SEC removes digital assets from hedge fund rule: What does it mean for the future of digital asset regulation

SEC removes digital assets from hedge fund rule: What does it mean for the future of digital asset regulation

The U.S. Securities and Exchange Commission (SEC), which regulates the securities industry, has recently decided about digital assets. Digital assets are virtual or digital currencies that can be traded or exchanged. The SEC previously defined digital assets as securities in its hedge fund rule, subjecting them to additional regulations.

Hedge fund rule

The hedge fund rule, officially known as Rule 206(4)-8 under the Investment Advisers Act of 1940, is a rule created by the U.S. Securities and Exchange Commission (SEC) to prevent investment advisers from making false or misleading statements to investors in pooled investment vehicles such as hedge funds.

The rule imposes additional reporting and disclosure requirements on advisers to hedge funds and other private funds and requires them to implement specific compliance programs and risk management measures. The rule is designed to protect investors and maintain the integrity of the financial markets by ensuring that investment advisers act in their client’s best interests and provide accurate and complete information about their investment strategies and risks.

In the context of digital assets, the SEC included a definition of “digital assets” as securities in its hedge fund rule, subjecting them to additional regulations. However, the SEC recently removed this definition, indicating that it is still evaluating the term and has not yet decided whether digital assets should be classified as securities.

New asset class for “digital assets”?

Many people have been surprised by this move and have questioned the SEC’s approach to regulating digital assets. It’s worth noting that SEC Chair Gary Gensler gave a speech before the House Financial Services Committee on April 18, 2023, regarding the agency’s stance on digital assets. The hearing was not dedicated exclusively to the SEC’s crypto strategies, but the regulatory agency’s chairman faced criticism over perceived regulatory overreach and lack of clear crypto classification. During the hearing, Gensler refused to comment on whether Ether (ETH) was a security or a commodity, saying it depends on the facts and the law, despite being told he knows. It is worth noting that the U.S. House Financial Services Committee and House Agriculture Committee are set to put together legislation to oversee the crypto sector. The bill will be introduced within the next two months.

Having said so, I do see this in a more positive light. This suggests that the SEC is working on a regulatory framework for digital assets, and this decision may be part of a larger strategy. The SEC may have removed the definition of “digital assets” from the hedge fund rule to allow for further consideration and evaluation of the appropriate regulatory approach for this new asset class. The SEC could be taking a cautious approach to ensure that any regulatory framework it develops is appropriate for digital assets’ unique characteristics and addresses potential risks without hindering innovation.

Regulating digital assets is complex and contentious

Experts have commented on the SEC’s decision to remove its previous definition of digital assets as securities, which would have subjected them to additional regulations. Coinbase, a major player in the crypto industry, has publicly opposed the SEC’s stance on regulating digital assets. Some experts believe that the digital assets sector needs to focus more on risk management and operational due diligence, coupled with thoughtful regulation, to repair its reputation.

It’s essential to recognize that the SEC has had a changing stance on digital assets, and this recent decision isn’t the first time they’ve taken a position on their classification. Previously, the SEC confirmed that a 401(k) plan could be considered a single investor under section 3 (c) (1) and a qualified purchaser under section 3 (c) (7) if plan participants have investment discretion to allocate their accounts.

The question of how to regulate digital assets is complex and contentious. In addition to the points made, some argue that digital assets fundamentally differ from traditional securities and should be treated as a separate asset class. Because they operate on a decentralized network, digital assets aren’t subject to the same regulations and oversight as traditional securities. This lack of regulation has led to concerns about market manipulation, fraud, and other illicit activities.

Moreover, digital assets aren’t backed by physical assets or government guarantees, which makes them inherently risky. However, they also have the potential for high returns, which can entice investors who are willing to take on more risk in their investments. Due to these unique characteristics, some experts suggest that digital assets require a different approach to risk management, valuation, and investment strategies than traditional securities.

The evolving nature of the digital asset market may require clearer regulatory frameworks and standards as it matures. However, there is uncertainty surrounding how these assets will be classified and regulated and how this will affect the overall market. Digital assets have unique characteristics that differentiate them from traditional assets, including decentralization and the use of blockchain technology. This technology enables borderless transactions, smart contracts, and decentralized applications that offer new investment opportunities for retail and institutional investors.

Ending remarks

The growth of the digital asset market has attracted significant attention from regulators and investors, with some arguing that digital assets should be treated as securities to protect investors from fraud. The SEC’s decision to remove the definition of digital assets as securities from its hedge fund rule have fueled ongoing debate about the appropriate regulatory framework for this asset class. As the use of digital assets continues to expand, the SEC will likely continue to develop its regulatory approach.

In conclusion, the SEC’s recent decision is a significant development in regulating digital assets and raises questions about how these assets will be classified and regulated. As the digital asset market matures, there may be a need for clearer regulatory frameworks and standards to protect investors and prevent fraud while allowing for innovation and growth.

 

Source: https://www.financialexpress.com/business/blockchain-sec-removes-digital-assets-from-hedge-fund-rule-what-does-it-mean-for-the-future-of-digital-asset-regulation-3080830/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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What do Ordinal Inscriptions Mean for the Future of Bitcoin?

What do Ordinal Inscriptions Mean for the Future of Bitcoin?

A great deal of buzz has been generated by a novel type of non-fungible tokens known as Ordinal inscriptions. What sets these NFTs apart is that all of their data is etched onto the Bitcoin blockchain, diverging from Ethereum NFTs which are reliant on off-chain metadata that can be altered. Here’s a closer look at Ordinal inscriptions and their potential impact on the future of Bitcoin.

Ordinal inscriptions are a type of NFT that can be created on the Bitcoin blockchain, which allows for all of the data to be directly inscribed on the chain. This is in contrast to Ethereum NFTs, which rely on off-chain metadata. Due to this distinction, Ordinals are considered a potential solution to the challenges that are associated with Ethereum NFTs.

Ordinal inscriptions serve as a means of organizing data on the Bitcoin blockchain. The Bitcoin blockchain functions as a decentralized ledger of all Bitcoin transactions, and Ordinal inscriptions provide a unique identifier for each transaction.

While these identifiers are useful for tracking and verifying transactions, there are concerns about the potential for issues, such as “transaction malleability,” to arise as a result of Ordinal inscriptions. Some experts have raised concerns in this regard.

The term transaction malleability refers to the ability of a third party to modify a transaction ID without altering the transaction itself. This can result in confusion and make it more challenging to track and verify transactions.

The concern with Ordinal inscriptions is that if they are not used correctly, they may lead to an environment in which transaction malleability is more prevalent. This could have the effect of making it harder to rely on Bitcoin as a secure and dependable method of payment and transfer.

Fortunately, many experts in the crypto community are aware of the potential risks associated with Ordinal inscriptions and are taking steps to mitigate them. One of the most significant efforts in this regard is the implementation of Segregated Witness (SegWit).

SegWit is a software upgrade that allows for more efficient use of the Bitcoin blockchain by separating signature data from transaction data. This helps to decrease the size of transactions and reduces their susceptibility to malleability.

Beyond SegWit, ongoing efforts are being made to develop other solutions to address the potential risks associated with Ordinal inscriptions. The Lightning Network is one such solution, as it is a layer of two solutions that enables faster and less expensive Bitcoin transactions by conducting them off-chain.

Should you be concerned? If you are a casual Bitcoin user, you likely do not need to be overly concerned about Ordinal inscriptions. The potential risks associated with them primarily affect those involved in more complex Bitcoin transactions, such as multi-signature wallets or smart contracts.

Despite the potential benefits of Ordinal inscriptions, there has been a lot of debate over whether they are a “good use” of block space. As more Ordinals are being inscribed, the cost of Bitcoin transactions has risen. Ordinals introduce additional, non-financial data on the Bitcoin blockchain, which can bog down on-chain confirmation times. This includes images, audio clips, and even games. Those not in favour of Ordinals see this as an impediment to the ability of Bitcoin to scale and reach full global adoption.

Inscribing non-fungible characteristics to satoshis, the individual increments of Bitcoin, may challenge its use in place of conventional currency. Ordinals challenge the fungibility of satoshis on the Bitcoin network, as all satoshis should be equal, or they begin to lose a significant trait of money. But Ordinals can alter the value of these units of money, much like rare collectible coins. This debate over whether these individual units must be deemed equal is unfolding before our eyes and needs to be understood.

Bitcoin is money, and that’s the largest and most important use case, impacting the most people in the world. In the end, I believe that Ordinals will remain niche. While Ordinals may be viewed as exciting, they are unlikely to become the go-to choice for many people who use Bitcoin’s block space.

Ultimately, the markets decide. One of the biggest yet baseless claims is that Bitcoin doesn’t evolve or change. While there may be some truth to this, any changes to the protocol should be slow and methodological. Ultimately, the markets will decide whether Ordinal inscriptions are a viable solution for the challenges associated with Ethereum NFTs.

One key factor to remember about Bitcoin, and any other digital asset, is that its success depends on market demand. If the market values the features offered by Ordinal inscriptions, then they are likely to be adopted and integrated into the Bitcoin network. However, if the market does not value them, then they will remain a niche offering.

While Ordinal inscriptions may pose some potential risks to the Bitcoin network, the crypto community is actively working to address these issues. As long as you take appropriate precautions to protect your Bitcoin holdings, there’s no need to be overly concerned about this discussion in the short term. In fact, these discussions help to strengthen and test the resilience of the Bitcoin network. I see lots of positivity in this.

 

Source: https://intpolicydigest.org/what-do-ordinal-inscriptions-mean-for-the-future-of-bitcoin/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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What Is Web3 and What Does It Mean for the Workplace?

What Is Web3 and What Does It Mean for the Workplace?

When the internet was first invented, many thought we were witnessing the greatest invention of human existence. The various iterations of the internet over the decades since has proven that to be arguably true.

The latest of those iterations, dubbed Web3, is called out by some as a transformation of how the internet works that will have effects on not just how we use the web, but also our workplaces as well.

The rise of blockchain technology, cryptocurrency, non-fungible tokens (NFTs) and burgeoning online and 3-D virtual environments collectively known as the metaverse are all primary drivers of this evolution. With spending on blockchain technology alone expected to reach $19 billion by 2024, up from $6.6 billion in 2021, the potential for Web3 to significantly impact the world is enormous, including the digital workplace.

What Is Web3?

At the most basic level, Web3 is a decentralized version of the internet where users can interact, collaborate and own their own creations. However, to truly understand what it is, we should also consider what Web 1.0 and Web 2.0 are.

Web 1.0 was the first iteration of the World Wide Web, ushered in by the introduction of web browsers, where the majority of users simply consumed content through pages built on largely static sites. Web 2.0, driven by the rise of mobile technology and social media, introduced a more dynamic version of the web featuring user-generated content and increased interoperability. Users were creating an increasingly large volume of content but large platforms such as Facebook retained ownership of it. Web3, as it’s come to be known, is the next evolution, and decentralization and democratization are at the heart of it.

Web3 “is based on the idea of a completely decentralized interconnected system of networks that allow us to read, write and own parts of those networks,” said  Shaun Heng, vice president of growth and operations at Delaware-based CoinMarketCap, a price-tracking site for cryptocurrency assets.

Whereas in the mature Web 2.0 version of the internet, users rely on tech giants like Facebook and Google to facilitate access, the decentralized protocols of Web3 will enable users to build and grow their own networks.

“Web3 brings collaboration, community and trust to Web 2.0,” said Medha Parlikar, co-founder and CTO at Switzerland-based CasperLabs, a blockchain technology company. “It will empower the individual, and those entities that engage with their communities will thrive in the transition.”

The idea is that third parties will not be needed to facilitate access, and that Web3 will provide a more human-centric, connected and open web.

How Web3 Will Impact the Workplace

Further Loosening of Physical Limitations on Work

Remote work was built on the cloud technology of Web 2.0 and enabled people to be scattered across the world, creating a type of decentralization. Web3 can take everything a step further and will have major implications for everyone, according to Heng.

“Web3 will revolutionize technology and create what is referred to as the Spatial Web,” he said.

For example, internet connections won’t only be limited to the devices we’ve grown accustomed to such as laptops and smartphones, as there will be easier access to interactive data and information.

“This will result in our workplaces looking, feeling and operating in vastly different ways than we’re used to today,” Heng said. “With Web3, the rigid idea of the office, or even the remote and hybrid workspace, will no longer be the norm.”

Empowers Creators and Freelancers

Over the last few years, concepts such as the gig economy and creator economy have been used more frequently as employees take control of their work lives and avoid being tied down to a single company or job. According to Parlikar, Web3 will decentralize these economies completely.

“Imagine content creators connecting even more directly with their communities than they do today, where even commerce does not need a mediator,” Parlikar said. “Everything happens via the blockchain.”

Accelerates the Rate of Digital Transformation

Anndy Lian, Asia chairman for Netherlands-based cryptocurrency exchange BigONE Exchange, said that Web3 will be an accelerant for new forms of digital transformation. “Web3 is able to bring services and products to people and businesses with high added value because of their assertiveness and high customization,” he said.

The result will be an increase in task automation and more use of AI technology since it can be used in combination with blockchain. “The combination of AI, automation and blockchain — it solves the trust element that we have been battling for decades,” Lian said.

Since it is built on the foundations of blockchain technology and decentralization, Web3 could alter the way people view the workplace and how individuals manage specific tasks. By removing the tether to third parties that currently enable connectivity in the Web 2.0 era, Web3 could give individuals more autonomy and freedom to create their own jobs in the increasingly digital workplace.

 

Original Source: https://www.reworked.co/digital-workplace/what-is-web3-and-what-does-it-mean-for-the-workplace/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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