SEC’s New Hedge Fund Rules Omit Definition of Digital Assets

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SEC’s New Hedge Fund Rules Omit Definition of Digital Assets

SEC’s Hedge Fund rules did not define digital assets – Despite having proposed it almost nine months ago, the US securities commission is delaying the approval of the definition of the phrase “digital assets” in the regulations governing reporting disclosures for hedge and private equity funds.

The Securities and Exchange Commission (SEC) published updates to Form PF on May 3. This form is used by SEC-registered funds to provide the SEC with basic fund information so that the regulator may evaluate any potential “systemic risks.”


The SEC originally proposed the modifications in an August 2022 proposal that included a description of digital assets. If it had been implemented, it would have been the first time the SEC has defined “digital assets.”


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“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’s New Hedge Fund Rules

The SEC’s definition of digital assets in the hedge fund rules included phrases like “virtual currencies,” “coins,” and “tokens,” as well as an item “that is issued and/or transferred using distributed ledger or blockchain technology.”

The SEC stated in its proposal from August that the existing reporting of information about a fund’s digital assets under the “other” category leads to “less robust Form PF data for analysis.”


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It developed the term in order to acquire distinct reporting on these assets, and consequently, more accurate reporting.

“We believe it is important to collect information on funds’ exposures to digital assets in order to understand better their overall market exposures.”

But as a likely response to the U.S. banking crisis, the most recent revisions to the SEC’s Form PF rules now demand, among other new requirements, that SEC-registered funds report the occurrence of significant events that could signal systemic risk or harm to investors.

As the SEC attempts to shed light on the multi-trillion dollar industry, companies are also required to disclose specifics of their fees and expenses.

The SEC hasn’t always avoided defining terms linked to cryptocurrencies; in mid-April, it declared that it will review its definition of an “exchange” and may add decentralized finance (DeFi).

Gary Gensler, the chairman of the SEC, has also long been outspoken in his assertion that cryptocurrencies fall within his Commission’s purview as securities and that the American crypto industry is violating securities regulations.

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