The staffs of the Division of Trading and Markets at the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) just released a statement on the custody of digital asset securities by licensed broker-dealers.
The regulators note that digital assets, digital asset securities and related innovative technologies have created a lot of challenges and complex regulatory issues. Notably, when compared with traditional assets such as stocks and commodities, digital assets, including cryptocurrencies and security tokens, are harder to protect.
According to the statement,
“The requirements of the Customer Protection Rule have produced a nearly fifty-year track record of recovery for investors when their broker-dealers have failed. This record of protecting customer assets held in custody by broker-dealers stands in contrast to recent reports of cybertheft, and underscores the need to ensure broker-dealers’ robust protection of customer assets, including digital asset securities.”
As the crypto industry expands, the SEC and FINRA report that more and more companies are seeking to become registered entities that can operate lawfully. These are new applicants as well as existing broker-dealers who are trying to expand into digital assets. In terms of approving various entities seeking to custody digital asset securities in full compliance with the broker-dealer financial responsibility rules, the regulators note that informative discussions are in progress.
While noncustodial activities involving digital asset securities raise fewer concerns, the staffs similarly note that the information-gathering phase is an important step in understanding how to move forward. Read More at Dailyhodl...