypto matters, which have played a significant role in both its enforcement actions and rule proposals, despite its decision to walk back the definition.

The SEC defines digital assets as "that is issued and/or transferred using distributed ledger or blockchain technology" including "virtual currencies", "coins", and "tokens".

Despite not holding a formal place in ...
... the SEC's lexicon, digital assets remain a constant topic in the speeches of Chair Gary Gensler and other SEC officials.

Anne-Marie Kelley, a partner at Mercury Strategies believes that the SEC deleted the definition because "any recognition of digital assets as a novel product weakens their litigation stance that digital assets are securities and subject to the SEC securities laws."

She added that the SEC is withholding regulatory clarity by not defining digital assets, despite requiring transparency from its registrants.

While the SEC may be stepping back from defining digital assets, it is certainly continuing to consider crypto matters.

Last month, the regulator reopened a previously proposed rule redefining the term "exchange" and adding decentralized finance (DeFi) to it.

Additionally, the SEC's latest updates to Form PF rules now require SEC-registered funds to disclose any events that may indicate a systemic risk of harm to investors.

The SEC wants transparency in the multi-trillion-dollar industry. So, it is mandating crypto firms to disclose their revenue. Chair Gary Gensler has always criticized the crypto sector in the US. And was very vocal in claiming crypto as securities.

Overall, the SEC's decision to define digital assets is a welcome step for the crypto community. However, future decisions of the SEC may be unpredictable, as the agency is still closely monitoring the market.