SEC Announces Priorities For Crypto-Assets In 2022

The U.S. Securities and Exchange Commission has announced its crypto assets examination priorities for fiscal year 2022, focusing on robo-advisers, fractionalization, and other crypto-custody arrangement practices.

Robo-Advisers

Due to the stated significant increase in the amount of robo-advisers, the SEC will is examiners will be reviewing the unique risks presented by these advisers and whether these risks are reasonably accounted for in the RIA’s regulatory compliance programs.

Fractionalization aka NFT

Fractionalization allows multiple people to hold (and trade) a share of an asset. The SEC examiners will be focusing NFT related transactions in whole and specifics, as this is so close to the Howey test. Simple they will be looking how NFT ownership and future revenue rights associated with the asset. For example when creators keep a percentage of royalty when ever the art work is resold, or to check if broker-dealers (aka Opensea & co) and IRAs have controls in place to protect investors and provide all information including unique risks associated with these assets.

Custody Arrangements

The SEC will review whether market participants involved with crypto-assets: (1) have met their respective standards of conduct when recommending to or advising investors with a focus on duty of care and the initial and ongoing understanding of the products; and (2) routinely review, update, and enhance their compliance practices, including crypto-asset wallet reviews, digital asset custody practices and safeguards, anti-money laundering reviews, valuation procedures, risk disclosures, and operational resiliency practices.

Additionally the SEC is looking to examine Crypto Exchange accounting practices, requiring them to report digital assets held on behalf of customers as liabilities.

Market Updates

BTC is currently trading around $46,100, ETH around $3,450 and LEVEN around $0.148. The global crypto market cap is $2.24T, down 0.9% over the last day. DeFi Total Value Locked is ~$230b and BTC dominance is around 42%.

Notable news includes:

SEC rejected Ark/21Shares spot Bitcoin ETF https://www.coindesk.com/business/2022/04/01/sec-rejects-spot-bitcoin-etf-application-from-ark-21shares/

Coinbase revealed plans to invest in various India-based Web3 initiatives despite controversial tax/regulatory changes https://cointelegraph.com/news/coinbase-to-invest-in-indian-crypto-and-web3-amid-tax-regulation-clarity

Goldman Sachs is looking to offer ‘full spectrum’ crypto investments to wealthy clients

https://www.cnbc.com/2021/03/31/bitcoin-goldman-is-close-to-offering-bitcoin-to-its-richest-clients.html

CME announced that they are evaluating Solana and Cardano futures

https://www.theblockcrypto.com/linked/140189/cme-group-is-considering-altcoin-futures-on-solana-and-cardano

Riot Blockchain filed a shelf offering for the sale of $500m in shares

https://www.yahoo.com/video/riot-blockchain-files-sell-500m-192539667.html

Bitcoin miner PrimeBlock revealed plans for a $1.25b SPAC deal

https://www.yahoo.com/video/bitcoin-miner-primeblock-plans-public-125637366.html

Greenidge’s mining permit renewal was delayed by regulators in NY

https://www.nysfocus.com/2022/04/01/bitcoin-mining-hochul-greenidge-delay/

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