While much of the recent news has fallen on foreign policy, the Securities and Exchange Commission (SEC) is once again stoking interest in crypto regulation news. Indeed, the government body is preparing new recommendations on the digital asset class this week. As investors await broader regulations on the crypto industry, new rules prepared by the SEC will further govern the relationship between investing advisors and crypto.
Cryptocurrency is especially coming into the global public eye this week; as a result of the ongoing conflict in Ukraine, the Ukrainian government has begun accepting crypto donations to help fund the war effort. The effort is proving wildly successful, with tens of millions in Bitcoin (BTC-USD), Ethereum (ETH-USD), Tether (USDT-USD) and several other cryptos being sent to the government. This success does not only prove the usefulness of the asset class in seamless international transaction; it shows that embracing cryptocurrency can be a helpful tool for a nation.
Of course, for the United States to reap the benefits of cryptocurrency, it must first regulate crypto. Indeed, Ukraine is only in this position after legalizing crypto and creating a number of policies centered around it.
Crypto Regulation News Heats Back Up as SEC Targets Digital Assets
Investors have been awaiting crypto regulation news for a while now. Prior to the outbreak of fighting in Eastern Europe, Americans had been expecting an executive order out of President Joe Biden’s office regarding crypto. This order will ultimately lay the groundwork for broader congressional policy on crypto.
As it turns out now, though, the executive branch is knee-deep in foreign policy issues. The conflict in Ukraine is putting legislature on the back burner. In the meantime, the SEC is centering itself on digital assets. Notably, it appears the agency will be preparing reforms to the Investment Advisers Act (IAA) to accommodate crypto.
Created in 1940, the act makes it a requirement that investment advisors hold their clients’ securities with a qualified custodian. By adding crypto to the act, advisors will be severely limited in where they can stow a client’s digital currency. “Qualified custodians” under the definition of the act include banks and other federally chartered businesses. This will then eliminate the possibility of an advisor staking clients’ assets with DeFi protocols and other non-qualified custodians. Of course, these DeFi protocols typically offer much higher returns than centralized custodians.
This news out of the SEC isn’t the only bit of regulatory foreshadowing this week. It is also probing the non-fungible token (NFT) industry. Ultimately, the probe hopes to address whether companies are using NFTs to raise money in a way similar to traditional securities. The agency’s primary concern, according to Bloomberg, lies in fractionalized NFTs; these types of assets are broken into “pieces” and distributed among multiple investors.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
