SEC seeks private vendors to translate blockchain data

The commission wants to hire a private vendor to gather data from the “most widely used blockchain ledgers” to help it police digital assets

Reps. David Kustoff, R-Tenn., and Claudia Tenney, R-N.Y., talk before a House Financial Services Committee hearing in Rayburn Building titled “Oversight of the U.S. Securities and Exchange Commission” on June 21, 2018. (Tom Williams/CQ Roll Call file photo)

The Securities and Exchange Commission wants to hire a private vendor to gather data from the “most widely used blockchain ledgers” to help it police digital assets.

The agency didn’t name the ledgers but its requirement that they be widely used suggests the SEC would include those underpinning cryptocurrencies such as bitcoin and ethereum.

The SEC put out a “sources sought” notice seeking to hire experts who can convert the blockchain data into an understandable format, and a separate notice seeking those who can provide “aggregated market data” for digital assets. The second request aims to provide the agency with pricing information for cryptocurrencies and digital tokens that’s common to markets the SEC is more familiar with, such as equities.

The requests, issued Jan. 31, don’t specify how deeply the agency would be monitoring the markets for fraud or other abuses. The information gleaned from blockchain may include transaction data that allows the SEC to “monitor risk, improve compliance, and inform commission policy with respect to digital assets,” it said.

The SEC declined to comment.

In the U.S. cryptocurrencies like bitcoin are generally considered commodities, not securities, though products based on bitcoin or other digital assets could be deemed to be securities and fall under SEC jurisdiction in certain circumstances.

While commodities are overseen by the Commodity Futures Trading Commission, bitcoin is traded for cash without a regulatory overseer.

The SEC is asking for a list of blockchain technologies for which vendors can provide data, how they would transmit it to the SEC, frequency of updates, and cost estimates. Potential vendors are asked to describe their ability to provide the data, how it would be extracted, how it would be converted to make it easily reviewable, and the steps taken to verify accuracy.

For the data on digital assets, the agency is seeking information such as daily high and low prices, supply volume, and market capitalization. The deadline to reply is Feb. 14.

Blockchain is a decentralized computer-ledger technology that allows digital recording and distribution of transactions among a network of users. No centralized authority governs or regulates the process, which gives bitcoin a high degree of anonymity.

It is increasingly being explored by banks and financial services firms, foreign governments, and technology startups.

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