United States

FINRA relies on disclosure of digital asset to understand involvement


Regulatory agencies need to monitor the digital asset market closely to understand developments and trends in order to adequately protect consumers, especially as this market grows. In order to achieve this, FINRA released a regulatory notice on July 6, 2018, which urges FINRA members and affiliates to notify the agency of any involvement or intended involvement in the digital asset marketplace. “Involvement” includes, but is not limited to: purchases, sales or executions of transactions in digital assets; provision of clearance and settlement services for cryptocurrencies and other virtual coins and tokens; cryptocurrency mining; and creation or management of a platform for the secondary trading of digital assets.

FINRA’s notice signals the importance of understanding the risks involved in this marketplace. It is important for your company to communicate internally to understand the extent of your own involvement and assess your firm’s exposure to risk in this area. It is equally as important to exercise caution and monitor this area as regulatory agencies develop laws and guidelines. You should also understand how digital asset activities fit into existing laws and regulations. If any of your activities match the digital involvement stated in FINRA’s notice, it is important to notify your regulatory coordinator. Your efforts will benefit your firm in understanding your own risks, and will benefit FINRA’s research to further consumer protection in the digital asset marketplace as well.

FINRA regulatory coordinators conducted a survey to better understand its member firms’ involvement in the digital marketplace. The survey resulted in a list of activities FINRA deemed important to disclose.