US SEC lays out plans for cryptocurrency oversight in 2020

Cryptocurrency enthusiasts and entities in the United States shouldn’t expect the Securities and Exchange Commission (SEC) to lighten up on its oversight of the Bitcoin ecosystem this year. If anything, more scrutiny is on its way and the financial regulator is going to be just as strict as it was in 2019.

The SEC, through its Office of Compliance Inspections and Examinations (OCIE), has published its list of priorities for 2020, and will be diligently watching the space, and it appears as though the SEC may be—ever so slightly—warming up to digital currencies.

The OCIE just released its 2020 Examination Priorities (in pdf) framework and is ready to tackle the crypto industry. Still referring to crypto as an emerging sector, the office explains that digital assets continue to be a volatile and risky subject for investors who don’t understand how they work in comparison to conventional investments. The document reads, in part, “Due to these risks, OCIE will continue to identify and examine SEC-registered market participants engaged in this space. Examinations will assess the following: (1) investment suitability, (2) portfolio management and trading practices, (3) safety of client funds and assets, (4) pricing and valuation, (5) effectiveness of compliance programs and controls, and (6) supervision of employee outside business activities.”

Crypto was first included in the OCIE’s guidelines in 2018 when the industry was just beginning to really take shape. In 2019, the office expanded on its efforts for the year, adding that it would more closely monitor those entities participating in the market to scrutinize certain activities, such as client fund safety, pricing structures and claims, trading practices, portfolio management and more.

For 2020, this scrutiny is going to continue, but the OCIE is also going to begin to provide “supervision of employee outside business activities.”

The good news is that it isn’t just crypto that’s under the microscope. The SEC is regulating all forms of investment opportunities and financial vehicles that present potential risks to consumers. However, the commission needs to ensure that it monitors the various facets equally and equitably, without showing any discriminatory reaction to one particular class. The fact that the OCIE’s publication seems to indicate a review of the crypto space more as a financial channel, with less emphasis placed on initial coin offerings than previously seen, could be an indication that the SEC is not going to continue its heavy-handed approach to the industry.

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