CFTC & SEC Proposes Amendment For Crypto Assets In Form PF

Coingapestaff
September 2, 2022
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The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are proposing amendments to Form PF. The amendment proposes that the categories of “cash and cash equivalents” and “digital assets” are distinct to ensure accurate reporting. This suggests that if the amendment is passed the Form PF would contain a new sub-asset class for digital assets.

As per the information available on the website of the Federal Register an amendment to the term “cash and cash equivalents” is proposed so 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 to private funds that are registered with the SEC and the CFTC.

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

The commissions (collectively) have maintained that in recent years the digital assets also called “crypto assets” have experienced growth as well as volatility. 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 allocating a portion of their portfolios to these assets. Thus, to have clarity on the overall market exposures of hedge funds, it is vital to collect information on their exposure to digital assets.

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How are digital assets defined in the proposed amendment?

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

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

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Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
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Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
CoinGape comprises an experienced team of native content writers and editors working round the clock to cover news globally and present news as a fact rather than an opinion. CoinGape writers and reporters contributed to this article.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.