According to a report of the Office of Compliance Inspections and Examinations (OCIE) of the United States Securities and Exchange Commission (SEC), examining cryptocurrencies will be one focus points for the agency’s monitoring activities in 2019.
Cryptocurrency Market Gets the Spotlight
OCIE issued a report called 2019 Examination Priorities. The document outlines on which practices, services, and products the office will put a priority on during 2019. Digital assets are one of the focus points.
According to the report, the growth of digital assets, as well as the risk associated with them is what caused the office to prioritize them:
Given the significant growth and risks presented in this market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance. In particular, through
high levelinquiries, OCIE will take steps to identify market participants offering, selling, trading, and managing these products or considering or actively seeking to offer these products and then assess the extent of their activities.
Activities associated with third-party management of digital assets will also receive increased regulatory monitoring.
For firms actively engaged in the digital asset market, OCIE will conduct examinations focused on, among other things, portfolio management of digital assets, trading, safety of client funds and assets, pricing of client portfolios, compliance, and internal controls.
Interesting Regulatory Developments
As of yet, the prevailing SEC’s position on the matter of existing cryptocurrencies, mainly the so-called ‘tokens’ is that they are securities. Speaking on the matter, the Commission’s Chairman Jay Clayton said in 2018:
A token, a digital asset, where I give you my money and you go off and make a venture […] and in return for me giving you my money you say, “You know what? I’m gonna give you a return or you can get a return in the secondary market by selling your token to somebody” — that is a security and we regulate that. We regulate the offering of that security and we regulate the trading of that security. That’s our job and we’ve been doing it for a long time.
However, the SEC also said in June 2018 that Bitcoin (BTC) and Ether (ETH) are not securities.
In a recent development, Rep. Warren Davidson from Ohio and Rep. Darren Soto from Florida introduced on December 22nd the “Token Taxonomy Act”. Most of all, the bill attempts to exempt cryptocurrencies from the security classification.
If the bill gets voted in, the securities laws of the US won’t apply to virtual tokens as soon as their projects develop into functioning networks.
What do you think of the current state of regulation of cryptocurrencies? Do share your thoughts in the comments below!
Images credit to Flickr.com; SEC.gov