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CFTC and SEC want to change how big hedge funds have to reveal their exposure to cryptocurrencies.

CFTC and SEC want to

The proposed change was justified by the two U.S. financial 

Regulators as a result of the expansion of the hedge fund market, which is partly attributable to the rise in popularity of investments in digital assets.

Large advisers to certain hedge funds would be required to disclose any exposure to digital assets, according to a proposal from the Commodity Futures Trading Commission and the Securities and Exchange Commission of the United States.

The SEC and CFTC recommended changing its confidential reporting form for particular investment advisers to private funds of at least $500 million in a notification on Wednesday. Qualifying hedge funds would have to record their exposure to cryptocurrencies under a different heading than "cash and cash equivalents" in order to "report digital asset strategies appropriately," according to the Form PR.

The two U.S. financial regulators attributed the proposed modification, which is partly a result of the rise in digital asset investments since the introduction of Form PR in 2008, to the development of the hedge fund market. The Financial Stability Oversight Council would be better able to evaluate potential threats to the U.S. economy, according to the SEC and CFTC, if investment advisers provided more thorough information on their strategies and exposure to particular assets.

Regulators have learned critical information about private funds in the ten years since the SEC and CFTC jointly issued Form PF, according to SEC chair Gary Gensler. Since then, however, the gross asset value of the private fund industry has increased by almost 150%, and it has evolved in terms of its business practises and complexity. If adopted, [this proposal] would enhance the calibre of the data we receive from all Form PF filers, with a focus on substantial hedge fund advisers.

According to a proposal data sheet that was made public on Wednesday, the quantity of private funds increased by about 55% between 2008 and the third quarter of 2021. IBISWorld, a market research company, estimates that 3,841 hedge funds will be based in the United States by 2022.

Over half of the typical hedge funds PricewaterhouseCoopers studied had less than 1% of their total assets under management exposed to digital assets, but over one-third of them had cryptocurrency investments. Respondents identified "regulatory and tax uncertainty" as the biggest deterrent to investing in cryptocurrencies, according to the company.


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