With the value of Bitcoin surging recently, one market observer expects the impending arrival of new enforcement chiefs at the US Securities and Exchange Commission and Commodities and Futures Trading Commission to throw the spotlight on fraud and deception against HNWs who invest in that asset.

Former SEC attorney Ashley Ebersole, an experienced securities enforcement partner in the Washington offices of Bryan Cave Leighton Paisner, told Compliance Matters in an email today: “The recent increase [in the price of Bitcoin] is making the Bitcoin space look more and more like a traditional asset space from an investor-protection and enforcement perspective. Key differences are that investors may be less informed about what they’re actually buying, or they may be transacting with new providers with whom they have no history. Both provide potential scenarios for the SEC and CFTC to take action if investors are threatened or harmed.

“The much-publicised Bitcoin price increases are attracting a broader swath of investors to take a look at whether they should open a position in Bitcoin. Part is due to the uptick in large investment advisers recommending that a modest Bitcoin allocation is good portfolio management, part is the flurry of news lately around major institutions who are themselves investing in Bitcoin or developing Bitcoin-based products and part is investor FOMO – the fear of missing out.

“Many in the DeFi [decentralised finance] community take the view that they are sufficiently different from traditional financial services providers that they fall outside of existing regulation. But looking to the lessons of digital assets and cryptocurrency, they would be better served to recognise that regulators will find a way to oversee them and the road will be easier if they take modest steps now.

"Whoever takes over the SEC will exert a heavier hand on fintech and digital assets. Outgoing SEC chair Jay Clayton has done much good for retail investors, but that has, at times, led him to take a cautious approach to digital assets and new technologies. With a new SEC chair, particularly some of the crypto-friendly potential nominees rumored to be under consideration, could we see a new, regulated era for digital assets? Could Commissioner Heather Peirce’s safe harbour plan actually gain traction?”

* J Ashley Ebersole can be reached on +1 202 508 6105 or at ashley.ebersole@bclplaw.com