On 7th January 2020, the annual announcement by the Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) mentioned fintech technology and digital assets as part of its examination priorities in 2020.
SEC’s 2020 examination priorities are retail investor’s protection, market infrastructure, information security, investment advisers, anti-money laundering programs, financial technology, financial industry regulatory authority (FINRA), and Municipal Securities Rulemaking Board (MSRB).
The report indicates that SEC intends to continue its campaign on the regulation of digital assets and clarification between securities and utility tokens, a topic that has plagued many crypto projects, especially in 2019.
OCIE’s Examination Priorities for Crypto in 2020 positively Differ From Previous Years
In its 2019 announcement, OCIE stated:
“We will continue to monitor the offer and sale, trading, and management of digital assets and where the products are securities, examine for regulatory compliance.”
However this year, OCIE priorities seem to be broader and generally offering an accommodative environment for the fast-growing fintech industry:
“OCIE recognizes advancements in financial technologies, methods of capital formation and market structures as well as registered firms, use of new sources of data, warrant ongoing attention and review. OCIE will also continue to identify and examine EC registered firms engaged in digital assets space as well as RIAs that provide services to clients through automated investment tools and platform, often referred to as Robo-advisors.”
How SEC’s Examination Priorities Align with Its Role in the Proposed Cryptocurrency Act 2020
The Cryptocurrency Act 2020 is a cryptocurrency bill that was put forth by a group of congressmen in December 2019 to clarify the regulations of digital assets further. SEC is among the three regulatory bodies mentioned in the bill alongside the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN).
SEC, which currently uses the Howey Test as a framework for investment contracts and analysis of digital assets, is tasked with keeping a watchful eye on security tokens in the proposed new legislation.
SEC has, in the past, conducted multiple crackdowns on illegal securities offerings (ICOs) since 2017. As of 2019, SEC has also successfully prosecuted many firms for illegal ICO activities, including the most recent cases involving Paragon and Blockchain of things (BCOT).
New Decade Expectations for Digital Assets
Cryptocurrency and blockchain technology have experienced their first ten years of dynamic and impressive developments, amidst trouble with regulatory authorities and slow adoption.
However, experts are predicting a major increase in the crypto user base, which seems to be supported by SEC’s willingness to offer more support to Fintech technology. Coinbase CEO Brian Armstrong stated:
“By shifting cryptocurrency from being primarily about trading and speculation to bring about real-world utility, the 2020s will see a huge increase in the number of people holding and using cryptocurrency, and start to really move the needle on global economic freedom.”