The SEC has just unveiled new examination priorities for 2020. Here’s what’s expected for cryptocurrencies in 2020.
It’s another year of cryptocurrency-related drama at the SEC. The regulatory agency has just announced its 2020 examination priorities. A focus on ‘digital assets’ is listed as a priority for the SEC.
The criteria for regulatory examination on cryptocurrencies comes down to a few key areas. Although the language is hard to understand for those not in-the-know, six key areas were outlined by Katherine Wu (@katherinekwu). Let’s break them down.
SEC 2020 priorities in crypto:
(1) investment suitability
(2) portfolio management + trading practices
(3) safety of client funds and assets
(4) pricing and valuation
(5) effectiveness of compliance programs and controls
(6) supervision of employees outside business activities https://t.co/K6Rsrmzhmu
— Katherine Wu (@katherineykwu) January 7, 2020
- Investment suitability: The SEC will assess risk and whether there is an overly high probability of losses that would unfairly hurt investors. This will work to further kick out scams from the industry.
- Portfolio management and trading practices: Sources of data will be vetted to ensure that cryptocurrency portfolio management is in line with other market sectors.
- Safety of funds: Given that custodial services and exchanges are increasingly holding cryptocurrency funds, the SEC is taking a focus on ensuring these funds are safe and insured.
- Pricing and valuation: Insider trading, pump-and-dump schemes, and assessing market risk all remain high on the agenda for the SEC. This is part of the reason why a Bitcoin ETF has been delayed thus far: the market still has to meet these standards.
- Compliance programs and controls: As expected, compliance programs will take precedence this year as the SEC is expected to green-light more blockchain projects.
- Supervision of employees outside business activities: All employees of broker-dealers will legally need to report outside business activities. This will expectedly be applied to the cryptocurrency industry as well.
Although the 2020 examination priorities did not put forward many regulatory specifics, it seems clear that digital assets will continue to be a hot topic for the SEC this year. Hopefully, there will be some clarification on the endless ‘securities or utility tokens’ question, which has been plaguing most cryptocurrency projects for some time now.
Legal clarity is ultimately the necessary step needed before the blockchain space can mature and be accepted in the economy at large. 2020 is looking like it’ll bring the industry closer to this goal.
Images courtesy of Shutterstock, Trading View and Twitter.
