The United States Securities and Exchange Commission (US SEC) has released a new report that reveals that the monitoring of cryptocurrency is a major item on their agenda for the year.
Titled “2019 examination priorities,” the SEC’s Office of Compliance Inspections and Examinations (OCIE) has put digital assets in the spotlight, citing the risks it poses to investors. The report reads:
Given the significant growth and risks presented in this market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance.
Certainly, ICOs have a bad reputation of being a dangerous form of investment, and the ICO market has only grown since the boom of late 2017. While the report gives no indication as to what the specifics of the SEC’s approach will be, it does tell us that the body is considering digital assets to be a legitimate asset class, which investors will no doubt welcome. Many of them — and the space in general — wish for regulatory clarity.
The OCIE’s Director, Peter Driscoll, stresses that investor protection is the driving factor:
OCIE is steadfast in its commitment to protect investors, ensure market integrity and support responsible capital formation through risk-focused strategies that improve compliance, prevent fraud, monitor risk, and inform policy.
Preventing Fraud and Theft
In 2016, the SEC created its own fake ICO called “Howey Coin” to show investors how easy it was to set up a fake ICO and be defrauded.
Actively monitoring the operations of the companies behind these assets will be no easy task, given how easy it is for a digital asset to be launched. The report says further,
In particular, through high level inquiries, OCIE will take steps to identify market participants offering, selling, trading, and managing these products or considering or actively seeking to offer these products and then assess the extent of their activities. For firms actively engaged in the digital asset market, OCIE will conduct examinations focused on, among other things, portfolio management of digital assets, trading, safety of client funds and assets, pricing of client portfolios, compliance, and internal controls.
While it is currently determining whether or not certain assets are security tokens, and is being deluged with Bitcoin ETF applications, the SEC must simultaneously establish laws that allow digital assets to flourish and prevent dishonest behavior in the market. 2019 will be a watershed year for regulation, not just in the US, but in the whole world.