Crypto assets—also known as digital assets—are assets that are issued or transferred using distributed ledger or blockchain technology. They include, but are not limited to, so-called “virtual currencies,” “coins,” and “tokens.” A particular crypto asset may or may not meet definition of a “security” under the federal securities laws. FINRA rules that relate to securities, or that do not depend on securities status, may impose obligations on the crypto asset-related activities of member firms and associated persons.
In Regulatory Notices 20-23 (July 2020) and 21-25 (July 2021), FINRA encouraged member firms to notify FINRA if they or their affiliates engage in, or plan to engage in, activities related to crypto assets, including crypto assets that are not securities.
As a result of our outreach and other efforts, FINRA has identified member firms with direct or indirect touch points to crypto asset-related activities. These include firms engaged in private placements of crypto asset securities, the operation of Alternative Trading Systems (ATSs) for crypto asset securities, and the operation of Special Purpose Broker-Dealers (SPBD) pursuant to the Securities and Exchange Commission’s December 2020 statement, Custody of Digital Asset Securities by Special Purpose Broker-Dealers (SPBD Statement). Other member firms have engaged in proprietary trading of crypto assets or distributed ledger technology initiatives for traditional securities or have established relationships with affiliates or other third parties to provide their customers with access to crypto asset-related products and services.
Associated persons have also engaged in a range of crypto asset-related activities through outside business activities (OBAs) or private securities transactions (PSTs), including PSTs for compensation that impose additional supervisory requirements on firms pursuant to FINRA Rule 3280(c). Examples include proprietary trading, operating investment funds that invest in crypto assets, selling private placements or crypto asset offerings, and participating in crypto mining operations.
A prospective member firm that intends to engage in crypto asset activities must seek approval for new FINRA membership through the submission of a New Membership Application pursuant to FINRA Rule 1013. An existing member firm that is contemplating a material change in business operations—including a material crypto-related change in business operations—must submit a Continuing Membership Application(CMA) pursuant to FINRA Rule 1017. FINRA follows the SEC’s guidance—including the SPBD Statement, the Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities (July 8, 2019), and the No-action Letter, ATS Role in the Settlement of Digital Asset Security Trades (September 25, 2020)—when assessing a firm’s proposed crypto asset business lines under applicable rules.
As crypto asset markets continue to evolve and new products and offerings become available to customers, FINRA will continue to adjust our regulatory program to address the crypto asset-related activities and conduct of member firms and associated persons for compliance with the securities laws and FINRA rules. To lead these efforts and ensure FINRA is prepared to fulfill our regulatory mission now and in the future, FINRA established the Crypto Hub, the Crypto Asset Investigations team (CAI), the Blockchain Lab (Lab), and the Crypto Asset Surveillance Team (CAST).
- Media CenterOn this episode, we delve into the results of FINRA's targeted review of certain member firms and their communications to retail investors regarding crypto products and services.January 23, 2024
January 2024January 23, 2024
- GuidanceThe Crypto Asset Developments topic of the 2024 FINRA Annual Regulatory Oversight Report (the Report) informs member firms’ compliance programs by providing annual insights from FINRA’s ongoing regulatory operations, including (1) regulatory obligations and related considerations, (2) findings and effective practices, and (3) additional resources.January 09, 2024
- Media CenterIn this third and final episode in our series covering FINRA's ongoing crypto asset regulatory work, we hear from FINRA's Blockchain Lab, which serves as a central point within FINRA for the development of blockchain-related regulatory initiatives to learn about how the Lab is supporting and advancing FINRA's regulatory work involving crypto assets.September 19, 2023
- Media CenterIn this second episode of a three-part series covering FINRA's crypto asset-related regulatory work, we hear from FINRA's Crypto Asset Investigations Team. This dedicated group of investigators specialize in conducting complex crypto asset investigations and share more about the crucial role it plays in ensuring compliance with existing rules and regulations in the crypto asset space.September 05, 2023
- Media CenterIn 2022, FINRA developed an enterprise-wide strategy to ensure it is prepared for an evolving crypto asset regulatory landscape and created the Crypto Hub, the Blockchain Lab and the Crypto Asset Investigations Team. On this episode, the first in a three-part series, we learn more about the strategy and the role of the Hub.August 08, 2023
- GuidanceFINRA is conducting a targeted exam of firm practices regarding retail communications concerning Crypto Asset products and services.November 14, 2022
- Compliance ToolsAn alternative trading system (ATS) is an SEC-regulated trading venue in which a computerized system matches buy and sell orders of securities. An ATS is not a national securities exchange, an ATS may apply to the SEC to become a national securities exchange. An ATS that registers as a broker-dealer must also comply with the obligations associated with being a registered broker-dealer, including FINRA membership and compliance with FINRA rules.
- Compliance ToolsActivities relating to digital assets have attracted the interest of prospective and existing FINRA member firms. Digital asset securities with their related innovative technologies raise novel, complex and challenging regulatory and compliance questions, and challenges for both prospective and existing FINRA members.
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