SEC Public Hearing on Cryptocurrency Trading Oversight to Protect Investors

The Securities and Exchange Commission (SEC) is seeking public comments on the proposed qualifications of cryptocurrency investors and the proposed requirement of a knowledge test to be conducted on investors by digital asset business operators before providing digital asset investment service. This regulatory proposal aims to create an appropriate mechanism for investor protection suitable for the level of risk associated with the digital asset product. 

 

The hearing is conducted on the public and involved parties until 27 March 2021. In addition, the SEC will hold a live talk about the hearing at SEC Facebook Page on 24 March 2021. 

 

Cryptocurrency is a financial innovation that is exposed to high volatility. Investment in this digital asset thus requires knowledge and understanding and a risk profile that is not so sensitive to investment loss. The SEC is therefore proposing to specify the qualifications of cryptocurrency investors to ensure proper investor protection mechanisms consistent with the level of risk related to the product. 

 

In essence, the public consultation is on the proposed qualifications of cryptocurrency investors and the proposed requirement for a knowledge test before services on digital asset investment can be given. 

 

These criteria would be part of the consideration for laying out appropriate regulations. For example, (1) Investor qualifications related to financial condition and/or knowledge and understanding of cryptocurrency. In case of unqualified investors, investment through a licensed digital asset fund manager would be allowed, and (2) Digital asset business operators would be required to conduct a knowledge test on investors before providing services to them.