Crypto Investment Advisors Will See SEC Examinations for Their Connection with Bitcoin
In a report from Politico, the Securities and Exchange Commission is changing their focus with cryptocurrency. Even though they have primarily been putting their energy towards regulating cryptocurrency and token sales, they are now looking into investment advisers, and how they are connected with cryptocurrency.
The watchdog is primarily looking at fund managers with a responsibility of at least $100 million, and the SEC is allegedly interested in the way that these managers are storing cryptocurrency. They also want to examine any correlation with price manipulation, and the role that they play in cyber security. Their look into cyber security has to do with the way that crypto entities often fall victim to hacks, due to their vulnerabilities.
Right now, the SEC has the power to dictate the way that advisers store the funds of their customers, but digital assets simple need updated guidelines. Formerly, the SEC has focused on categorizing tokens, and eliminating initial coin offerings that prove to be a sham.
A perfect example of this problem happened in September with a company named 1pool, which was guilty of offering unregistered securities for sale, resulting in the SEC shutting it down. The SEC shut down Blockvest the following month, after they claimed to have been the recipient of a license.
Historically, the SEC has denied many cryptocurrency companies in their quest to be licensed for exchange-traded funds (ETFs), which seems to be due to the potential for manipulating the crypto market. To learn more about this risk, the SEC subpoenaed many crypto exchanges at the beginning of the year.
This apprehension and preparation could be the result of the multiple funds being established to support the bigger investors that are breaking in to cryptocurrency. Based on research performed in June this year, there were 212 hedge funds at the time that were centered around cryptocurrency. Since then, many others have popped up as well.
Many businesses in the U.S. economy have been hoping for clear regulations, enabling them to use cryptocurrency in a way that brings profit, rather than added stress. In a statement to Politico, Gail Bernstein of the Investment Adviser Association said,
“Typically, after a sweep of this type, the SEC staff will publish its findings and observations, and that can provide very helpful guidance for advisers as they consider their compliance obligations.”