Hedge funds may have to disclose cryptocurrency exposure via confidential filings that regulators use to spot bubbles and other threats to financial stability

• Regulators want hedge funds to disclose their cryptocurrency exposure via confidential filings.
• Form PF was designed in response to the 2008 financial crisis to better identify potential risks to market stability.

Regulators on Wall Street want hedge funds to disclose their cryptocurrency exposure in more detail as the sector has seen massive losses this year.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are expected to issue a proposal Wednesday that would require firms to reveal their crypto holdings via a Form PF.

The proposal would apply to funds with over $500 million in assets under management while requiring more transparency into their investment concentration, strategy and borrowing obligations.

Form PF was created after the 2008 financial crisis and is a vehicle for regulators to better identify bubbles and other financial risks that pose broader threats to market stability.

Agencies including the SEC and Federal Reserve use data from the confidential filings to assess the private-funds industry and also publish statistics and trends.

The regulators' proposal comes after massive swings in the digital asset space caused crypto hedge funds and lenders to collapse.

The turmoil in crypto this year has raised fears that it could spill over to traditional markets as large institutions start offering more digital asset products and beef up investments.