The Securities and Exchange Commission and the Commodity Futures Trading Commission are reportedly putting forward a proposal on Wednesday that would require hedge funds to report their bets, including exposure to cryptocurrency.
The proposal entails having the investment funds file a confidential Form PF with the regulators–a form devised after the 2008 financial crisis so government agencies can monitor irregularities and potential bubble-like risks within the opaque private funds space. Under the measure, hedge funds managing more than US$500 million of net assets would have to report their investment exposures, portfolio concentrations and borrowing arrangements.
“Gathering such information would help the Commissions and [financial-stability regulators] better to observe how large hedge funds interconnect with the broader financial services industry,” SEC Chairman Gary Gensler said in a statement.
The move comes a month after crypto-based hedge fund Three Arrows Capital went bankrupt, taking down with it fellow crypto firms Voyager Digital (TSX: VOYG), 8 Blocks Capital, and Genesis, among others. The crypto collapse also increased the regulators concerns as the volatile and nascent industry could affect other traditional assets amid the budding crossover of the two spaces.
This could be seen as a move by the regulators in response to Coinbase’s call out in clarifying the rule book on crypto securities, as it claims that it is the regulatory body’s job to delineate it from crypto assets. If it was the appropriate response seems to be up for debate.
Information for this briefing was found via The Wall Street Journal and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.