The U.S. Securities and Exchange Commission (SEC) top priority On February 7, 2023, we emphasized the need to pay greater attention to those who advise investors to participate in cryptocurrency projects without proper accreditation.
Alongside initiatives to ensure that registered investment advisors (RIAs) “adopt and implement written policies and procedures reasonably designed to prevent violations by advisors,” the SEC has a specific core focus area: As a spotlight on crypto asset advisors.
US crypto regulation
The SEC statement refers to the broader segment of “Emerging Financial Technologies” in the “Emerging Technologies and Crypto Assets” section as a catch-all for the rapidly changing blockchain industry.
“A survey of broker-dealers and RIAs using emerging financial technologies or adopting new practices, including technical and online solutions to meet compliance and marketing demands and serve investor accounts. .”
Regulators have struggled to adopt good advice for crypto projects. This is because the targets are constantly changing due to constant innovation in this field. From NFTs to DeFi, proper regulation requires a technology stack that drives a well-defined set of data points, use cases, and rules.
One of the key breakthroughs of MiCA legislation in Europe is the inclusion of a clear set of definitions for blockchain-related terminology. However, there is currently no such definition in the US, leading to frustration within the industry. For example, his Nexo, a centralized exchange headquartered in Bulgaria, recently announced that it would cease all operations in the United States due to a lack of necessary regulatory oversight.
SEC Targets Crypto Advisors
However, the SEC statement has clearly identified areas of crypto promotion that will be most focused in 2023. ” and “Risk Management Practices”, along with other reviews and disclosures.
“Registrant reviews will focus on proposals, sales, recommendations, or advice regarding the trading of crypto or crypto-related assets and will determine whether (1) the company has met and followed its respective standards of care when making recommendations; and (2) regularly reviewed, updated and enhanced our compliance, disclosure and risk management practices.”
Although not directly mentioned in the statement, the SEC appears to be stepping up its stance on the promotion of crypto assets in the wake of the FTX implosion. Revelations from John Ray III and others involved in the FTX bankruptcy case identified a lack of procedures within the company.
Aside from criminal activity by stakeholders, poorly reviewed, updated, and controlled compliance disclosure and risk management practices were said to be prevalent within FTX. Additionally, the “standards of care” given to FTX customers may be scrutinized in light of information released after the collapse.
The SEC also said the research is conducted annually and “starts with feedback from uniquely positioned research staff who identify practices, products, services and other factors that may pose risks to investors and financial markets.” made it clear.