In this edition of Regulations Roundup, we focus on the U.S. Securities and Exchange Commission’s (SEC) ongoing discussions with companies that are interested in setting up cryptocurrency funds. We also look at a recent warning by the South Korean financial regulator about virtual currency investments, as well as a call by the CEO of U.S. financial giant Circle for G-20 leaders to reach consensus on rules for cryptocurrencies.
SEC ‘Serious’ About Fund Proposals
In a recent interview, SEC Commissioner Kara Stein said the regulator has been speaking to a number of undisclosed companies about the possibility of setting up cryptocurrency funds. She added that the regulator has been taking a “serious” approach to such proposals.
“We actually released a staff letter not too long ago talking about some of the critical issues we will be looking at, which include valuation, liquidity, custody, and making sure that firms are thinking through how they are going to deal with all of those issues,” Stein said.
However, she declined to say whether U.S. investors can expect to see a regulated cryptocurrency exchange-traded fund within the next year. “I don’t know the answer to that,” she said. “It’s all going to be based on facts and circumstances.”
Stein explained that the SEC still needs to clarify a number of important regulatory considerations before any significant progress can be made.
“Whatever fund presents a concept to us [will] have to show how they can get accurate valuations, despite sometimes volatile price swings, how they can make sure that there is physical custody, when necessary, how they can guarantee that there is adequate liquidity, especially in a 40 Act fund context, so that investors can get their money when they need to get their money,” she said. “So we’ll look at all of those factors and make a decision based on that particular fund and how its actually going to be able to handle those particular requirements.”
South Korea’s FSA Urges Caution on Crypto
South Korea’s Financial Services Commission (FSC) has published a public note cautioning potential investors who are considering seeking exposure to virtual currency funds. The regulator claimed that many investors are mistaken in believing that cryptocurrency funds are legal and regulated. It pointed to similarities between crypto funds and mutual funds as the reason for confusion among retail investors.
The FSA said that in addition to being formally unregulated, cryptocurrency funds do not meet the requirements of the country’s Capital Markets Act. It therefore encourages investors to consult with the relevant authorities before investing.
Circle CEO Calls for G-20 Consensus
In a recent interview, Jeremy Allaire, the chief executive officer of Circle, has called for international consensus regarding cryptocurrency regulations. In particular, Allaire emphasized the need for agreement among the G-20 nations.
“Ultimately there needs to be normalization at the G-20 level of critical crypto-related regulatory matters,” Allaire said.
Allaire also urged regulators throughout the world to establish transnational norms regarding initial coin offerings. “When it comes to token offerings, how should they be treated? Which token offerings are securities, which are not?” he asked. “The trading venues — are they like spot commodity markets that need to have rules in place around market manipulation?”
Do you think that U.S. investors will have access to a cryptocurrency exchange-traded fund within the next 12 months? Share your thoughts in the comments section below!
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