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SEC thwarts progress on U.S. crypto regulations as it refrains from defining “digital assets”
Despite proposing it nine months ago, the SEC abstained from defining the term “digital asset” in a move that temporarily sets back crypto regulations in the U.S.
- The SEC was yet to define the term “digital assets” in rules governing reporting disclosures for hedge funds.
- The U.S. regulator proposed a definition of digital assets in an August 2022 petition for revisions.
The U.S. Securities and Exchange Commission (SEC) was yet to ratify the definition of the term “digital assets” in rules governing reporting disclosures for hedge and private equity funds. It was first proposed nine months ago.
SEC issued revisions on 3 May to document PF, a document that SEC-registered funds use to submit basic information about their fund so that the regulator can examine potential “systemic risks.”
The SEC earlier proposed a definition of digital assets in an August 2022 plan for the revisions. If it became law, it would be the first time the SEC defined “digital assets.”
But the regulator now says that it will not add the definition, at least not for the time being.
The statement read as follows,
“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.”
SEC tough on crypto but doesn’t define it in words
The definition the SEC put forward initially for digital asset 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.”
The term was proposed in order to achieve distinct, and hence more accurate, reporting on such assets.
However, the most recent updates to the SEC’s Form PF rules now require, among other things, that SEC-registered funds report the occurrence of key events that could indicate systemic risk or harm to investors in response to the U.S. banking crisis.
The SEC hasn’t always avoided crypto-related definitions. The regulator declared in mid-April that it would reconsider its definition of “exchange” to potentially include decentralized finance (DeFi).
SEC Chair Gary Gensler has for long been vociferous in his argument that cryptocurrencies are securities. He has also said that the U.S. crypto sector is a threat to the global financial system.
