Home Digital Asset CFTC & SEC Proposes New Category For Digital Assets In Form PF

CFTC & SEC Proposes New Category For Digital Assets In Form PF

by Lottar


The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are proposing amendments to Form PF. The amendment proposes to distinguish the categories of “cash and cash equivalents” and “digital assets” to ensure accurate reporting. This suggests that if the amendment is adopted, the Form PF will contain a new sub-asset class for digital assets.

According to information available on the Federal Register website, an amendment to the term “cash and cash equivalents” is proposed so that it would direct advisers to exempt digital assets while reporting cash and cash equivalents.

Form PF is the clandestine reporting form for specific investment advisers for private funds registered with the SEC and the CFTC.

Why is there a need for a separate digital asset category?

The commissions (jointly) maintained that the digital assets, also called “crypto-assets”, have experienced growth as well as volatility in recent years. In the current scenario, various hedge funds have been created to invest in digital assets. At the same time, many other existing hedge funds are also seen to allocate a portion of their portfolios to these assets. Therefore, to have clarity about the overall market exposure of hedge funds, it is essential to gather information about their exposure to digital assets.

How are digital assets defined in the proposed amendment?

The proposal defines a “digital asset” as any asset issued and/or transferred through distributed ledger or blockchain technology. This includes, but is not limited to, so-called “virtual currencies”, “coins” and “tokens.”

According to the commission, the amendments are aimed at improving its ability to examine the extent of hedge fund portfolio concentration and to identify directional exposures. It added that high portfolio concentration involves the risk of greater losses that can happen when a fund’s investment represents a large part of a particular investment, asset class or market segment. Leveraged portfolios further amplify this risk. The proposed amendments are designed to identify a fund’s concentration risk (where gross exposure to a reference asset is greater than the fund’s NAV).

CoinGape consists of an experienced team of native content writers and editors who work 24 hours a day to cover news worldwide and present news as fact rather than opinion. CoinGape writers and reporters contributed to this article.

The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. Neither the author nor the publication holds any responsibility for your personal financial loss.



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