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US regulators are proposing to ask hedge funds to report their crypto exposure

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(Kitco News) – Efforts to improve regulatory oversight of cryptocurrencies continue to mount after it was announced Wednesday that the Securities and Exchange Commission (SEC) had submitted a proposal that would require large hedge funds to increase their exposure to cryptocurrencies Report.

According to the proposal, the SEC and the Commodity Futures Trading Commission (CFTC) want to amend the Form PF procedure to require at least $500 million in funds to report cryptocurrency risk in a new category to include “digital to report asset strategies accurately”.

The changes are intended to “improve the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk, as well as strengthen the SEC’s regulatory oversight of private fund advisors and its efforts to protect investors as the private fund industry grows.” it says in the announcement.

Form PF was created in the wake of the 2008 financial crisis with the aim of helping regulators spot asset bubbles and other potential risks to financial market stability by bringing a little more transparency to the opaque realm of private equity funds.

The two agencies cited the rapid growth of the hedge fund industry in recent years as the main reason for the proposed changes, as well as the fact that cryptocurrencies did not exist when the form was originally launched. Both the Treasury Department and the Federal Reserve have been consulted to ensure the changes do not pose risks to the private funds industry.

According to a fact sheet released along with the proposal, the number of private funds grew by around 55% from 2008 to the third quarter of 2021, with data from IBISWorld showing that there were 3,841 hedge funds in the US as of early 2022.

In a statement from SEC Chairman Gary Gensler, the regulator noted that “the gross asset value of the private fund industry has grown nearly 150 percent and has evolved in terms of its business practices, sophistication and investment strategies.”

On why he supports this proposal, Gensler explained: “If adopted, it would improve the quality of information we receive from all Form PF filers, with a particular focus on large hedge fund advisors. This will help protect investors and maintain fair, orderly and efficient markets.”

The main rule affecting cryptocurrency-related activities would add “digital assets” as a new asset class on Form PF and provide a definition for the term. The proposal invites comments from the investor community on whether funds provide detailed information about the cryptocurrencies they hold, such as: B. their name and their properties should report.

SEC commissioners voted 3-2 to issue the proposal, while Republican commissioners Hester Peirce and Mark Uyeda voted against. Among the concerns raised by the dissenters was whether the government really needs all the information that the new Form PF will collect.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of the author Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article assume no responsibility for any loss and/or damage resulting from the use of this publication.

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