Crypto adaptation: US Securities and Exchange Commission publishes new report on crypto regulation
As the traditional financial world begins to adopt crypto-assets into the mainstream, the process of legitimising digital assets as financial products carries a host of risks and regulatory challenges.
What is the SEC planning?
A few hours ago, the U.S. Securities and Exchange Commission (SEC) released an 8-page document outlining the framework under which the agency will examine investments in digital assets.
Requiring compliance in areas ranging from custody, recordkeeping, registration requirements to conflict of interest protocols, the SEC has made it clear to major broker-dealers and investment advisers that Crypto Investor digital assets will face similar scrutiny as traditional securities.
For example, the SEC noted that due to the decentralised nature of many digital assets, it has observed „inadequate [anti-money laundering] procedures, controls and documentation.“
For advisors registered with the Financial Industry Regulatory Authority (FINRA), strict know-your-customer (KYC) procedures are required in accordance with FINRA Rule 2090.
Many of the key tests replicate traditional financial practices and apply them only to digital assets. However, new concerns have also arisen due to the fundamental differences between asset classes.
Questions such as how much control an investment firm should have over its customers‘ private keys are one of many new issues raised in the compliance notice.
The timing of the report does not coincide with a recent event. However, the prevalence of social media platforms in the explosive rise of altcoins like Dogecoin has likely stimulated discussions within the SEC about the potential dangers of an unregulated industry.
Nonetheless, officials describe the announcement as a reminder of the risks that can be associated with digital assets and the need for compliance frameworks to protect the common interests of market participants. Many industry participants believe regulation is necessary to make Bitcoin (Go to Plus500 Buy Bitcoin Guide) and cryptocurrencies a global success.